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Should You Register Your Partnership?: Register of Joint Stock Companies and Firm
Should You Register Your Partnership?: Register of Joint Stock Companies and Firm
partnership?
After reading the title, you may wonder. Is it possible to run a partnership business
without registration?
The answer is yes, unregistered partnership can legally run business in Bangladesh.
Partnership is the most convenient vehicle for carrying out business by more than
one person. In comparison with company, partnership has less obligations in terms
of both tax and Register of Joint Stock Companies and Firm (RJSC) return filling. It
also cost less to maintain a partnership than a company.
In Bangladesh, the relevant law for regulating partnership is the Partnership Act
1932 (Partnership Act).
You might find it interesting, the Partnership Act does not need even a written
agreement between the partners.
Persons who have entered into partnership with one another are called
individually partners and collectively a firm, and the name under which their
business is carried on is called the firm name.
At various times, the court decided that it is not necessary that there should be a
formal or written agreement. An agreement to create a partnership may as well
arise from the conduct of the parties concerned.
know-how;
However, registration becomes necessary at one time or the other. Because, Section
69 of the Partnership Act seriously cuts short the capacity of an unregistered firm
and its partners to sue.
Effect of non-registration
69.(1) No suit to enforce a right arising from a contract or conferred by this Act
shall be instituted in any Court by or on behalf of any person suing as a partner in
a firm against the firm or any person alleged to be or to have been a partner in
the firm unless the firm is registered and the person suing is or has been shown in
the Register of Firms as a partner in the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any
Court by or on behalf of a firm against any third party unless the firm is
registered and the persons suing are or have been shown in the Register of Firms
as partners in the firm.
(3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off
or other proceeding to enforce a right arising from a contract, but shall not effect-
(a) the enforcement of any right to sue for the dissolution of a firm or for accounts
of a dissolved firm, or any right or power to realise the property of a dissolved
firm, or
(b) the powers of an official assignee, receiver or Court under the 5[ Insolvency
(Dacca) Act, 1909, or the] Insolvency Act, 1920, to realise the property of an
insolvent partner.
(b) to any suit or claim of set-off not exceeding one hundred Taka in value which,
is not of a kind specified in the Second Schedule to the Small Cause Courts Act,
1887, or to any proceeding in execution or other proceeding incidental to or
arising from any such suit or claim.
As you can see from section 69(1), a partner of an unregistered firm cannot sue the
firm or his/her present or past co-partners for the enforcement of any right arising
out from a contract or conferred by the Partnership Act. Only a partner of a
registered firm, whose name appears in registration can sue for enforcement of
such rights.
Section 69(2) suggests that an unregistered firm cannot sue any third party for the
enforcement of any right arising from a contract. A suit can be brought only by or
on behalf of a registered firm and that also by persons whose names appear as
partners in the register of firms.
So, suppose you have a unregistered partnership. And you want to take legal action
in any civil court against your partner or any third party to enforce a contractual
right. You will have hard times, pretty hard times to do that.
Any party may file criminal suit under section 138 of the Negotiable Instruments
Act 1882 against the partners of an unregistered firm.
There are some exceptions. However, in this post, I am not going to discuss those.