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Presentation On Partnership Act, 1932

Rules of conduct enforced by the State. Functions & duties of the State/Government to enforce.

Definition by Salmond: Law is a body of recognized & applied by the State in administration of justice.

Section 4 Indian Partnership Act 1932 defines Partnership in following terms:Partnership is the relation between persons who have agreed to share the profit of business carried on by all or any of them acting for all.

Partners Persons who have entered into partnership with one another are called individually "partners".
Partnership The relationship between the persons is called partnership". Firm The partners are collectively called a "firm".

Firm Name The name under which the partnership business is carried on is called the "firm name".

Sec 6 of the Act provides that in determining

whether a group of persons is or is not a firm or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. Thus all incidents of relations of the
partnership are to be examined as shown in written agreement, verbal agreement or conduct.

Example A&B jointly buy a mine and lease it out. They make a partnership agreement that they will divide the lease rent in a ratio of 50:50 between themselves. In this case A&B are having understanding that they are partners but in the eyes of law it is not partnership.

Partnership at will:- Sec 7 Where no provision is made by a contract between the partners for duration of their partnership or for the determination of their partnership, the partnership is, partnership at will. Particular Partnership:- When a partnership is to formed for a particular period or for a particular venture, in a such a case the partnership is automatically dissolved at expiry of fixed term or on the completion of the venture. Example: A&B have formed a partnership for manufacture of a particular film, the partnership is automatically dissolved on completion of the venture provided they dont enter into a contract to continue this partnership for future.

A partnership agreement put to writing is termed as the Partnership deed. The partnership deed must contain the following clauses:1. Name and address of the firm and nature of business to be carried on. 2. Name and address of the partners 3. Date of commencement and duration of partnership 4. The capital and any other contribution made by partners. 5. The ratio to share profit and losses amongst the partners. 6. Rules as to interest on loans and capital, their salary, commission, etc. 7. Method and arrangement of keeping accounts 8. Division of task and obligation of partners 9. Rules to be followed in case of admission, retirement or death of a partner. 10. Whether a partner is allowed to carry competing business. 11. The circumstances under which the partnership will stand dissolved. 12. In case of dispute which course of action shall be followed e.g. Court, arbitrations etc.

When the Registrar is satisfied that the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the Register of Firms, and shall file the statement.

1. Obtain a statement in the prescribed form


2. Fill in the form with requested details 3. Verification and signed by partners 4. File the statement with prescribed fees with registrar of firms 5. Obtain certificate from registrar

There are six types of partner:Actual partner he takes an active part in the business.

Sleeping or dormant partner he does not take active part in the business
Nominal partner he lends his name to the firm and does not take part in business

Partners in profit only he shares the profit only and not losses
Sub partner he is a third person with whom partner agree to share his profit Partner by Estoppels or by holding out Holding out means a partner retires from the firm and does not give notice of retirement. If transactions are taking place treating the retired partner as active partner of the firm, he shall be estopped from denying the fact.

It is said that minor is not capable of entering into a contract so an agreement by or with a minor is said to be void. Since partnership is formed by an agreement ,a minor cannot enter into a partnership agreement.

On the basis of general rule that minor cannot be a promisor but can be a promisee or a beneficiary.
As per section30 of the Indian partnership act 1932,with the consent of all the partners for the time being ,a minor may be admitted to the benefits of partnership.

1. To Share Profit- a minor has a right to share of the property and of the profits of the firm. 2. To Have Access To Accounts - a minor partner may have access to and inspect and copy any of the accounts of the firm. 3. To Sue - minor has a right to sue the partners of the firm for payment of his share of the property or profit of the firms. 4. To Elect To Become A Partner - a minor has a right to elect to become a partner on attaining majority.

1.The duty of the partners is to carry on the business of the firm to the greatest common advantage i.e. Profit. 2. Every partner in the business should be faithful to each other .good faith requires that partner should not deceive the other partner. 3. It is the duty of partners to render true accounts and full information of all things affecting the firm .

1.RIGHT TO TAKE PART- every partner has a right to take part in the conduct of the business. 2. RIGHT TO EXPRESS OPINION every partner has the right to express his opinion before the matter is decided. 3.RIGHT TO HAVE ACCESS TO BOOKS-every partner has a right to have access to and to inspect and copy any of the books of the firm. 4.RIGHTS TO SHARE PROFIT EQUALLY- a partner is entitled to share the profits of the business of the firm equally. 5.RIGHTS TO RETIRE- every partner has a right to retire with the consent of all other partners . 6.RIGHT TO RECEIVE INTEREST ON CAPITAL OUT OF PROFIT-every partner has a right to receive interest on capital out of profit and not from loss.

The authority of a partner means the

capacity of the partner to bind the firm by his act . The authority may be express or implied The authority conferred on the partner by mutual agreement is called express authority . The authority conferred on a partner by the provisions of section 19 of the Indian partnership act is called implied authority.

An agreement with a minor is void. It does not create any legal rights and obligation . It is well explained by the following case : A minor mortgaged his house in favor of a moneylender. To secure a loan of Rs. 20000, the moneylender advanced a part of the amount Rs.8000 to the minor. Subsequently, the minor sued for cancellation of the mortgage on the plea that he was a minor when he executed the contract.

Where else the moneylender pleaded for refund of the sum of Rs.8000 paid by him. The privy council held that a minors agreement was void hence the question of refunding money wont arise.

Reconstitution of A Firm

Introduction of a Partner [Section 31]

Retirement of a Partner [Section 32]

Expulsion of A partner [Section 33]

Insolvency of A partner [Section34]

Death of a partner
[Section35]

Transfer of Partners Interest

[Section29]

Meaning of Dissolution: The term dissolution stands for discontinuation. Under the Indian Partnership Act, 1932, the dissolution may be either of Partnership or of a Firm. Dissolution of a Partnership: Dissolution of partnership refers to the change in the existing relations of the partners. The firm continues its business after being reconstituted. Example: X,Y & Z are partners in a firm. X retires. The partnership between X,Y & Z comes to an end and new partnership between Y & Z comes into existence. Thus this new partnership is called reconstituted firm.

Basis of Distinction
1.Termination of old Partnership

Dissolution of Partnership
Old partnership ends and new partnership starts.

Dissolution of
Firm
Old partnership ends but no new partnership starts

2.Name of the Firm

The business continues under the firms name. Revaluation A/c is prepared.

Does not continue under the firms name. Realisation A/c is prepared.

3.Revaluation vs. Realisation

Dissolution of a firm

Without the order of the Court [Sections 40 to 53]

By the order of the court [Section 44]

By mutual Compulsory Agreement Dissolution [Sections 40] [Section 41]

On happening Of certain Contingencies [Section 42]

By notice [Section 43]

Insanity

Permanent Misconduct Persistence Transfer of Perpetual Any other Breach of Just interest incapacity losses Agreement ground

1. Treatment of Losses [Section 48(a)]: Losses including deficiencies of capital are to be paid in the following manner: a. First out of profits b. Then out of capital c. By Partners Individually in their profitsharing ratio.
2. Application of Assets [Section 48(b)]:

The assets of the firm in the following order: a. in paying firms debts to the third parties b. in paying to each partner due to him on account of his advances.

c. in paying to each partner due to him on account of his capital. d. the remaining will be divided among the partners in their profit sharing ratio. 3. Payment of Firms Debts & Partners Private Debts [Section 49]: In this case, the given provisions will apply : a. Firms property will be used first for the payment of the firms debts then if any, will be used in the payment of the partners private debts. b. Partners private property will be first used to pay his private debts then to pay the firms debts.

Thank You.