PARTNERSHIP ACT 1932
BY SUSHMA GOWDA
INTRODUCTION
The Indian Partnership Act 1932 defines a partnership as a relation between two or more persons who agree to share the profits of a business run by them all or by one or more persons acting for them all.
ESSENTIALS OF PARTNERSHIP
There are about 5 essentials of partnership
1) There must be Contract
Partnership is the result of a contract. It does not arise from status, operation of law or inheritance as per Section 5 under Indian Partnership act 1932
CASE
Thus a ‘contract’ is the very foundation of partnership. It may, however, be either express or implied. Again, it may be oral or in writing (Laxmibai vs. Roshan Lai).
2) Association of two or person.
Sec. 11 of the Companies Act, 1956, lays down that a partnership consisting of more than 10 persons for banking business and 20 persons for any other business would be illegal.
3) Carrying on a business
If the purpose is to carry on some charitable work, it will not be a partnership. Divide of property or bulk of things will not be considered as partners
if a number of articles are purchased at one time and the sales are to go on, profits are to be realised and are to be divided amongst a number of persons, there is a carrying on of business.
4) Sharing of profit and sharing of looses is not necessary.
This essential element provides that the agreement to carry on business must be with the object of sharing profits amongst all the partners. an agreement to share profits implies an agreement to share losses as well.
5) Mutual Agency
every partner is both an agent and principal for himself and other partners.
ESSENTIAL OF PARTNERSHIP DEED DRAFTING
However partnership deed need not to be registered. One can run unregistered partnership deed
Essential characteristics of a Partnership deed.
KINDS OF PARTNERSHIP
There are two Kinds of it
1) Partnership at Will
As per section 7 of Indian partnership act 1932 partners with no fixed agreement will be considered as partnership at will.
2) Partnership for Fixed Duration
When partners comes together to form partnership firm for fixed duration will be considered as partnership for fixed duration. If that fixed duration comes to an end partnership will be considered as end of it, but even after end partnership, partners continue then it will be considered as Partnership for fixed duration.
3) Particular partnership
A partnership can be formed for carrying on continuous business, or it can be formed for one particular venture or undertaking. If the partnership is formed only to carry out one business venture or to complete one undertaking such a partnership is known as a particular partnership.
4) General Partnership
Unlike a particular partnership in a general partnership the scope of the business to be carried out is not defined. So all the partners will be liable for all the actions of the partnership.
(i) The name of the firm and the names and addresses of partners who compose it.
(ii) Nature of business and the town and place where it will be carried on.
(iii) Date of commencement of partnership.
(iv) The duration of partnership.
(v) The amount of capital to be contributed by each partner and the methods of raising finance in future if so required.
(vi) The ratio of sharing profits and losses.
(vii) Interest on partners’ capital, partners’ loan, and interest, if any, to be charged on drawings.
(viii) Salaries, commissions etc., if any, payable to partners.
(ix) The method of preparing accounts and arrangement for audit and safe custody of cash etc.
(x) Division of task and responsibility, i.e., the duties, powers and obligations of all the partners.
(xi)Rules to be followed in case of retirement, death and admission of a partner.
(xii) Expulsion of partners in case of gross breach of duty or fraud.
(xiii) Can a partner carry on a competing business or any other business whether competing or not. Section 11 (2) clearly provides that the Deed may provide that a partner shall not carry on any business other than that of the firm while he is partner, notwithstanding anything contained in Section 27 of the Indian Contract Act where agreements in restraint of trade are void.
(xiv) The circumstances under which the partnership will stand dissolved.
(xv) Arbitration in case of dispute among the partners.
