Admission, retirement,

expulsion of partners and their

liabilities.

Business Law
PRAGUN GUPTA - 20021021182
SAMYAK JAIN - 20021021475
RISHIT GOYAL - 20021021458
SIMARJYOT KAUR – 20021021247
GAURAV VERMA - 20021021372
AASHNA SAPRA - 20021021301
ARSHIA JAIN - 20021021039
NIPUN DHINGRA – 20021021174
SAMAY GARG - 20021021472
 ADMISSION
LIABILITY OF
OFAAPARTNER
PARTNER
Adjustments need to be made at time of admission
Conditions Leading to Admission of New Partner Liability of a Partner upon reduction of minimum number of
Nature & extent of liability of a partner of an LLP
 Calculating the new members in an LLP
profit-sharing ratio along with the
 When the firm is in an expansion mode and requires fresh
Liability of partners shall be limited except in case of unauthorized sacrificing ratio.
capital. If at any time the number of partners of a limited liability partnership is
acts,fraud and negligence.
When the new partners possess expertise which can be 
reduced below two and
Accounting the limited liability partnership carries on
for goodwill.
An obligation of the limited liability partnership whether arising in
beneficial for the business expansion of the firm. business for more than six months the person, who is the only partner of
contract
 orWhen otherwise, is solely the obligation of the limited liability limited
the partner in question is a person of reputation and the Revaluation of assets and
liability partnership liabilities.
during the time shall be liable personally
partnership.
adds goodwill to the firm. for the obligations of the limited liability partnership incurred during
The liabilities of LLP shall be met out of the property of the LLP.  Adjustment of capital as per new profit-sharing ratio.
that period.

Treatment of holding
Partner by GoodwilloutAt Admission
liable of Act
under the Partner Admission
Penal action of
onCapital
errant onand Change
partners in PSR
who Among
are not residentsExisting
of India
Partners
 ActWhen
The the that
provides amount for goodwill
any person is paid
(not being privately
a partner in any LLP), Atleast Sacrificing
one residentratio
designated partner (DP) in every LLP is would
who by words spoken or written or by conduct, represents himself, or ensure that at least one partner is available in India for at least six
 When the amount  New profit-sharing ratio
knowingly permits himselfnecessary for paying
to be represented to bethe share ofingoodwill
a partner a LLP months for regulatory compliance requirements
(knownisasbrought
‘partnerasbycash.
Holding out’) is liable to any person who has on Civil
 liability on such
Revaluation of aassets
partner
andwould be adjudicated
Reassessment by the courts
of liabilities
the faith of any such representation given credit to the LLP. under civil law which recognizes ‘foreign awards.
 When share of goodwill is not brought as cash.  Valuation and adjustment of goodwill

 Adjustment of partners’ capitals

 Distribution of accumulated profits (reserves)

 Retirement Laws of a partner in firm 
A Partner may retire from a firm

• With the consent of all the other partners.

• With the express agreement of the partners.
• If it is a partnership at will, then by giving notice of retirement to all the other partners.

In case of partnership at will, a partner may retire from the partnership by giving notice of his
intention to retire to all the other partners. In partnership at will, a partner has also a right to get a firm
dissolved by giving a notice in writing to all the other partners of his intention to dissolve the firm.
This notice is needed when  all the other partners either do not agree to the retirement of a partner or
they are not available to give their consent

There are certain restrictions but the law allows an outgoing partner to
carry on the business but he
• Cannot use the firm name.
• Cannot represent himself as a member of the partner.
• Cannot solicit the customs of the person who was dealing with the
firm before he ceased to be a partner. 
EXPULSION OF A PARTNER
A partner cannot be ordinarily expelled from the firm by any majority of the partners. But, if need
arises, expulsion may be done while satisfying the following requirements : 

• The power of expulsion must be available to the partners by an express contract between them.
• The power to expel should be exercised by majority of partners.
• It should be exercised in absolute good faith in the interest of the firm
• The accused partner should be given a chance to defend himself.

If any of the above conditions is not satisfied, the expulsion of the partner will be considered as
improper. A partner who is not properly expelled is entitled to be reinstated in his position.
CASE
STUDIES
Liability Case Liability of the firm for wrongful acts of a partner : Hamlyn v. John Houston & Co
 In this case, X and Y were partners in a firm.
 Hamlyn was a person who was operating a similar business to that of X andVishnu Y. Chandra v. Chandrika Prasad
 ADMISSION CASE STUDY
Hamlyn clerk was bribed by X for getting some important confidential information. Agarwal (1983)
 Hamlyn realised the fraud played on him by X and his clerk, he sued X’s firm for damages.
As per sub-section (2), no deduction will be allowed to an

industrial Itundertaking
was held by thewhich
Court that
is all the partners
formed of the firm up
by splitting are responsible
or for the wrongful act committed by the partners of the firm.
Issue before the court- Whether the appellant is
the reconstruction of a business already in existence, and entitled to retirement or the dissolution of the
that it is not formed by transfer to a new business of partnership itself.
machinery or plant previously used for any purpose. The plaintiff had filed a suit for the dissolution of the
Liability of firm
On the conversion of proprietorship firm forinto
misapplication
partnershipby partners : Rhodes
firm and v. Moules,
rendition (1895) He alleged that the
of accounts.
firm,thereIn was no one
this case, transfer of plantof and
of the partners a firmmachinery
of a solicitorto
wastherequested partnership was aatloan
by a client to obtain willforand that on
the client the
the firm hadofbeen
mortgage some
new firm but it was transfer of industrial undertaking as a dissolved on 23 November 1976 by notice.
property.
whole along with all the assets and liabilities. Neither there After listening
 The partner told the client that the mortgagees wanted some additional security and thustoobtained
the arguments
from the clientof some
bothshare
sides and
warrants
was any splitting up nor reconstruction of business already after a thorough discussion, the High Court held that
payable to the bearer.
in existence, but it was a case of change in the constitution the partnership wasn’t a partnership at will.

of the sameHe subsequently
industrialmisappropriated
concern the share warrants
which continuedand absconded.
to Result - The two-judge bench of the Supreme Court

manufactureThe other
the partners
same had no awareness
item even after of theadmission
deposits of theofwarranties
a and consequent appropriation thereof. had retired from the
decided that the plaintiff
 To make the firm liable for the acts of
partner. Thus, both the conditions which disqualify the a partner, it is necessary that such a partner while receiving
partnership and that such money retirement
or property fromis a effective
third party
acted within his apparent authority.
deduction are not present in the instant case. from the day of the institution of the suit.
 If the act done is not permitted under such authority, the firm cannot be made liable for the same .