Partnership deed is a legal document written when two or more individuals come

together and decide to run a business for the aim of obtaining and sharing profit.

It is always recommended that there must be a partnership deed among the partners
before getting into any partnership business. But sometimes a partnership is
commenced without a partnership deed. In this case, the rules of partnership will be
applicable as per the provisions of the Partnership Act.

For Tanzania the law that governs partnership is part X of the Law of contract Act,
Cap 345.

The following are the provisions that are relevant to the partnership accounts in
absence of partnership deed.

Interest on Capital:

When there is no partnership deed or the partnership deed is silent on the case
related to interest on partner’s capital, then according to the Partnership Act,
partners’ are not entitled to get interest on capital.

However, on the consent of all partners, rate of the interest on capital can be
decided and then they are free to give interest on capital out of the profit of the firm.

Court Final decision:

If the partnership somehow ends up in a courtroom, usually partnership deed serves

as a legal document that can influence the final decision served.

However if the partnership deed is absent, then the Partnership Act will be used
instead.

Interest on Drawings:

When there is no partnership deed the case related to the interest on drawings will
be treated according to the provisions Partnership Act,

The Act states that, no Interest on drawings will be charged from the partners.
Example if AsmaB withdraws TZS 3 million for personal use, then only withdrawn
amount will be debited to AsmaB’s Current account.

Interest on Partner’s Loan:

When there is no partnership deed among the partners or the partnership deed is
silent on interest on partner’s loan, then according to the Partnership Act, The
partners are to recieve 6% p.a interest on the loan.

Example if Bayeyo provided Loan of TZS 40,000,000 to their partnership, then

Bayeyo is entitled to receive 6% of 40,000,000 per annum which is TZS 2,400,000.
Such amount will be credited to the Bayeyo’s Currrent or Capital account.

Profit Sharing Ratio:

When a partnership deed is absent or even if it is present but is silent on sharing of

profit or losses among the partners of a firm, then according to the Partnership Act,
profits and losses is to be shared equally among all the partner of the firm.

This is regardless of the capital contributed by partners, each partner will get qually
share.

Example if the Retained profit obtained for the year was TZS 45,000,000, then the
share on profit to Bayeyo, Dydah and AsmaB will be TZS 15,000,000 each.

Salary to Partner:

When partnership deed is not there or it is silent on the issue related to salary to a
partner, then as per the rules of the partnership Act.. No partner will be entitled to
any salary.

This means that in absence of the partnership deed, it doesn’t matter if the partner is
Active or dormant/sleeping, the partnership act provides that no partner is to receive
salary.
Capital contribution:

If there is no partnership deed, then not every partner must have contributed his
share of capital. Some partners like QUASI partners does not contribute any capital
to the partnership but allows the business to use his/her name as means of
popularity and take advantage of the name to earn more customers

Minor:

On the absence of the partnership deed, the partnership act allows Minor (18 age
and below) to be admitted in the partnership by consent off all existing partners.

Settlement of disputes:

If there is no partnership deed, then any partner can settle disputes to the external
parties related to the partnership.

Example if Bayeyo caused a dispute with customer due to overpricing, then AsmaB
or Dydah can settle this on behalf of the partnership.

Right to participate on business:

On the absence of the partnership deed, then the partnership act provides that every
partner has the right to carry on the business in due diligence and honest.