Law of partnership

Source: www.roc.gov.bd/acts/partnershipact1932.html

What is partnership?
Partnership is the relation between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all
Partners- Individuals who have entered into partnership with one another
Collectively "a firm", and the name under which their business is carried on is called
the "firm name".

3 essential elements of partnership:

Agreement by two or more persons
Agree to share profits
Business must be carried on by all or any of them acting for all

Source: www.roc.gov.bd/acts/partnershipact1932.html

Partnership Act (ACT NO. IX OF 1932).

This Act may be called the Partnership Act, 1932.

It extends to the whole of Bangladesh.
It came into force on the 1st day of October, 1932, except section
69, which shall come into force on the 1st day of October, 1933 .

Source: www.roc.gov.bd/acts/partnershipact1932.html

The partnership business plays a dominant role in the trade sector in

Bangladesh.
As on 30 June 2000, the total number of partnership firms registered
in Bangladesh under the Partnership Act 1932 was 32,726, while the
total number of joint stock companies registered under the companies
act 1994 was 44,524

Source: www.roc.gov.bd/acts/partnershipact1932.html

Who can be a partner?

1. Has to be a person, eg.- Company A cannot be a partner of company B
2. A minor cannot be a partner unless agreed upon by other partners
3. Person of unsound mind
4. Woman- Married or unmarried, CAN be a partner

Source: www.roc.gov.bd/acts/partnershipact1932.html

Mode of determining existence of partnership

The sharing of profits or of gross returns arising from property by
persons holding a joint or common interest in that property does not
of itself make such persons partners.
The receipt by a person of a share of the profits of a business, or of a
payment contingent upon the earning of profits or varying with the
profits earned by a business, does not of itself make him a partner
with the persons carrying on the business;

Source: www.roc.gov.bd/acts/partnershipact1932.html

Types of partnership
Partnership at will- Partnership at will means a partnership in which
the partners have not agreed to remain partners until the
expiration of a definite term or the completion of a particular
undertaking.
Can be dissolved by any partner, at any time, without any liability
Particular Partnership- a partnership formed for a single
transaction or project as distinguished from one organized for
carrying on a general business
E.g.- NSU HAAT BAZAR

Source: www.roc.gov.bd/acts/partnershipact1932.html

Classes of partners
Active- One who participates in the business of the firm
Dormant- Do not take part in the active part of the business but
their liabilities are same as active partners
Sub partner- When a share of a partner is transferred to another
person. That person will have limited rights and liabilities

Source: www.roc.gov.bd/acts/partnershipact1932.html

Relations of partners to one another

General duties of partners
Partners are bound to carry on the business of the firm to the
greatest common advantage,
To be just and faithful to each other
Render true accounts and full information of all things affecting
the firm to any partner or his legal representative

Source: www.roc.gov.bd/acts/partnershipact1932.html

Rights subjected to contract

Every partner has a right to take part in the conduct of the business
Every partner is bound to attend diligently to his duties in the
conduct of the business
Every partner shall have the right to express his opinion before the
matter is decided, but no change may be made in the nature of the
business without the consent of all the partners

Source: www.roc.gov.bd/acts/partnershipact1932.html

Every partner has a right to have access to and to inspect and copy any of the
books of the firm.
A partner is not entitled to receive remuneration for taking part in the
conduct of the business;
Equal share in both profit and losses
According to Bangladeshi law- a partner making, for the purposes of the
business, any payment or advance beyond the amount of capital he has
agreed to invest, is entitled to interest thereon at the rate of six percent, per
annum;

RELATIONS OF PARTNERS TO THIRD PARTIES

Partner to be agent of the firm:

A partner is the agent of the firm for the purposes of the business of the firm.
Implied authority of partner as agent of the firm:
(1) According to the provisions of section 22, the act of a partner which is done to carry on the
business, which binds the firm.

Implied Authority: It is the authority of a partner to bind the firm is known as Implied Authority

(2) The implied authority of a partner does not empower him to(a) To submit a dispute relating to the business of the firm to arbitration,
(b) To open a banking account on behalf of the firm in his own name,
(c) To compromise or relinquish any claim or portion of a claim by the firm,
(d) To withdraw a suit or proceeding filed on behalf of the firm,
(e) To admit any liability in a suit or proceeding against the firm,
(f) To acquire immovable property on behalf of the firm,
(g) To transfer immovable property belonging to the firm, or

Extension and restriction of partner's implied authority:

The partners in a firm may extend or restrict the implied authority of any partner.
Partner's authority in an emergency:
A partner has authority to do all such acts for the purpose of protecting the firm from
loss
Mode of doing act to bind firm:
It is an act or instrument done or executed by a partner or other person on behalf of
the firm

Effect of admissions by a partner:

An admission or representation made by a partner concerning the affairs of the
firm is evidence against the firm, if it is made in the ordinary course of
business.
Effect of notice to acting partner:
It is a notice to a partner who acts in the business of the firm of any matter
related to the affairs of the firm operates as notice to the firm, except in the
case of a fraud committed by or with the consent of that partner in the firm.

