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Indian Partnership Act, 1932

Indian Partnership Act, 1932

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Published by Shruti Punja
Indian Partnership Act 1932
Indian Partnership Act 1932

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Categories:Types, Business/Law
Published by: Shruti Punja on Aug 25, 2010
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05/09/2013

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St.

Andrews

Indian Partnership Act, 1932
Group 5 & 9

What is Partnership? 

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.´

Essentials of a Partnership 

Partnership always the result of an agreement
Partnership relation based on Contract. Implied or Express (Oral or Written) 

Carrying on business
Trade, Occupation or Profession

Sharing of profits the business  Business is carried on by all or any one of them acting for all (Mutual agency) 

Formation of a Partnership
Based on agreement  Agreement may be express or implied 

In Writing : helpful in times of adversity Written agreement : ³Partnership Deed´

Essence of Partnership : Trust & Confidence  Drafted with care and signed by all partners  Firm should be registered and copy of the Deed to be filed with the 

Classes of Partners
Active Partner Active partners are those partners, who actively participate in the business of the firm.  Dormant, Sleeping or, Nominal Partner Dormant, also known as sleeping, or nominal partners, are those, who join the firm by agreement but do not actively participate in the business of the firm.  Sub-Partners When a partner transfers a share of his interest in a firm, the transferee is called a sub-partner. 

Firm Name 

The name, under which the business of the firm is carried on, is called the ³firm name.´ No Name with a Fraudulent Intent. 
Should

not be a name already adopted by a reputed firm, to mislead public

No Name Suggesting Patronage of the States. 
Should

not contain words : Crown, Emperor, King, Queen, Royal, Empire, Imperial or words expressing or implying the sanction, approval or patronage of Government

Types of Partnership 

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

Types of Partnership 

Partnership at Will
No provision in contract between the partners for
Duration of Partnership  Determination of Partnership 

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

Types of Partnership 

Particular Partnership
A 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.

Registration of Firms 

Section 58 lays down that the registration of a firm may be effected at any time by sending by post or delivering to the Registrar, a statement in the prescribed form and accompanied by the prescribed fee, stating the following particulars: The name of the firm The place or principal place of business of the firm The name of any other places, where the firm carries on business The date when each partner joined the firm The names in full and permanent addresses of the partners The duration of the firm

Dissolution of Firm/Partnership 

Section 39 lays down : ³The dissolution of partnership between all the partners of a firm is called the dissolution of the firm.´ When a firm is put to an end, it is called the dissolution of a firm. 

Modes of Dissolution of a Firm 

A firm may be dissolved by any of the following three ways: By voluntary acts of the partners themselves By operation of law By intervention of Court

Rights and Duties of Partners 

Section 11 lays down : ³Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing.

Duties of Partners
The Indian Partnership Act, 1932, prescribes the following duties and liabilities of partners of a firm:  What are the General Duties of Partners?
To carry on the business of the firm to the greatest common benfit To be just and faithful to each other in their mutual dealings To render true accounts and full information of all things, affecting the firm, to any partner or to his legal representative

Duties of Partners 
    

A Duty to indemnify the Firm for Any Loss, Caused by Fraud. A Duty of a Partner to attend Diligently to His Duties. A Duty of a Partner to indemnify the Firm for Any Loss, Caused by His Willful Neglect. A Duty of a Partner to account for Private Profits A Duty of a Partner to account for Profit in Competing Business No Remuneration to Partners

Rights of Partners 
     

Right to take Part in the business of the firm Right to share Equally in the Profit, Earned by the Firm Right to claim interest on the Capital, Subscribed by Partners Right to be consulted in All Matters of the Firm Right to Access to the Books of the Firm Right to claim Interest on Advances Made by Partners Right of a Partner to be Indemnified

Rights of Partners 
    

Right of a Partner to act in an Emergency Right of a Partner to prevent Introduction of a New Partner Right of a Partner to Retire Right of a Partner not to be Expelled Right of an Outgoing Partner to carry on Competing Business Right of an Outgoing Partner to Share in the Profit

Property of the Firm
Joint property of all the partners as opposed to their personal property  Property includes 

Originally brought into firm by partners Acquired by the firm Acquired by one or more partners for the purpose of business Goodwill of the firm 

To be held and used by all partners for the purpose of business (not for private use)

Position of Minor
Sec 30(1), A person who is a minor according to law to which he is subject may not be a partner in a firm, but with the consent of all the partners for the time being, he may be admitted to the benefits of partnership.  A minor can only be admitted to the benefits of an already existing partnership 

Position of Minor
During his Minority  Rights 

Right to receive agreed share of profits and property Have access to and inspect and copy the accounts of the firm If share in profits is not given, can sue (can do if he wants to sever his connection) 

Liabilities
Only to the extent of share in profits and properties (not personally liable)

Position of Minor 

On Attaining Majority
Within six months should give notice whether he is joining the partnership or not. If notice not given he shall become a partner

Restrictions On Authority Of A Partner 

Under the Partnership Act in the absence of any usage of trade to the contrary, the implied authority of a partner does not empower him to do the following acts:
Submit a dispute relating to the business of a firm to arbitration. Open a bank account in his own name. Compromise or relinquish any claim of the firm. Withdraw a suit or proceeding on behalf of the firm. Admit any liability in a suit or proceeding against the firm. Acquire immovable property on behalf of the firm. Transfer immovable property belonging to the firm. Enter into partnership on behalf of the firm.

Limited Liability Partnership
Limited Liability Partnership Act, 2008 came into effect from 31st March 2009.  LLP: A corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner, providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership. 

Limited Liability Partnership 
     

LLP has separate Legal Entity Liability of the partners limited to their agreed contribution Not liable for the independent or un-authorized actions of other partners Perpetual succession Indian Partnership Act, 1932 not applicable No maximum limit of members; one partner should be Indian Registrar of Companies - register and control LLPs.

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