Contents Introduction of Partnership............................ Partnership....................................................... ..................................................... .......................... .........1 Important elements necessary to constitute partnership..................................... partnership.........................................1 ....1 Types of Partnership............................ Partnership....................................................... ...................................................... ......................................... ..................1 ....1 Ordinary Partnership............................ Partnership....................................................... ............................................... ................................ ..................... .........1 1 Limited Partnership.................................. Partnership............................................................. .......................................... ........................... ...................... ..........1 1 Partnership at-will.................................... at-will............................................................... ...................................................... ......................................2 ...........2 Difference between Company and Partnership............................ Partnership....................................................... ................................3 .....3 Difference between Joint Venture and Partnership............................. Partnership.................................................. .........................5 ....5 Rights Duties and Liabilities Liabilities of Partners............................................................ Partners............................................................ ..........6 .......... 6 Rights of Partners................................... Partners.............................................................. ................................................................ ..................................... ..6 Duties of Partners (General/ Fundamental Fundamental /Absolute)............................ /Absolute)........................................ ..................6 ......6 Liabilities of Partners................................. Partners............................................................ ........................................................ ............................. .......6 Registration of Partnership......................... Partnership.................................................... .......................................................... ............................... .......8 Procedure and Requirements............................................ Requirements........................................................................ ............................ ...........8 ........... 8 Partnership Deed.......................................... Deed..................................................................... ............................................................8 .................................8 Application............................ Application....................................................... ...................................................... .........................................................9 ..............................9 Advantages of Registration........................... Registration...................................................... ...................................................... ..................................10 .......10 Advantages of Registration to the firm..................................................... firm................................................................... ..............10 10 Advantages of Registration to the Partners................................. Partners............................................................ ........................... 10 Advantages of Registration to the Creditors............................................... Creditors...........................................................10 ............10 Costs for Non-Registered Non-Registered Firm....................................... Firm.................................................................. ......................................... .............. 10 Reconstitution Reconstitution of a Partnership Firm..................................................... Firm..........................................................................11 .....................11 Dissolution of Firm/ Partnership................................................ Partnership.................................................................................12 .................................12 Process for the dissolution dissolution of a Partnership firm........................................................15 firm........................................................15 References................................ References........................................................... ...................................................... ......................................................16 ...........................16 References
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Introduction of Partnership “Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The term is defined as a voluntary contract between two or more competent person to place their their money, effects, effects, labor and skill, skill, or some or all of them, in lawful lawful comm commer erce ce or busi busine ness ss,, with with the the unde unders rsta tand ndin ing g that that ther there e shal shalll be a comm commun unio ion n of the the prof profit its s ther thereo eoff betw betwee een n them them.. Hals Halsbu bury ry defi define nes s a partnership as "the relation which subsists between persons carrying on a business in common with a view of profit".
Important elements necessary to constitute partnership There are four important elements necessary to constitute partnership. 1. There must be an association of two or more persons to carry on a
business. 2. There must be an agreement entered into by all the persons concerned. 3. The agreement must be to share the profits of a business. 4. The business must be carried on by all or any of the persons concerned acting for all.
Types of Partnership Thus, when all these conditions are fulfilled, a group can be registered as partners. Now there are various types of partnerships. 1. Ordina Ordinary ry Part Partner nershi ships ps 2. Limite Limited d Partn Partners ership hips s 3. Partne Partnersh rship ip at-wi at-will ll
Ordinary Partnership All of the partners share equal rights and responsibilities in the management of the business. Likewise, each partner in an ordinary partnership assumes full personal liability for the debts and obligations of the business. And one partner can enter into a contract on behalf of the partnership, making the other partner(s) legally bound to the terms of the contract. The profit of a general partnership passes through to its owners, making it taxable at each 2|Page
partne partner's r's indiv individu idual al income income tax rate. rate. (Part (Partner nershi ship p losses losses are also also "pass"passthrough", giving each partner the ability to offset taxable income from other sources.)
