Presenters:

Kamran SiddiqSyed Wajahat AliSyed Arshad Ali

ARSHAD PART

Section 4 of the Indian Partnership Act, 1932 defines Partnership as the relation between persons who have agreed to share the profits of a business carried on by all or anyone of them acting for all.”

There must be an agreement. Agreement between two or more persons.

Must carry on some business Share profits of the business Business is carried on by all or any one of them acting for all (mutual agency)

Based on agreement Agreement may be express or implied

In Writing : helpful in times of adversityWritten agreement : “Partnership Deed”

Essence of Partnership : Trust & Confidence Drafted with care and signed by all partners Stamped in accordance with Indian Stamp

Act Firm should be registered and copy of the

Deed to be filed with the Registrar

Prepared for resolving mutual differences Usual Contents :

Date of Agreement

Name and Address of the Firm

Name and Address of the Partners

Nature of Business

Duration of Partnership

Capital invested by each partner

Ratio to divide profits and loss

Usual Contents Contd. :

Appointment of Auditor and remuneration

Drawing by partners and interest

Interest on Capital and Advances

Salary and Commission payable to partners

Duties, Functions and Powers of Partners

Rules regarding admission, retirement and death

Dissolution

Arbitration

Method of valuation of Goodwill

Wajahat

A contract of partnership may be entered into by every person who is competent to enter into a contract (sec 11 of the Indian Contract, 1872).

Alien Enemy: An alien enemy cannot enter into a contract of partner ship with an Indian subject. An alien friend ca do so.

Minor: Minor cannot become a partner in a firm but with consent of all partners, he may be admitted to the benefits of partnership.

Person of unsound mind: a person of unsound mind is not competent to enter into a contract of partnership.

Married woman: A married woman can enter into a contract of partnership.

Corporation: A corporation, a registered company, can enter into contract of partnership as a single individual but not as a group of individuals comprising it.

Person who have entered into

partnership with one another are

called individually ‘partners’ and

collectively a ‘firm’, and under which

the business is carried on is called

‘firm name’(sec 4,para 2)

Name under which the business is carried

on

Any name

Should not be a name already adopted by a

reputed firm, to mislead public

Should not contain words : Crown, Emperor,

King, Queen, Royal, Empire, Imperial or

words expressing or implying the sanction,

approval or patronage of Government

Partnership Firm

Not a separate person Separate juristic person

Contractual obligation Perpetual succession

Individual property of partners

Can hold property and sue or be sued in its own name

Dissolution on cessation Members can come and leave

Partners inter se contract

Members contract with Co

Contractual liability Members liability may be ltd.

No requirement Accounts & Audit mandatory

Khurram part

Partnership at WillNo provision in contract between the partners for

Duration of PartnershipDetermination of Partnership

If any partner gives notice of dissolution in writing, the partnership is dissolved.

Particular PartnershipA person may become a partner with another person in particular adventures or undertakings.On completion of such a venture, the partnership comes to an end.

Partnership for a Fixed TermDuration is fixedPartnership comes to an end when the term expires.If Partners continue the business after the fixed period, it becomes partnership at will.

Actual or Active PartnerEngaged in actual conduct of the businessHis acts binds the firm and other partnersNotice to be given in case of retirement

Sleeping or Dormant PartnerDoes not take part in the conduct of businessContributes his share of capital and enjoys profits and lossesNot known to outside worldNot liable to third parties for the acts of the firm.Not required to give notice in case of retirement

Nominal PartnersNo real interest in business, Does not contribute any capital, Lends his name onlyNo share in profits but liable to third parties for all acts of the firm

Partner in Profits onlyShares the profits but not lossesNo interest in the management of the firmLiability for the acts of the firm is unlimited

4th Member

Rights Duties

Take part in business Carry business in best mutual interest

Express opinion (majority to prevail)

Just and Faithful

Express opinion (majority to prevail)

Diligently attend business

Joint ownership Share profits/loss as per contract

Right to be indemnified Indemnify partners for loss due to fraud

Right to resist introduction of new partner

Not to assign

Right to access to books of accounts

Render true and fair accounts

The dissolution of partnership between all

the partners of a firm is called ‘dissolution

of firm’ (sec 39).This means there is

difference between ‘dissolution of

partnership’ and ‘dissolution of firm’.

MODE OF DISSOLUTION OF FIRM

Dissolution Without Order of Court

Dissolution by Court

By Agreement (Sec 40)

Compulsory Dissolution (Sec 41)

On happening of Certain Contingencies (Sec 42)

By Notice (Sec 43)

Kamran

Dissolution By Agreement:With the consent of all partners

In accordance with a contract between them.

The contract of the dissolution of the firm may be expressed or implied

Compulsory Dissolution :Business of the firm become unlawful.

Insolvency of all partners, or all but one partner, a partner on being adjudicated insolvent ceases to be a partner from the date of order of insolvency.

On Happening of Certain Contingencies:The expiry of the term for which the firm was constituted.The completion of particular adventure or adventures. if the firm is constituted for the execution thereof.The death of partner and,The adjudication of a partner as an insolvent

By Notice:When partnership at will it can be dissolve by any partner by given notice to other. The notice should contain clearance and valid reason of intention to dissolve partnership in writing and signed by him and also to be served to all partners.

Under section 44. the court may at the suit of a partner, dissolve a firm on the following grounds:

Insanity (Sec 44 a): Where a partner become unsound mind, the court may dissolve the firm on the petition of any other partner.

Permanent Incapacity: (Sec 44b): Where a partner become in any way permanently incapable of performing his duties as a partner, the court may dissolve the firm.

Misconduct (Sec 44 c): Where a partner other than partner suing, is guilty of misconduct and it is likely to affect prejudicially the carrying on the business, the court may dissolve the firm.

Persisitant Breach of agreement: (Sec 44d): Where a partner other than partner suing, wilfully or persistently commits the breach of the partnership agreement relating to the management of the affair of the firm , or otherwise so conduct himself that is not reasonably practicable for the other partner to carry out the business with him, the court may dissolve the firm.

Transfer of Interest (Sec 44 e): Where a partner has in any way transferred the whole of his interest in the firm to a third party or where his share has been attached under decree, or sold in recovery of arrears of land revenue, the court may dissolve the firm at a instance of any other partner.

Business working at loss: (Sec 44e): Where the business of the firm cannot be carried on except at a loss, the court may dissolve the firm at the suit of partner.Any other Ground: (Sec 44f): The court may dissolve a firm on any ground which renders it just and equitable that the firm should be dissolved .