Partnership Act- Admission of new partner-Incoming partner

Introduction

Partnership is based on mutual trust. One of the duties is to act honestly for the greatest common benefit of firm which we have already seen.

Chapter 5 of the partnership deals with how partner may be admitted, expelled, retired etc from section 31 to section 38.

Since this relationship is based on trust and faith, admission of partner too have certain restriction and can be admitted in certain manner only.

Section 31 lays out the modes for introduction of new partner in the firm. It also provides for liabilities of incoming partner or new partner.

Below are 3 modes of introduction of a partner

Introduction with consent of all partner

For mutual trust, this is general rule of admission of partner. It states that consent of ALL the partner is necessary for admission. This rule is for obvious reason, partner needs to be faithful to each other and hence consent of all the partner is necessary.

Introduction in accordance with contract between the partner

In partnership deed, partners may agree on certain way of introduction of new partner. For example, partners may agree that some of the partner may nominate new partner or admit partner by majority.

In such cases, some partner may not be happy with introduction of new partner, but they are bound by the contract. This position was stated in case of Lovergrove V Nelson.

To clarify this provision further, let's say there is partnership between 3 person A, B and C. They agree that A can nominate his son as partner.  In this case A may introduce other partner without the permission of other partners.

Introduction by the provision of section 30

In earlier article, we have discussed how minor can become regular partner in partnership firm as per he provision of section 30(5). 

When minor shares profit, after attaining majority (18 year of age) he can give public notice either to become a partner or not to become a partner. Such notice has to be given withing six months of his attaining majority.

Liability of incoming partner

The newly inducted partner will be liable for all acts of a firm after which he is admitted. For example Mr Mallya become partner of a firm "Kingfisher" on 1st Jan 2019. If this firm defaults loan in February 2019, then Mr Mallya become liable.

However, the incoming partner may agree to share liabilities of the firm for firm's act in the past. It mean in above example, Mr Mallya could expressly agree that he will share the liabilities for firm's act done before 1st Jan 2019. Who will do such agreement ?


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