Limited Partnership In this kind of partnership one or more partners have limited liability and at least one of the partners has unlimited liability. The liability of the limited partner is limited to the extent of his investment in the business. a) It is formed under Limited Partnership Partnership Act 1907 1907 (of England) b) One or more partners have limited liability c) There is at least least one partner with with unlimited liability liability d) The firm must be registered. Once this is done the rights and duties of the partners are also recognized. e) A limited partner partner has no right to take take an active role in the the management of partnership. f) The capital capital invested invested by the limited limited partner partner will not be returne returned d to him as long as he remains a limited partner on the firm. g) The limited partner can inspect the accounts of the firm at any time. h) A new partner partner can be introd introduce uced d into into the firm at any time time without without the consent of the limited partners. i) The partne partnersh rship ip should should not consist consist of more more than than 20 partne partners rs (whethe (whetherr limited or not) except in the case of banking where they should not exceed 10. j) The registrar registrar of Joint Joint Stock Companies Companies shall shall be the registrar registrar of Limited Limited Partnerships.
Partnership at-will The essence of a “partnership at-will” is that the partners do not limit the duration of their partnership, and are free to break their relationship at any time they see fit. It is a partnership for indefinite period. The partnership may be dissolved at any point as long as the partner gives notice to all the other partners. An ordinary partnership becomes a partnership at-will under the following circumstances: a) If the partnership partnership is of a indefinite period period 3|Page
b) If a part partne ners rshi hip p is form formed ed for for a limi limite ted d peri period od of time time,, and the the firm firm continues to function after the expiry of this period. c) If a part partne ners rshi hip p is formed formed to conduc conductt a parti particu cula larr vent ventur ure, e, and then then continues to function after the venture is complete.
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Difference between Company and Partnership The The abov above e ment mentio ione ned d part partne ners rshi hip p type types s can can be diff differ eren enti tiat ated ed from from a company in many ways. These include: PARTNERSHIP
COMPANY
1. A part partne ners rshi hip p is not not a dist distin inct ct lega legall person, but is made of the persons composing it.
1. A company is a distinct legal person.
2. Creation of Partnership is purely a matter of agreement between the parties such an agreement need not even be in writing.
2. Creati Creation on of Compan Company y involv involves es elabor elaborate ate legal formalities.
3. In a firm firm part partne nerr cann cannot ot tran transf sfer er his his inte intere rest st with with the the cons consen entt of the the othe otherr partners.
3. Shares in a Company (especially, in a public Company) are generally freely transferable.
4. Each partner is prima facie the agent of 4. Shar Shareh ehol older ders s in a Comp Compan any y are are not not the the others, and can bind them by his contract agents of one another. made made in the the cour course se of busi busine ness ss of the the partnership. 5. Each partner is liable in full for the debts of the firm.
5. The liability of Company’s shareholders is limited by shams or by guarantee.
6. A part partner ner cann cannot ot cont contra ract ct with with his his firm firm..
6. A shar share e hold holder er in a comp compan any y can contr contrac actt with the company.
7. Partners may make any private 7. Arrangements in regard to Companies are arra arrang ngem emen ents ts amon among g them themse selv lves es.. For For regulated by law and statute for instance a inst instan ance ce a part partne nerr may may buy buy his his part partne ners rs company cannot buy its member's shares, but share. a partner can. 8. The Maximum number of partners can be twenty. But in banking business it is ten.
8. Ther There e is no maxi maximu mum m numb number er of shar share e hold holder ers s laid laid down down by the the law law in a publ public ic company though the minimum is seven. In a privat private e Compan Company, y, the minimu minimum m is two, two, and the maximum is fifty.
9. The The deat death h or reti retire reme ment nt of a part partne nerr 9. Death or retirement of a share holder does dissolves a firm. not dissolve the company.
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10. Property may be the common property of partners.
10. Property belongs belongs to the company and not to its members.
11. Restrictions contained in a partnership deed will not affect third parties, who are not aware of such restrictions.
11. 11. On the the othe otherr hand hand restr restric icti tion ons s in the the Articles of a Company affect third parties also.
