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Introduction So far we have seen how firm is formed, what are rights of partners, how partner can move out of partnership and last how partner can be removed from partnerships. In this article we will discuss how partnership is dissolved. Chapter 6, from section 39 to 54 deals with dissolution of firm. Section 39 defines what a dissolution of firms mean. Subsequent sections talks about various methods in which firms can be dissolved. What is dissolution by the way ? By the way, it mean termination of relationship of each partner with every other partner. For example there is a firm of three folks, A, B and C. Each of them terminate relationship as to partner then it would be termed as dissolution. Below are various methods of dissolution of firms. Dissolution by Agreement (Section 40) If you get bore of partnership, or business, you all can agree on stopping to do business. There are two ways to With consent of all partner: Again, permission of all other p...

Introduction In previous post, we have discussed how new partner can be introduced to the partnership firms. In this blog we will talk about how partner may cease to be partner, or how partner can be kicked out of partnership. Section 32 to 38 deals with this aspect. It also covers what kind of liabilities and rights the outgoing partner may incure. Partner can cease to be a partner and could terminate the relationship with partnership firm in following four ways Retirement Expulsion Insolvency Death We will see each of them in bit detail. Retirement of a partner Retirement is voluntary withdrawal or severing a relationship of partnership firm. May be partner have other priorities like family, friends or he may want to go to Himalaya! In such cases he can terminate the relationship with partnership firm. There are 3 ways in which partner can retire 1) With the consent of all other partner Partner cannot retire on whims and fancies of his own whe...

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...

Introduction Minor in general not capable of contract. Partnership is specific type of contract. Hence minor cannot enter into partnership. There is "But" to this idea, and which is provided by Section 30 of Partnership Act. There are certain nuances and subtleties with respect to minor's position. Section 30 have 8 clauses which deals with different aspects related to minor's position. Can minor share profits in partnership ? Clause 1 offers answer to this question. It states that minor may not be partner, but he may be admitted to benefits of partnership. Meaning he can share profits with consent of of all partners. What are the rights of minor ? Clause 2 provide explanation to this. Minor can have share in the property of partnership along with the profits. He can also have access to and inspect and copy any of the accounts of the firm. This is however limited in nature. He can have access to accounts only and not to other books Liabilit...

Introduction  Generally speaking, partners are individually liable for any liability of a firm. Is it possible that third person( who is not partner of course ) can be liable for liability of firm.  Answer is YES. Section 28 have provision related to this peculiar arrangement. Section 28  It states that if a person represents himself that he is partner though he is not, and then third party acts on this representation then the person who made representation will be liable. Take for example our famous "Chocolate Wale" trading firm in chocolate consisting of Ramesh and Suresh. If Mahesh, in some or the other way tells bank that he is also partner, and based on this Bank lends money to partnership firm, in case of default, Bank can file a suite against Mahesh as a partner. Clause 2 deals with the death of partner. It states that when partner dies, and firm continues the business, then his legal representatives or heir will not be liable for any acts...

In previous post, we have discussed about implied and express authority. Under what circumstances firm will be liable to third parties. In this part we will discuss specific cases such as tort committed by partner, misuse of money by partner etc. In these cases what will be liability of firm and exceptions if there are any. Also we will cover a section dealing with communication to partner. Ratification of act As we have studied in Contract of agency, if agent does some act which is beyond the authority granted to him and principle agrees or don't take an objection to this act, then principle will be completely liable. Same principle is applied in partnership also. Partner is authorized to some things. If he does something beyond the purview of the authority granted to him, and other partners ratifies such act then firm will be completely liable for such an act For example, Ramesh and Suresh in Chocolate trading business. If Ramesh borrows money from bank, and Sur...

 Introduction In previous articles we have seen relationship of partner among themselves, their rights and duties. How is relationship with third parties are determined ? We know act of partner is binding on the firm from it's definition as their is relationship of mutual agency among partners. But is this true ? Do all acts of partner bind the firm ? If not, then what kind of act bind the entire firm ? How do we determine which acts bind and which don't ? These all question will be answered in Game of thrones, Season 8! Chapter 4 of partnership act, from section 18 to 30 deals with relations of partners to third parties. It includes below things Authority of Partners-Implied,expressed Liability of firms towards third parties for act of partners Doctrine of holding out (Section 28)  Position of Minor (Section 30) Each of the above will be discussed separately for sake of focus, brevity and better understanding. In this part we will cover authority of partners...

You can make you own type if you could describe them with certain common features. For example "Fraud Partner", meaning partners which commits fraud, greedy lier etc.! However below are certain types are partner for academic purpose. Types of Partnership Partnership At Will Section 7 provides for partnership at will. It says that whenever there is no provision for the duration of their partnership  or for the determination of partnership (coming to an end), then it would be termed as partnership at will. This kind of partnership is important for dissolution of partnership, which we will cover later. Particular Partnership When two or more people come together for particular venture or adventure or undertaking then it is called as particular partnership. Section 8 of the Act provides the definition of particular partnership. For example Mr Modi and Mr Rahul come together to make a flyover as a partner!  ( And then inaugurate it! ) Partnership for fixed t...

Difference between Partnership and Hindu Undivided Family Partnership Hindu Undivided Family Basis for partnership is Contract between the parties Membership arises out of status When new member is to be added, consent of all other partner need to be taken New member is generally baby . Consent for baby ?   J Mutual Agency between members No such relationship. Karta acts like a head Liability of partner is   unlimited Limited Liability only to the extent of shares in the family business Partnership is dissolved by death of partners HUF is not dissolved by death of partner Difference between Company and Partnership Partnership Company Regulated by Partnership Act, 1932 Regulated by Company Act, 2013 Does not have separate legal identity Company have separate leg...