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The Partnership Act, 1932

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INTRODUCTION

Until 30 September, 1932 the partnership


businesses of the Indian subcontinent were
controlled according to the Contract Act of 1872.
But due the expansion of business and trade, a
separate Partnership Act was enacted which was
effective from 0ctober 1, 1932. It was accepted as
it was in 1947 in the then East Pakistan and after
liberation it was effective and enforceable in
Bangladesh from March 26, 1971.

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The Contents of The Partnership Act, 1932

Chapter I: Preliminary (Sec. 1 - 3)


Chapter II: Nature of Partnership (Sec. 4 - 8)
Chapter III: Relations of Partners to One Another
(Sec. 9 - 17)
Chapter IV: Relations of Partners to Third Parties
(Sec. 18 - 30)
Chapter V: Incoming and Outgoing Partners
(Sec. 31 - 38)
Chapter VI: Dissolution of A Firm (Sec. 39 - 55)
Chapter VII: Registration of Firms (Sec. 56 - 71)
Chapter VIII: Supplemental (Sec. 72 - 74 ) & Schedules
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What is Partnership?

According to the Partnership Act, Partnership is the


relationship between persons who have agreed to share the
profits of a business carried on by all or any one of them
acting for all.

Basic Elements of Partnership


* Plurality of Members (2 20 person, but for banking
business 2-10 person)
* Contractual Relationship
* Objective of Legal Business
* Share Profit and Losses of the business
* Mutual Operation, Confidence and Trust
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Who can be or can not be partners?

Any person who has the capacity of contract can


be a partner
Minor can not be a partner
Person of unsound mind can not be a partner
A company can not be a partner
An alien enemy can not enter into a contract of
partnership.

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Classes of Partners

Dormant, Sleeping or Nominal Partner


Active partner

Classes of Partnerships

Partnership At Will
Particular Partnership

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Creation of Partnership

A partnership is brought into existence through agreement


or contract (oral / written / written and registered)
between persons who agree to become partners in a
business.
The deed (written agreement) is known as the articles of
partnership. This generally contains the following
particulars:
Name and address of the firm
Nature,scope, objective and duration of the business
Management and operational guidelines of the business
Keeping of accounts and its examination
Authority for signing cheque(s) etc.
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Registration of a partnership business

Registration is only a concrete and reliable evidence


of the existence of a partnership. Registration
does not create partnership. Contract between
partners create partnership. The Partnership Act
does not make registration compulsory. But when
a firm is registered, the partners cannot deny the
partnership to avoid liability. Thus it affords
protection to persons dealing with the firm. An
unregistered firm may suffer from certain
disadvantages.
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Formalities of Registration

A firm must apply to the Registrar of firms for


registration. The application for registration
should be accompanied by the prescribed fee
and it should contain a statement of the
following particulars:
The name and address of the firm
The place(s) of business of the firm
Joining date of each partner in the firm with
their full name and addresses, and
Duration of the firm,
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Formalities of Registration (Continued)

The statement must be signed and verified by all the


partners or by their agents specially authorized on
this behalf. A firm name must not contain words like
Crown, Emperor, Imperial, Royal and so on
When the registrar is satisfied that the above
provisions have been complied with, he shall record
an entry of the statement in a register, called the
Register of Firms and shall file the statement and
this will amount to registration of the firm. Alteration
in any of the above particulars have to be recorded.

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DURATION AND RECONSTITUTION OF A
PARTNERSHIP FIRM
Duration of Partnership
Unless a partnership is dissolved in the meantime a
partnership will continue for whatever period of
time is specified in the agreement, or where the
partnership is for carrying out a particular venture,
until the completion of that venture.