12. A firm cannot sue and be sued in its own name.
12. A company can sue and be sued in its own name.
13. Decree against a firm can be executed against the partners.
13. A Decree against a company cannot be executed against its shareholders.
14. Registration is optional.
14. Registration is compulsory.
15. A firm having no separate lega egal 15. A company on the other hand can be a exis existe tenc nce e cann cannot ot be shar shareh ehol olde derr of shareholder of another company. company.
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Difference between Joint Venture and Partnership Partnership can also be differentiated from a joint venture according to the following differences: PARTNERSHIP
JOINT VENTURE
1. A partnership firm arises as a result of an agreement or a contract.
1. Joint venture involves two or more companies joining together in business.
2. In partnership, the individuals involved become partners in an organization for the sake of profit.
2. Two or more companies, which are listed in the stock market often, engage in a joint venture to overcome business competition.
3. The members in a partnership can claim Capital Cost Allowance as per the partnership rules.
3. Joint ventures on the other hand can use as much or as little of the CCA as they wish. There is no need to file returns in a joint venture but it has to be filed in partnership.
4. However, a member of the joint venture can retain the identity of his firm or property
4. In Partnership, the members cannot act a ct as per their wishes and they do not have any individual identity
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Rights Duties and Liabilities of Partners Rights of Partners The different rights of the partners are as follows. 1. Right Right to take take part part in in busin business ess.. 2. Right Right to to expr express ess opini opinion. on. 3. Right Right to inspec inspectt book books. s. 4. Right Right to share share the the profi profits. ts. 5. Right Right to inte interes restt on capit capital. al. 6. Right Right to inte interes restt on advan advances ces.. 7. Right Right to to be be indem indemnif nified ied.. 8. Right Right to to act act in eme emerge rgency ncy.. 9. Right Right to give give Cons Consent ent.. 10.Right to retire. 11.Right not to be expelled. 12.Right to carry on competing business. 13.Right to enforce. 14.Right to share in profits or interest. 15.Right to bind other partners.
Duties of Partners (General/ Fundamental /Absolute) The following are the duties of the partners. 1. Duty Duty of good good fait faith. h. 2. Duty Duty to carr carry y on busi busines ness. s. 3. Duty Duty to is is to share share los losses ses.. 4. Duty to to use use firm’s firm’s proper property ty for the firm. firm. 5. Duty to accou account nt for for persona personall profits profits.. 6. Duty to to be liable liable individu individually ally and joint jointly. ly. 7. Duty to work for for the great greatest est commo common n advantag advantage. e. 8. Duty Duty to render render accoun accounts. ts. 9. Duty Duty of of disc disclo losu sure re.. 10.Duty to indemnify for frauds. 11.Duty to act within authority. 12.Duty in emergency. e mergency. 13.Duty not to transfer interest.
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Liabilities of Partners The liabilities of the partners are given below. 1. 2. 3. 4.
Liability Liability of partner partner for acts acts of of the firms. firms. Liability Liability of the firm firm for for the wrong wrongful ful acts. acts. Liability Liability of firm firm for for misap misapplic plicatio ation. n. Liab Liabil ilit ity y of reti retiri ring ng part partne nerr for for all all the the liab liabil ilit itie ies s of the the firm firm prio priorr to his his retirement.
