Professional Documents
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Partnership Act 1932
Partnership Act 1932
Partnership Act 1932
INTRODUCTION
Partnership remains a common mode of business
enterprise in Pakistan for small to medium business setups. Partnerships are normally formed where there is a
desire to have some structural flexibility along with some
formality of relationship between partners. There is no
compulsory requirement for registration of a partnership
in Pakistan . Nonetheless some litigation and tax related
consequences and advantages are linked to a registered
partnership.
Legal regime for establishment and regulation of
partnerships in Pakistan is stated in the Partnership Act,
1932 which defines a partnership in the following terms:
DEFINITION
'"Partnership" is the relation between persons who
NUMBER OF PARTNERS
Any twenty or less persons desiring to carry out a lawful
PARTNERSHIP DEED
A statement in prescribed form must be delivered to the relevant
Registrar stating:
Name of the firm
Names in full and permanent addresses of the partners
Nature and Place or principal place of business of the firm
Names of any other places where the firm carries on business
Date when each partner joined the firm (Date of
commencement of partnership)
Duration of the firm
Amount of capital of each partner
Profit Sharing Ratio
Interest on drawings
Method of valuation of goodwill
PARTNERSHIP DEED
Settlement of accounts in case of retirement, death of
(1) A and B buy 100 bales of cotton, which they agree to sell on their
joint account. A and B are partners in respect of such cotton.
(2) A and B buy 100 bales of cotton, agreeing to share the cotton
between them. A and B are not partners.
(3) A and B agree to work together as carpenters. A is to receive all the
profits and pay a salary to B,-A & B are not partners.
CO-OWNERSHIP
PARTNERSHIP
1. Not always a result of agreement.
1. Always a result of agreement.
2. Does not always involve Community of profits or losses.
2. Involves Community of profits and losses.
3. Co--owner can transfer his interest without consent of other co-owners.
3. A partner can not do so.
4. Co-owner is not agent of other co-owners.
4. Partners are agents of one another.
5. Co-owner has no lien on thing owned by all co-owners.
5. A partner has such lien.
6. Co-owner is entitled to partition.
6. Partner is entitled to have partnership dissolved and take share of the
proceeds.
business it is ten.
8. There is no maximum number of share holders laid down by the law
in a public company though the minimum is seven. In a private
Company, the minimum is two, and the maximum is fifty.
9. The death or retirement of a partner dissolves a firm.
9. Death or retirement of a share holder does not dissolve the company.
10. Property may be the common property of partners.
10. Property 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. On the other hand restrictions in 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.
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 legal existence, cannot be
shareholder of company.
15. A company on the other hand can be a shareholder of
another company.
Test of Partnership.
Although the right to participate in the profits of a
TYPES OF PARTNERSHIP
Partnership at will:
TYPES OF PARTNERSHIP
Particular partnership duration of.-
Types of Partners
Actual or Ostensible Partner:
Types of Partners
Sleeping or Dormant Partner:
business.
He is liable to third parties.
He needs not give public notice of his retirement.
His insanity is no ground for dissolution of the firm.
Types of Partners
Silent Partner: He lends his name to the firm without
competing business.
Right to take part in the conduct of the business.
Right to express opinion.
Right to share profits equally.
Right to be indemnified.
Right to prevent the induction of a new a partner.
Right to retire in the partnership at will.
Right not to be expelled.
Partnership property
The property of the firm, as stated above in the
(1) Subject to the provisions of section 22, the act of partner which
is done to carry on, in the usual way, business of the kind carried on
by the firm, binds the firm. The authority of a partner to bind the
firm conferred by this section is called his "implied authority.
Examples of Implied authority of a partner.1. A partner can buy on the credit of the firm any goods of a kind
used in its business.
2. Similarly, a partner may hire on the credit of the firm, any goods
of a kind used in its business.
Case.- A partner of firm, whose business it was to trap wild
elephants, hired an elephant to be used for trapping wild elephants,
and one of the terms of hire was that the hirer should pay Rs.
5,000/- if the elephant died during the period of hire. It was held
that other partners also were bound by this term.
Dissolution Of A Firm
Dissolution of a firm:
Dissolution Of A Firm
Dissolution on the happening of certain
contingencies:
Subject to contract between the partners a firm is
dissolved(a) if constituted for a fixed term, by the expiry of
that term;
(b) if constituted to carry out one or more adventures
or undertakings, by the completion thereof;
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent.
Dissolution Of A Firm
Right of partners to have business wound up
after dissolution:
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 have the surplus
distributed among the partners or their
representatives according to their rights.