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Effect of Non-Registration of Firm

(Section-69)
• Introduction:
The registration of the partnership firm is not made compulsory under Partnership Act, 1932
but it should be registered with the Registrar of Firms soon after its formation because an
unregistered firm cannot sue outsiders although outsiders can sue the firm.

• Procedure of Registration (Section 58):

A partnership firm can be registered by providing the following information to the Registrar
of Firms:

1. The name of the firm.

2. The principal place of the business of the firm.

3. The names and addresses of the partners.

4. The names of the places where the firm has its branches.

5. Date of the commencement of the business of the firm.

6. Dates on which the various partners joined the partnership firm.

7. The duration of the partnership firm.

The statement providing the above-mentioned information should be submitted along with
prescribed fees and must be signed by all the partners. Then according to Section 59,
Registrar shall make an entry of the statement in a register and shall file the statement
when he will be satisfied that all legal formalities have been completed.

• Effect of Non-Registration of Firm:

The working of a firm without the procedure of incorporation is an advantage but it is
subjected to restrictions. A non-registered firm cannot avail of all the rights of a registered
firm. The working of a non-registered firm is different from that of a registered firm and the
right of a non-registered firm is limited. The effect on a firm for not being a registered one is
provided under Section 69 of the Partnership Act, 1932. There are some consequences to it
which are the following as under:

1. No suit to enforce rights under the Act:

A firm that has not undergone the procedure of incorporation/registration will not
be able to file a suit against any other firm or third party. A non-registered firm does
not have the right to file a suit like all other registered firms.
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2. No Lawsuit can be filed in civil court by the firm or other co-

partners against the third party:
If the firm is not registered, the firm or any other person on its behalf cannot sue
against third party for infringement of contract that the firm has entered. In
addition, the person filing the lawsuit on behalf of the firm must be registered as a
partner in the register of firm.

3. No partners can claim a set-off relief:

Without registration of the firm, any steps conduct against the firm by a third party
for a value greater than Rs. 100 cannot be compensated by the firm or one of its
partners. Further proceedings to assert the rights arising from the contract cannot
be carried out either.

4. An aggrieved person/partner cannot sue against other

partner or the firm:
No legal action can be taken against the firm or any partner (or accused as a partner)
unless the firm’s partner or any person is registered on its behalf. However, if the
firm is dissolved, such a person can sue for the dissolution of the firm’s account and
the recovery of his share in the firm’s assets.

5. A third party can sue the firm:

Even if the firm is not registered, a third party can take legal action against the firm.

• Exception to Section 69:

Though being subjected to many restrictions, unregistered firms still possess certain powers
that may not be as absolute as with the registered ones but they do exist. Some rights and
power are given to the unregistered firm which is following as under:

1. Sue: The third party has a right to sue the firm or its partners for protecting their
rights.
2. Dissolution: The right of the partner to sue for dissolution of the firm or for
accounts if the firm has been dissolved or for his share of assets of the dissolved
firm.
3. Breach: The unregistered firm has right to recover amount for breach of contract.
The infringement of trade or otherwise.
4. Assignee: The official assignee or receiver has a right to realise the property of an
insolvent partner.
5. Firms: The rights of firms or partners of firms having no place of business in
Pakistan.
6. Set-Off: An unregistered firm can file a suit for set-off not exceeding rupees one
hundred (Rs-100/-) in amount when the other firms have filed Court case against it.
7. Arbitration: The partners of an unregistered firm apply for reference to
arbitration to settle the dispute among them.
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