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Registration of Partnership Procedure and Requirements The registration of Partnership firm is not required by law and there is no pena penalt lty y for for nonnon-re regi gist stra rati tion on.. Ne Neve vert rthe hele less ss regi regist stra rati tion on can can give give my advantages to the firm. First of all Form – I needs to be filled. It is attached in appendix B. Then Partnership Deed is prepared on the Stamp Paper of worth Rs. 500. A sample sample for the statemen statementt of Partne Partnersh rship ip Deed Deed is also also added added in appen appendi dix x B. Regi Regist stra rati tion on fee of Rs. Rs. 500 500 also also needs needs to be depo deposi site ted d in National Bank of Pakistan through Challan Form. It is mandatory for the firm to be located located in commerci commercial al area. Copy of Lease Agreemen Agreementt or Ownership Ownership proo prooff need needs s to be prov provid ided ed as well well.. A temp templa late te of Leas Lease e Agre Agreem emen entt is attached in appendix B. The next requireme requirement nt is the attachment attachment of computeri computerized zed National National Identity Identity Cards of Partners Partners and Witnesses. Witnesses. It is mandatory mandatory that all papers should be attested from Notary Public. And the partners should contact the office after three days of submission of papers. All partners are required to appear before Regist Registrar rar of Firm Firm during during 9:00am 9:00am to 11:00 11:00am am with with their their origi original nal Nation National al Identity Cards. Lastly an affidavit regarding accuracy of papers and existence of office needs to be submitted on stamp paper worth Rs. 5.
Partnership Deed “Par “Partn tner ersh ship ip Deed Deed” ” is a docu docume ment nt that that tell tells s abou aboutt the the mutu mutual al righ rights ts and and obligations of all partners. This needs to be signed by all the partners and subsequent copies held by each partner. At the time of registration, a copy of the deed has to be submitted with an application to the Registrar of Firms in the concerned area. This document may also be referred to as an “Article of partnership”. A partnership deed usually contains the following format: 1. The The name name of of the the firm firm 2. The nature nature of business business that that is to be carrie carried d out by the firm firm 3. The address at which the firm intends to conduct its business 4. The amount of capital that each partner contributes. The form of capital whet whethe herr that that be cash cash or prop proper erty ty need needs s to be docu docume ment nted ed.. If the the
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capital is property, a full description of the property and the valued amount should be given also. 5. The names names and addresses addresses of of each partner partner should should be given given 6. The durati duration on of the partnership partnership if any 7. The ratio ratio of of sharing sharing profit profits s and losses losses 8. The amount or percentage of interest, if any, which is to be allowed on capital 9. The amount amount of salary salary each partne partnerr is to recei receive ve 10. The The manne annerr in whic hich a part artner nership ship is to be diss dissol olv ved and and the the subsequent distribution of property among the partners. 11.In the case of insolvency the valuation and treatment of goodwill 12.Provisions regarding the accounting system and the fiscal year to be used 13.Rules to be followed in the case of retirement, death and admission of a partner The method of settling disputes if any among partners. I.e. whether or 14. The not an arbitrator is to be appointed Method od of calc calcul ulat atin ing g amou amount nt issu issued ed to a dece decease ased d part partne ner, r, and and 15.Meth whet whethe herr this this is to be paid paid in full full or in inst instal allm lmen ents ts to his his lega legall representative. 16.In the case of breach of duty by one partner, powers of other partners to expel him from the firm 17. The The keeping of proper books of accounts and periodical preparation of accounts. 18.Any provisions to prevent any future misunderstanding and ill will.
Application The procedure of registration is comparatively simple. An application in the Form No. 1 Partnership Act 1932) along with the fee has to be submitted to the the Regi Regist stra rarr of Firm Firms. s. All All the the part partne ners rs must must sign sign the the appl applic icat atio ion. n. The The application or statement must contain the following particulars: 1. The The name name of of the the firm firm 2. The place place or princip principal al place of of business business of the firm firm 3. The names and addresses of other places where the firm may conduct business 4. The partner partner’s ’s date date of joinin joining g the firm 5. The durati duration on of of the firm firm 11 | P a g e
6. The name name and address address of the the partners partners.. Once the registrar is satisfied with the application, a certificate of registration is issued to the partners. As mentioned previously this is not required to commence business. If at any time there are changes to the firm in relations to the partners, place of business, insolvency etc. the registrar must be notified. The whole registration procedure is summarized in the form of a flow chart and is attached in appendix A.
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Advantages of Registration Advantages of Registration to the firm 1. The regist registere ered d firm can sue the third third par party ty if it vio violat lates es the term on contract and can claim adjustments from third party in court of law. 2. The registere registered d firm attracts attracts large large capital resourc resources es from the public public and it increases the goodwill of the firm, as in case the details of the firm are needed, they can be acquired from the third party. 3. The registere registered d firm also obtains obtains the benefit benefit of income income tax concession. concession.
