Presented To:

Miss Mudassira Aziz

Presented By:

Faheem Saleem Butt

Usman Sohail
Omer Khan
Salahuddin Shah
TOPIC
 Partnership
Definition of Partnership

Section 4 partnership act 1932defines partnership as

follows:

“It is the relation between persons who have agreed to share

the profit of a business carried on by all or any of them
acting for all”.
 Elements of Partnership
1. There must be an association of two or more persons for
carrying on some business.

2. There must be an agreement.

3. The agreement must be to share the profit of a business.

4. The business must be carried on by all or any of the

partners acting for all.
 Characteristics of Partnership
1. Agreement

2. Number of partners

3. Business

4. Profit motive

5. Conduct of business

6. Unlimited liability
 Characteristics of Partnership
7. Investment

8. Transferability of share

9. Chances of dissolution

10. Duration of partnership

11. Position
 Characteristics of Partnership
1. Agreement
There must be agreement between the parties concerned.
This is the most important characteristic of partnership.
Without agreement partnership cannot be formed. No
agreement no partnership. But only competent persons
are entitled to make a contract
2. Number of partners
There should be more than one person to form a
partnership. But there is restriction for the maximum
number of partners. In case of ordinary business, the
partner must not exceed 20 and in case of banking must
not exceed 10(Befor nationalization).
 Characteristics of Partnership
3. Business
The object of the formation of partnership is to carry on
any type of business. It may be manufacturing or
merchandise type, small or large scale business. But it
should not be illegal business in the country.
4. Profit motive
The basic motive of the formation of partnership is to earn
profit. This profit is distributed among the partners
according to agreed proportion. If there is loss it will be
sustained by all the partners except the minor.
 Characteristics of Partnership
5. Conduct of business
The business of partnerships conducted by all the partners
or any of the acting for all. But each partner is allowed to
participate in the management by law .

6. Unlimited liability
This is the prominent of the feature of partnership that the
liability of each partner is not limited to the amount
invested but his private property is liable to pay the
business obligation.
 Characteristics of Partnership
7. Investment
Each partner contributes his share in the capital according
to the agreement. Some persons become partners without
investing any capital to the business. But they devote their
time ,energy and ability to their business instead of capital
and receive profit.
8. Transferability of share
There is restriction to transfer the share from one partners
to another person without the consent of existing partners.
So the investment in the partnership remains confined into
few hands.
 Characteristics of Partnership
9. Chances of dissolution
Partnership may be dissolved on the happening of any
events. Retirement, death, insolvency and disagreement
of any partner make shorter life of partnership .
10. Duration of partnership
Partnership is not always for a fixed period of time
partnership at will (section 7) but it may be for
indefinite period of time. Some partnership is also
formed for completion of particular ventures
11. Position
One partner is an agent as well as to other partner. He
can bind by other person by his act. In the position of an
agent he can make contract with another person or
parties on behalf of his firm.
 Partnership Agreement

It is the most important document of the partnership which

includes terms and conditions relating to partnership and the
regulations governing its internal management and organization.
Partnership agreement must be oral or written or implied
conduct of partners. But it is not necessary to have the agreement
in writing, so that in case of dispute or misunderstanding among
the partnership it may be removed according to the provision of
this document. It is also called the article of partnership.
Important Provision of Partnership Deed
The usual provision which should be contained in such
documents are as follows:
1. Name of the firm
2. Nature of business
3. Location
4. List of partners
5. Duration of partnership
6. Date of commencement
7. Total Capital
Important Provision of Partnership Deed
8. Ratio of profit
9. Amount of drawing
10. Interest on capital and drawing
11. Amount of salary
12. Division of work
13. Amount of profit
14. Head office and branches
15. Additional capital
16. Dealing bank
17. Audit of accounts
Important Provision of Partnership Deed
18. Rules of admission and with drawl
19. Determination of goodwill
20. Period of accounts
21. Rights and duties of partners
22. Loan and Interest
23. Settlement of accounts
24. Arbitration
25. Deficiency in capital
26. Witness
27. Ways of dissolution
 Types of Partnership

There are three types of partnership.

1. Partnership at will

2. Particular partnership

3. Limited Partnership
 Types of Partnership
1. Partnership at will
This type of partnership is defined the section 7of the
partnership act 1932: “Where no provision is made by
contract between the partners for the duration of their
partnership or for the termination of partnership”.
Partnership at will may be created under the
following circumstances:
a. Indefinite period
b. Existence after completion of venture
c. Existence after the expiry of period
Types of Partnership
 Registration of Firm
The registration of partnership is not compulsory. If the
partners so desire they may get their firm registered. The
registration of firm is only a proof of the existence of the
firm registered. It does not provide any legal entity to the
firm.

