LABOUR LAW

TOPIC: PARTNERSHIP DEED

SUBMITTED TO:

Prof. Muhammad Arshad Baig

SUBMITTED BY:
Muhammad Faisal Shahzad
2018-143-MBA 1.5

Institute of Business and Management

University of Engineering and Technology, Lahore

 PARTNERSHIP DEED
Definition
A partnership is a unique form of business in which partners work together to achieve common
goals. Due to this feature of partnerships, partners are allowed to decide the terms of
their relationship with each other. The documents which they do so are called partnership deeds.
It is a document that outlines in detail the rights and responsibilities of all parties to a business
operation. It is helpful in preventing disputes and disagreements over the role of each partner in
the business and the benefits which are due to them.

Relationship Between Partners

The Partnership Act, 1932 governs partnership forms of business in Pakistan. This law contains
several provisions defining rights, duties, liabilities, and powers of partners. These provisions,
however, are not always binding on them. Partners are free to bind themselves with contrary
provisions.

Most provisions of the Partnership Act are subject to a contract to the contrary. This means that
if partners have agreed to contrary understandings, they will prevail over the Act. For example,
although payment of salary to partners is prohibited by the Act, partners can still draw a salary if
they mutually agree.

Partnership Deed
As explained above, partners are free to define the terms of their relationships, even if they go
contrary to the Act in certain cases. They can either decide on such terms with an
oral agreement or a written one.

Partnership deeds, in very simple words, are an agreement between partners of a firm. This
agreement defines details like the nature of the firm, duties, and rights of partners, their liabilities
and the ratio in which they will divide profits or losses of the firm.

Although the drafting of partnership deeds is not compulsory, it is always advised to do so. This
helps in ensuring that all terms agreed by partners exist in written form on paper. Doing so can
reduce disputes between partners and govern their functioning better.
Unlike similar documents like articles of association of companies, partnership deeds need not be
registered mandatorily. However, registration can ensure the prevention of legal challenges to its
validity when disputes arise. An ideal partnership deed is comprehensive and clear about all
details pertaining to the functioning of a firm. It should not contain any ambiguities.

Contents of Partnership Deeds

Although there is no specific format prescribed for drafting a partnership deed, a typical deed
contains the below mentioned clauses:

 The name of the firm

 Name and details of all partners
 Date of commencement of business
 Duration of the firm’s existence
 Capital contributed by each partner
 Profit/loss sharing ratio
 Interest on capital payable to partners
 The extent of borrowings each partner can draw
 Salary payable to partners, if any
 The procedure of admission or retirement of a partner
 The method used for calculating goodwill
 Preparation of accounts of the firm
 Mode of settlement of dues with a deceased partner’s executors
 The procedure followed in case disputes arise between partners

Absence of a Partnership Deed

In case partners do not adopt a partnership deed, the following rules will apply:
The partners will share profits and losses equally.
Partners will not get a salary.
Interest on capital will not be payable.
Drawings will not be chargeable with interest.
Partners will get 6% p.a. interest on loans to the firm if they mutually agree.
 SAMPLE PARTNERSHIP DEED

“Partnership Deed”
This Deed of Partnership is Made on This July 13th , 2010, By & Between: -

1. Fahim Sher khan S/O Sheikh Mehiuddin, aged 31 Years, CNIC # 420001-
37970989897778-9000000, presently residing at United Arab Emirates; permanent
address in Pakistan: A-10009935, Block-D, North Nazimabad, Karachi, hereinafter
referred to as, ‘ the Party of the FIRST PART’.
2. Skeeema Saforee W/O tipu khan pathan Shaikh, aged 33 years, CNIC # 42065652-
40987000008700-0, presently residing at United Arab Emirates; permanent address in
Pakistan: A-130989875, Block-D, North Nazimabad, Karachi, hereinafter referred to as, ‘
the Party of the SECOND PART’

WHEREAS, the above-mentioned parties are fervent to initiate business of engineering,

supplies and manufacturing of flanges and valves, commissioning, civil, electrical, mechanical
work etc. including any other business incidental thereto & any other business as may be agreed
upon, time to time, by the partners under the name and style “ENGINEERING & OILFILELD
SUPPLIES COMPANY”.

WHEREAS, it is expedient to reduce the ‘terms’ and ‘conditions’ of the partnership

relationship in writing.

Now This Deed Witnesseth as Under:

1. That the partnership business shall come into effect from July 13th , 2010.
2. That the business shall be carried on under the name and style: “ENGINEERING &
OILFIELD SUPPLIES COMPANY”.
3. The head office of the firm shall be situated at 6909098776-KNnm, Commercial, 2nd
Floor, Phase I, DHA, Lahore or at any other place (s) as may be decided by the
partners from time to time.
4. The firm’s business shall be: -
(a) to carry on manufacturing & supplying of engineering provisions;
equipments; materials; goods; stores including flanges and valves.
(b) to execute civil, electrical, mechanical, engineering projects.
(c) to carry on any other business as may be mutually agreed upon, time
to time, by the partners.
5. The duration of the partnership shall be ‘at will’.
6. The ‘Profit & Loss Ratio’ between the partners shall be as under:

Party of the First Part: 95%

Party of the Second Part: 5%

7. The party of the first part shall be the ‘Managing Partner’ of the firm; will exercise
complete authority to manage all the affairs of the firm.
8. The party of the second part shall be a ‘Sleeping Partner’.
9. The Managing Partner on behalf of the firm is authorized to borrow or raise money from
any bank or financial institution(s) as the case may be.
10. Neither partner can assign his interest in the firm to any person without the consent of the
other.
11. No any new partner can be admitted in the firm unless the partners mutually agreed
thereupon.
12. Required ‘Books of Accounts’ shall be kept and maintained by the firm at the head
office.
13. ‘Firm’s bank Account (s)’ shall be operated solely by the party of the first part.
14. The ‘Good Will’ of the firm will belong to the partners.
15. The ‘Statement of Assets and Liabilities’, after making final adjustments, shall be
prepared at the end of every financial year.
16. The Accounts of the firm shall be closed at the end of every Financial Year id-est on
3oth June.
17. Any term of this deed, without executing a fresh partnership deed, may be varied,
altered or amended mutually by the partners.
 18. Any dispute arising between the partners shall be referred to arbitration under The
Arbitration Act.
19. Subject to the provisions mentioned as above, the partnership relation shall lope
inconformity with the provisions of the Partnership Act 1932, or any other law enforced
for the time being in Pakistan.

IN WITNESS WHEREOF, the partners on the date mentioned as above have agreed to set their
respective hands on this partnership deed as under:

Particulars, Signatures & Thumb Impressions of Signatures & Thumb Impressions of the
Witnesses: Partners:
(1) Muneer khan pathan Ahmed Awan S/O
Kareen Awan khan peshawar, CNIC#
35989876200-1575498765460, R/O House
# 311987654,Mohallah Block-G-486. M.A
Johar Town, Lahore.

Party of the First Part

(2) Amiutn Butt S/O Hangrdfeez-ur-Rehman,

CNIC# 359876202-3918876543045-9, R/O House #
9902, Street # 096, Mohallah Muslim Colony,
Bastamee Road, Samman-abad, Lahore.

Party of the Second Part