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Reconstitution of a firm

A partnership firm is said to be reconstituted when


any of the following changes occurs
Introduction of a new member
Retirement of a partner
Expulsion of a partner
Insolvency of a partner
Death of a partner

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RIGHTS AND LIABILITIES
OF PARTNERS
The Partnership Act lays down two general rules
regarding the conduct of the partners to one
another :
Utmost good faith
Indemnity

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RIGHTS AND LIABILITIES
OF PARTNERS (Continued)

Besides, the following rules are laid down in the


Act regarding the relationship between the
partners as regards the management of the
business and their mutual rights and liabilities.
Rules regarding the conduct of the business
Mutual rights and Liabilities
Personal profits earned by partners
The property of the firm
Continuance of pre-existing terms
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RIGHTS OF PARTNERS

The important rights of partners are summarized


below:
Conduct of business
Can express opinion
Access, inspection, copy
Equality of profits
Interest on capital
Interest on advance
To get indemnity
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RIGHTS OF PARTNERS (Continued)

Partner's authority
Powers in an emergency
Reconstitution
Dissolution
Right to carrying on a competing business
Right to share profits after retirement

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DUTIES/LIABILITIES OF PARTNERS

The important duties/liabilities of partners are summarized below:


Justice, faithfulness, true accounts, full information
To pay indemnity
To attend diligently
No remuneration
Equality of losses
To pay indemnity for willful neglect
No private benefit
To account for secret profit
No secret profit
Unlimited Liability
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DISSOLUTION OF A FIRM

A firm is dissolved in the following ways:


Dissolution by agreement of partners
Dissolution on the happening of certain
contingencies
Dissolution by notice
Dissolution by court

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Minor As A Partner Special Guidelines

According to the Section 30 of The Partnership Act defines that a


minor cannot be a partner of any kind of business. So, A minor
cannot become a partner in a firm. But with the consent of all
the partners, for the time being he may be admitted to the
benefits of partnership. Such a minor has a right to such share
of the property and of the profits of the firm as may be agreed
upon, and he may have access to and inspect and copy any of
the accounts of the firm.
But such a minor is not entitled to sue the partners for an account
or payment of his share of the property or profits of the firm,
except when he severs his connection with the firm.
Such a minor is not personally liable for the liabilities of the firm
but his share in the business is liable for such liabilities.
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Minor As A Partner (Continued)

When a minor can become a partner?


A minor admitted to the benefits of a partnership may, within
six months of his attaining majority, or of his obtaining
knowledge that he has been admitted to the benefits of
partnership, whichever date is later, give public notice that
he has elected to become or that he has elected no to
become a partner in the firm.
If he elects to become a partner he will become a partner and
if he elects not to become a partner he will cease to be a
partner. But if he fails to give such notice, he will become a
partner in the firm on the expiry of the said six months.

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Minor As A Partner (Continued)

When a minor becomes a partner in the above


way -
(a) His rights and liabilities as a minor continue up to the
date on which he becomes a partner, but he becomes
personally liable to third parties for all acts of the firm
done since he was admitted to the benefits of
partnership; and
(b) His share in the property and profits of the firm after by
the consent of the other entire partner at the time of his
admission in to the partnership business.
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Minor As A Partner (Continued)

When a minor elects not become partner?


(a) His rights and liabilities shall continue to be
those of a minor up to the date on which he
gives public notice,
(b) His share will not be liable for any acts of the
firm done after the date of the notice, and
(c) He shall be entitled to sue the partners for his
share of profits when he severs his connection
with the firm.

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WHAT SHOULD A BANKER DO TO OPEN A
PARTNERSHIP ACCOUNT?
The banker should first verify the relationship between the parties
concerned;
All the partners join in and sign the account opening form/ letter of
partnership;
Specimen signature card is to be filled in and signed duly (as per
instruction or declaration);
The banker will, of course, take up the appropriate references;
The account should be opened in the name of the firm and not in the
name of individual partner(s);
The bank should obtain a mandate giving details about the operation
of the account, that is, who will sign on behalf of the firm, the properties
to be mortgaged etc.
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DOCUMENTS REQUIRED:

Deed of partnership/ Articles of partnership


Certificate of Registration of the firm
Mandate/Letter of partnership
Copy of Passport / Certificate from the
Chairman of Union Council Parishad/ Ward
Commissioner of Pourasava regarding personal
identity of the individual partners.

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OPERATING THE ACCOUNTS BANKS POSITION AND

SAFEGUARDS:

Security and Guarantee


Power to set-off
Conversion
Delegation of authority
Countermand action
Minor as a partner

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Thank You All.

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