Advantages of Registration to the Partners 1. In case of registered registered firm, firm, any new partners partners have the security security of liability liability and may resort to the court of law in case of a dispute. 2. The partners partners can file file a lawsuit lawsuit against against the firm for for their claims. claims. 3. The new perso person n who wants to become become a partner partner has less less doubt doubt if the firm is registered because he can take help of the court in case of a dispute. 4. When the partner partner leaves leaves the registered registered firm after after their retirem retirement, ent, they cannot be held liable for the firm’s debt because the record with the registrar will prove that they have left.
Advantages of Registration to the Creditors 1. The creditor creditor cannot cannot be denied the membe membership rship of the firm firm if the firm is registered. 2. The partne partners rs of the firm can be held liabl liable e for their due due payments payments by the creditors.
Costs for Non-Registered Firm In case of dispute between the partners or ex-partners, the unregistered firm cann ca nnot ot en enfo forc rce e an any y ri righ ghtt ar aris isin ing g fr from om th the e co cont ntra ract ct or gr gran ante ted d by th the e Partnershi Partn ership p Act of 1932. 1932. No law suit can can be filed against against the third third party or the th e pa part rtne nerr of th the e fi firm rm to en enfo forc rce e th the e ri righ ghts ts fr from om a co cont ntra ract ct an and d th the e partnership cannot claim any dues in the court which may be outstanding. If one denies the existence of the partnership nothing much can be done legally as there are no formal documents as a proof, thus registering the firm is very important.
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Reconstitution of a Partnership Firm Change in partners may occur due to various factors like admission of new member, retirement, expulsion, insolvency, death etc. After such change the liabilities and rights of each partner are determined again. This is named as reconstitution of a firm. The new ‘incoming partner’ can be added by consent of other partners and by agreeing to the previous contracts. He has all the rights of existing partner according to ‘section 31’ and he is not liable for any act of the firm prior to his admission. The partner gets retirement by the consent of all partners and in accordance with the agreement with other partners. A written notice is given to all partners as well, showing the intention to retire of the leaving partner and he is liable for all the acts of the firm before the date of his retirement unless he is discharged from liability. In case of expulsion of a partner, the partners expel by exercising their right given by the contract and for the benefit of the firm. The expelled partner (outgoin (out going g part partner) ner) mu must st be pr prov ovid ided ed wi with th op oppo port rtun unit ity y to ex expl plai ain n hi his s position and to eradicate the source of his expulsion. When the partner is adjudicated as an insolvent he ceases to be partner from the date of the notice. After that date the partner is not liable for any act of the firm as explained expl ained by secti section on 34. In case the part partner ner dies, the firm may be dissol dissolved ved but if other partners agree the continuity it is not dissolved. The estate of the deceased partner is not liable for any act of the firm after his death nor is any public notice of death required to alleviate the deceased partner’s estate from future future liabilities. liabilities. (Section 35). 35).
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Dissolution of Firm/ Partnership When an environment is created where a partnership is no longer possible, there are two main steps involved: 1. a drafting drafting of deed deed for dissol dissolution ution of of partnersh partnership ip 2. Registrati Registration on of deed for for dissoluti dissolution on of partnershi partnership p There are various methods which can be adopted for this purpose. The first invo involv lves es diss dissol olut utio ion n by agre agreem emen ent. t. This This occu occurs rs when when ther there e is mutu mutual al agreement between the partners to terminate the firm and hence the firm is dissolved. The second is the case of compulsory dissolution. In such a case the following circumstances need to prevail: 1. All the partners are declared insolvent or bankrupt. 2. All of the partners except one is declared are declared as insolvent or
bankrupt. 3. The business being practiced by the firm is declared unlawful.