Procedure of Registration

1. Submission of Application
2. Certification
3. Change of Particulars
4. Penalty for False Particulars
 Effect of Non-Registration
1. No suit by a partner
If any dispute arises among the partners or between a
partner and the firm or between a partner and ex-partners
regarding the rights arising from contract, then a partner of
an unregistered firm cannot file a suit to settle such
disputes however, criminal proceedings can be brought by
one partner against the other Thus, if partner steals the
property of the firm any partner can file a suit
2. Suit by third party
A third party can file a suit against the firm or its partner
to enforce his rights
 Effect of Non-Registration
3. No suit by firm
An unregistered firm cannot file a suit against a third party,
for the enforcement of any right arising from a contract e.g.;
for the recovery of the price of goods supplied. But, criminal
proceedings can be brought against the wrong doers.
4. No claim for adjustment
A firm cannot even claim adjustment of the amount
exceeding Rs.100 payable and receivable by the firm. For
example, a firm has to pay Rs.500 to Mr. A who owes Rs.80
to the firm, the firm cannot claim adjustment and get it
enforce in the court.
 Advantages of Registration
1. Advantage to firm
a. The registered firm can file a suit against the third
party for the enforcement of rights arising from
contract.
b. The registration enhances the goodwill of the firm.
c. The registered firm attracts large capital resources
from the public.
d. The registered firm can claim adjustment from the
third party.
 Advantages of Registration
2. Advantages to the partners
a. The partner of registered firm can file a suit in the court of
law in order to settle their disputes.
b. In case of registered firm the new person feels less
hesitating while becoming a partner because he knows that
in case of dispute, he can resort to court of law.
c. In case of a registered firm the partner who leave the firm
cannot be held responsible for the firm’s debts after their
expulsion from firm because the record of the “Registrar
of firm “ will show that they have left the firm.
 Advantages of Registration
3. Advantage to the creditors
a. The partners of a registered firm cannot deny from the
membership of the firm to the creditors.
b. The creditors of the firm can hold all the partners liable for
the payment of their debts due by the firm.
 Dissolution of partnership
It must be noted that there is a difference between
dissolution of firm and dissolution of partnership. Section
39 of partnership act describes, “the dissolution of
partnership between all the partners of a firm is called the
dissolution of firm". It means that dissolution of the firm
includes the dissolution of partnership. But when
partnership is dissolved, the firm may or may not be
dissolved because the business may be conducted by the
surviving partners on the retirement, death or insolvency of
partners. So it is dissolution of a partnership but not
dissolution of firm.
 Ways of Dissolution
The following are the five manners in which a firm may
be dissolved:
1. Dissolution by agreement
2. Compulsory dissolution
3. Contingent dissolution
4. Dissolution by notice
5. Dissolution by court
 Ways of Dissolution
1. Dissolution by agreement
a. With the consent of all partners
A firm may be dissolved by the mutual consent of all the
partners at any time or in accordance with a contract
between the partners.
2. Compulsory dissolution
a. By the insolvency of partners
A firm may be dissolved when all the partners or all but
one become insolvent.
 Ways of Dissolution
b. By business becoming illegal
A firm shall be dissolved when the business of the firm is
declared illegal or become unlawful due to happening of
any event.
3. Contingent dissolution
The partnership firm may be dissolved due to the
following reasons:
a. Completion of venture
By the completion of particular undertaking or venture
for which the partnership was formed.
 Ways of Dissolution
b. Expiry of period
If partnership is formed for a fixed period, the firm may
be dissolved the expiry of that time in the absence of new
contract.
c. Insolvency of partner
By the adjudication of a partner as an insolvent
d. Death of partner
The firm may be dissolved by the death of partner
whether the partnership is at will or for a fixed period
e. Insolvency of partnership
If partnership is itself declared at any time as insolvent.
 Ways of Dissolution
f. Retirement of partner
The partnership may come to an end on the retirement of
any partner if remaining partners do not join in the new
contract.
4. Dissolution by notice
In case of partnership at will, the firm may be dissolved
by any partner serving notice in writing to all the existing
partners of his intention to dissolved the firm.
5. Dissolution by court
The following are the grounds in which a firm may be
dissolved by the order of the court:-Section 44
 Ways of Dissolution
a. Transfer of interest
If any partner transfer his share or interest to other person
without the consent of existing partners.\\
b. Breach of contract
If any partner commits breach of partnership contract and
remaining partners finds it impossible to continue the
business
b. Assurance of loss
The court may issue the order of dissolution if the
business of the firm cannot be carried on except at a loss.
d. Unsound mind
If any partner becomes of unsound mind.
 Consequences of Dissolution
There are several ways of consequences of dissolution.
1. Liability of partners after dissolution.
2. Rights of partners after dissolution.
3. Authority of partners on Winding up.
4. Liability to Share Personal Profit.
5. Return of Amount on Dissolution.
6. Partnership Contract Based on Fraud or Misrepresentation.
7. Use of Firm Name or Firm Property.
8. Agreement In Restraint of trade.
Settlement of Account Between Partners
Upon Dissolution
1. Losses including deficiencies of capital, shall be paid first
out of the profit, next out of capital, and, lastly, by the
partners individually in the proportions in which they
were entitled to share, profits.\
2. The assets of the firm, including any sums contributed by
the partners to make up deficiencies of capital, shall be
applied in the following manner and order:
i. In paying the debts of thefirm to third parties
ii. In paying to each partner ratably what is due to him from
capital .
Settlement of Account Between Partners
Upon Dissolution
iii. In paying to each partner ratably what is due to him on
account of capital.
iv. In distributing, the surplus, if any, shall be divided among
the partners in the proportions in which they were entitled
to share profit.Sec.48