What is definition of partnership in Indian Law ?
Relevant provision : Section 4 of the Partnership Act
Partnership = the relation between persons - agreed to share the profits of a business carried on by all.
Who are partners ?
Partners = Persons entered into partnership - collectively called a firm
What is firm name ?
Firm Name - The name under which their business is carried on is called the firm name.
What is definition of partnership under English Law ?
The relation which subsists between persons carrying on business in common with a view of profit.
What are essential elements of partnership ?
Essential elements of partnership:
1. There must be at least two persons.
2. That must be result of an agreement.
3. It is organised to carryon a business.
4. Agreed to share the profits of the business.
5. The business is to be carried on by all or anyone of them acting for all.
FORMATION OF PARTNERSHIP
What are the basic requirement for formation of partnership ?
Basic requirement - all the elements of a valid contract must be present.
What should be the form of partnership agreement ?
It may be oral or writing or it may be implied or inferred from the conduct of the parties.
Whether the such agreement must be stamped or registered ?
The deed must be stamped according to Stamp Act. Although registration is notcompulsory, firm may be registered to enjoy certain rights.
What are the procedures for registration of partnership ?
Relevant provision : Section 58 # The registration should be made in the form of a Statement signed by all the partners
Details to be mentioned : Firm name, place of business, other places of business , date of joining of partners, names & address of partners , duration of firm # Furthermore, every change must be informed.
REGISTRATION OF A FIRM
What are the effect of Non-registration of a Firm ?
Registration is optional but unregistered firm cannot do the following :
A partner of an unregistered firm cannot file a suit against any firm or partner # S.69(1).
Cannot file a suit against any third party to enforce a right arising from a contract # S. 69(2).
Cannot claim a set off above Rs.100 in a suit # S.69(3).
What are the rights that stay non- affected by not registering the firm ?
Relevant Provision: Section 69 .
The right of a third party to sue the firm or any partner .
The right of a partner to sue for dissolution of the firm or for settlement of accounts if the firm is already dissolved or for his share of the assets of the dissolved firm.
The right of an unregistered firm to sue to enforce a right arising otherwise than out of contract
The power of an Official Assignee or Official Receiver to realise the property of an insolvent partner.
A suit or set-off not exceeding Rs. 100 in amount.
When a firm could be registered ?
Registration Time: An unregistered firm can be registered anytime before dissolution.
Caution ! It should be registered before filling a suit or the court will reject such suit.
Remedy ! The firm can subsequently get itself registered and file the suit again .
What is duration of partnership firm ?
Duration of Partnership: The parties may fix duration or say nothing about it.
Partnership with fixed Time : decide to do business for certain period = partnership for a fixed period” # Implication: When period over, partnership ends.
Partnership with particular purpose : Formed for particular venture= “particular partnership” # Implication : Ends on the completion of the venture.
Partnership with no limit : agree to carry on till they wish=“Partnership at will”.
Implication: Continued till will of the partners .
What all are said to be partnership property ?
Partnership Property: The property of the firm includes
all property originally brought into stock of the firm + subsequently added.
property acquired in course of business with firm money.
the goodwill of the business
What is partnership deed ?
Partnership Deed = agreement creating partnership
What are its contents ?
Contents = nature, principal place of business, firm name, names and addresses of the partners, firm duration, profitsharing ratio, interest on capital and drawings, valuation of goodwill on the death or retirement of partner, management, accounts, arbitration, etc.
Stamping !The Indian Stamp Act, 1889, requires that the Deed mustbe stamped.
Eligibility !Any person who is competent to contract can enter into partnership agreement.
Who are all persons of special consideration in a partnership ?
1. Minor: Can be only admitted to benefits of firm.
2. Alien- cannot be partner in an Indian firm.
3. Person of unsound mind:cannot be partner.
4.Company:If authorized by its articles of association can enter into partnership .
5.Firm: A firm cannot enter into partnership contract.
What is position of minor in partnership firm ?
MINOR POSITION DISCUSSED ! Legal Status of Minor : Minor contract void abinitio
Partnership as an exception : If all the partners agree a minor may be admitted to the benefits of an already existing partnership firm.
What is status of minor in partnership in India ?
Rights and liabilities of Minor in partnership # Relevant Provision : -Section 30.
1. The minor has a right to such share of property + profits .
2. Right to access +inspect + get copy any of the accounts of the firm.
3. The minor not personally liable for debts but his share in profits + assets of the firm will be liable for the same.
4. Minor can files suit for share after he severe his connection with the firm.
5. Within six months of his attaining majority minor can elect to become partner or not .
Implication of election : If he stay quiet he shall become a partner in expiry of the said six months.
6. Result of minor electing to be partner : A minor who thus becomes a partner will become personally liable for all debts and obligations of firm incurred since date of his admission to benefits of partnership.
7. Result of minor electing not to be partner :
His rights and liabilities continue to be those of a minor upto the date on which he gives public notice to not to become its partner.
His share will not be liable for any act of the firm done after the date of the notice.
He can sue for his share of the property and profits of the firm.