Under Under contin contingen gentt dissol dissoluti ution, on, any of the follow following ing circum circumsta stance nces s need need to exist to give rise to the closing of a firm; 1. If the firm is constituted for a fixed term, on the expiry of that term. 2. If the firm is constituted to carry out one or more projects, on the
completion thereof pa rtners in the firm a. A death of one of the partners b. If a partner partner of the firm firm is is declared declared as insolven insolventt or bankrupt bankrupt In the case of dissolution by notice, the partnership is at-will, if any of the partners submits a written notice of his intention to dissolve the firm, then the firm may be dissolved. The firm is dissolved from the date mentioned in the notice as the date for dissolution. However, if no date is mentioned, then the date for the communication of the notice is treated as such.
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Partnership may also be dissolved through dissolution by Court. In this case, the court may dissolve the firm if a partner files a suit for dissolution of the firm on any of the following basis: • •
•
•
•
•
•
Insanity. The partner has become of unsound mind Perman Permanent ent Incapac Incapacity ity:: a partne partner, r, other than the partner partner suing, suing, has become permanently incapable of performing his duties as partner Misconduct Misconduct:: a partner, partner, other than than partner partner suing, is guilty guilty of conduct conduct which is likely to affect prejudicially the carrying on of the business, regard being had to the nature of the business. Breach of Agreement: a partner, other than partner suing, willfully or persistently commits breach of agreement relating to the management of the affairs of the firm. Transf Transfer er of Intere Interest. st. That a partne partner, r, other other than than partne partnerr suing, suing, has transferred whole of his interest in the firm to a third party or has allowed his share to be sold in execution of a decree. Loss Losses es.. The The busi busine ness ss of the the firm firm cannot cannot be cont contin inued ued furthe furtherr on except at a loss. Just and Equitable Equitable Cause. On any other ground ground which renders renders it just and equitable that the firm should be dissolved.
Under Liability for acts of partners done after dissolution (1) Notwit Notwithst hstand anding ing the dissolut dissolution ion of a firm, firm, the partners partners continue continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution, until public notice is given of the dissolution: Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable under this section for acts done alter the date on which he ceases to be a partner. (2) Notices under sub-section (1) may be given by any partner. In the case of Right Right of partners to have business business wound up after dissolutio dissolution, n, on the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to
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have have the surplu surplus s distr distribu ibuted ted among among the partne partners rs or their their repre represen sentat tative ives s according to their rights.
Continuing authority of partners for purposes of winding up After the dissolution of a firm the authority of each partner to bind the firm, and the the othe otherr mutu mutual al righ rights ts and and obli obligat gatio ions ns of the the part partne ners rs,, cont contin inue ue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the firm and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise: Provided that the firm is in no case bound by the acts of a partner who has been adjudicated insolvent; but this proviso does not affect the liability of any pers person on who who has has afte afterr the the adju adjudi dica cati tion on repr repres esen ente ted d him him or know knowin ingl gly y permitted him to be represented as a partner of the insolvent.
Mode of settlement of accounts between partners In settling the accounts of a firm after dissolution, the following rules shall, subject to agreement by the partners, be observed:1. Losses, Losses, including including deficienc deficiencies ies of capital, capital, shall be paid first first out of profits, profits, next out of capital, and, lastly, if necessary, by the partners individually in the proportions in which they were entitled to share profits. 2. The assets assets of the firm, includi including ng any sums contribu contributed ted by the partners partners to make up deficiencies of capital, shall be applied in the following manner and order:a. In paying paying the debts of the firm firm to to third third parties; parties; b. n paying to to each partner partner ratably ratably what what is due to him him from from the firm firm for advances as distinguished from capital; c. in paying paying to each each partner partner ratably ratably what is is due to him on on account account of capital; and The residue, if any, shall be divided among the partners in the d. proportions in which they were entitled to share s hare profits.
Payment of firm's debts and of separate debts Where there are joint debts due from the firm, and also separate debts due from any partner, the property of the firm shall be applied in the first instance in payment of the debts of the firm, and, if there is any surplus, then the share of each partner shall be applied in payment of his separate debts or 17 | P a g e
paid to him. The separate property of any partner shall be applied first in the payment of his separate debts, and the surplus (if any) in the payment of the debts of the firm.
Personal profits earned after dissolution Subjec Subjectt to contra contract ct betwee between n the partners, partners, the provis provision ions s of clause clause (a) of section 16 shall apply to transactions by any surviving partner or by the representatives of a deceased partner, undertaken after the firm is dissolved on acco accoun untt of the the deat death h of a part partne nerr and and befo before re its its affa affair irs s have have been been completely wound up: Prov Provid ided ed that that wher where e any any part partne nerr or his his repr repres esen enta tati tive ve has has boug bought ht the the goodwill of the firm, nothing in this section shall affect his right to use the firm name.
Return of premium on premature dissolution Where a partner has paid a premium on entering into partnership for a fixed term, and the firm is dissolved before the expiration of that term otherwise than by the death of a partner, he shall be entitled to repayment of the premium or of such part thereof as may be reasonable, regard being had to the terms upon which he became a partner and to the length of time during which he was a partner, unless 1. The dissoluti dissolution on is mainly mainly due to his his own miscon misconduct, duct, or 2. The dissolution dissolution is in pursuance pursuance of an agreement agreement containin containing g no provision provision for the return of the premium or any part of it.
Right to restrain from use of firm fi rm name or firm property Alter a firm is dissolved, every partner or his representative may, in the absence of a contract between the partners to the contrary, restrain any other partner or his representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been completely wound up: Prov Provid ided ed that that wher where e any any part partne nerr or his his repr repres esen enta tati tive ve has has boug bought ht the the goodwill of the firm, nothing in this section shall affect his right to use the firm name.
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Agreements in restraint of trade Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within within a specif specified ied period period or withi within n specif specified ied local local limits limits;; and notwithstanding anything contained in section 27 of the Contract Act, 1872, such agreement shall be valid if the restrictions imposed are reasonable. Sale of goodwill after dissolution: 1. In settling the accounts of a firm after dissolution, the goodwill shall,
subject to contract between the partners, be included in the assets, and it may be sold either separately or along with other property of the firm. 2. Rights Rights of buyer and seller seller of goodwil goodwill: l: Where Where the goodwill goodwill of a firm firm is sold after dissolution, a partner may carry on a business competing with that of the buyer and he may advertise such business, but, subject to agreement between him and the buyer, he may nota. Use Use the the firm firm name name,, b. Represent Represent himsel himselff as carrying carrying on the business business of the firm, firm, or c. Soli Solici citt the the cust custom om of pers person ons s who who were were deali dealing ng with with the firm firm before its dissolution. 3. Agreement Agreements s in restraint restraint of trade: Any Any partner partner may, upon the sale sale of the goodwill of a firm, make an agreement with the buyer that such partner will will not not carr carry y on any any busi busine ness ss simi simila larr to that that of the the firm firm with within in a specified period or within specified local limits, and, notwithstanding anything contained in section 27 of the Contract Act, 1872, IX of 1872 suc such agr agreeme ement shal hall be valid alid if the the restr estriictio ctions ns impo impose sed d are are reasonable.
Process for the dissolution of a Partnership firm The process requires a Rs. 250 stamp paper called the dissolution deed which is submitted in National bank through a challan form. After this, the partnership is required to inform the general public through best possible means so an ad is placed in a newspaper. The copies of N.I.C. of all partners are attached to all the attested documents. Later, when all the documents are submitted, the partners are required to report to the office with their original N.I.C. from 9 am to 11 am.
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References •
“Registration procedure for partnership” prepared by: Policy Planning and Strategy, SMEDA Pakistan, Dated June 1, 2008
•
Business Law By Kalid Mehmood Cheema, Revised Edition 2009.
•
Partnership Act of 1932 available from World Wide Web by links ○
[http://www.jamilandjamil.com/publications/pub_commercial_laws/ac t1932.htm]
○
http://www.scribd.com/doc/2441358/Partnership-Act
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