Liabilities faced by the partners and the firm

for their act
Liability of a partner for acts of the firm: All the partners of a firm will be jointly
liable for the acts done by the firm.
Liability of the firm for wrongful acts of a partner: If any wrongful act or omission of a
partner, or with the authority of his partners, loss or injury caused to any third party, or
any penalty is incurred, the firm will be liable to same extent as the partner.
Liability of firm for misapplication by partners:
(a) A act of a partner receiving money or property from a third party and misapplies it
(b) A act of misapplying a firms money or property received in the course of business

Holding out:
Liability extends to any individual who, whilst is not an actual partner, holds
himself out publicly to the outside world to be one, is liable as a partner in
that firm
If a business of a firm is continued with the old name of the firm or the name
of the partner who is died, will not be liable for any act of the firm after his
death.

Rights of transferee of a partner's

interest
A partner of his interest in the firm either absolute or by mortgage,
The transferee gets no the rights to, interfere in the conduct of the business, or require
accounts, or inspect the books of the firm, only entitles receive the share of profits, shall
accept the account of profits agreed to by the partners.
In the case If the firm dissolved or if the transferring partner ceases to be a partner, the
transferee partner will be entitled as against the remaining partners to receive the share of
the assets of the firm to which the transferring partner is entitled, and, for the purpose of
ascertaining that share, to an account as from the date of the dissolution.

Minors admitted to the benefits of partnership

According to the law a person who is a minor may not be 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
Right of sharing property and profit as agreed upon.
Inspection of accounts.
Can not conduct any business activities.
Will not be liable for any acts of the firm.
In case of dissolving firm, the share of the minor shall be determined along with the shares of the
other partners by the court

INCOMING AND OUTGOING PARTNERS

Introduction of a new partner:
According to the contract between partners and provisions of section
30, no person can be introduced as a partner into a firm, without the
consent of all other existing partners.
Therefore according to section 30, the person who is newly
introduced into the firm will not become liable for any act of the firm
done before he become a partner.

Retirement of a partner
A partner may retire(a)with the consent of all the other partners
(b)in accordance with an express agreement by the partners, or
(c)where the partnership is at will, by giving notice in writing to all the other partners of
his intention to retire.
()
Expulsion of a partner
1) A partner may not be expelled from a firm by any majority of the partners.
2) Good faith for the benefit of the firm
3) The provisions of sub-sections (2), (3) and (4) of section 32 shall apply to expelled as if he were a retired
partner

 Insolvency of a partner:
*It is where a partner in a firm is adjudicated an insolvent he ceases to be a partner on
the date on which the order of adjudication is made. After the order both the firm n the
will not be liable for any act related to the firm, vise versa.
Liability of estate of deceased partner:
*The firm will continue to exist and run accordingly after the death of a partner, the
deceased partner will is not liable for any act of the firm done after his death.

Rights of outgoing partner to carry on competing business

(a) Can not use the firm name,
(b) Can not represent himself as carrying on the business of the firm, or
(c) Can not solicit the custom of persons who were dealing with the firm before he was a partner

Agreements in restraint of trade

After ceasing to be partner he will not carry on any business similar to that of the firm
for a specific time and location.

Source: http://bdlaws.minlaw.gov.bd/pdf_part.php?id=157

Dissolution of a firm
The dissolution of partnership between all the partners of a firm is called
the "dissolution of the firm
When the partners Decide to end their agreement between them in case of
any dispute or of own will it is known as dissolution of firm
With the dissolution of firm come other issues related to the dissolution
which will be discussed in the following.

Sorce: http://bdlaws.minlaw.gov.bd/pdf_part.php?id=157

How a Firm is Dissolved

Dissolution by agreement
A firm may be dissolved with the consent of all the partners or in accordance with a
contract between the partners i.e when all the partners decide to bring an end to
the firm and are all on same page with the decision.

Sorce: http://bdlaws.minlaw.gov.bd/pdf_part.php?id=157

Compulsory dissolution

According to the THE PARTNERSHIP ACT, 1932:

(a) by the adjudication of all the partners or of all the partners but one as insolvent, or
(b) by the happening of any event which makes it unlawful for the business of the firm
to be carried on or for the partners to carry it on in partnership:
Provided that, where more than one separate adventure or undertaking is carried on
by the firm, the illegality of one or more shall not of itself cause the dissolution of the
firm in respect of its lawful adventures and undertakings. (Laws of Bangladesh, 2013)
Any event which leads to the making of the partnership or company unlawful will
make the partnership absolute and cause it to break.

Sorce: http://bdlaws.minlaw.gov.bd/pdf_part.php?id=157

Dissolution on the happening of certain contingencies

If the firm is constituted for a term allocated by the contract. When the term
ends then the firm will dissolute. If a partner dies then the firm will also
dissolute. Or if a partner is declared insolvent that is he or she becomes
bankrupted.
Dissolution by Court:
At the suit of a partner, the Court may dissolve a firm on any of the following
grounds, namely:When one partner becomes insane that is he or she is not of state mind.
When a partner in any way fails to do his duties towards the firm.

Sorce: http://bdlaws.minlaw.gov.bd/pdf_part.php?id=157

Dissolution by court continued.

When a partner conducts act that harms the business or harms the
image of the business.
If a partner breaches his or her terms and condition of the
agreement the court can declare the firm dissolved.
A partner can be suied if he or she sells his share to some other
3rd party and without the consent of the other party. (Laws of
Bangladesh, 2013)

Sorce: http://bdlaws.minlaw.gov.bd/pdf_part.php?id=157

After Dissolution
After the dissolution of a firm partners are liable to pay of any third party
that are liable to the firm but according to laws of Bangladesh:
Provided that the estate of a partner who dies, or who is adjudicated an
insolvent, or of a partner who, not having been known to the person dealing
with the firm to be a partner, retires from the firm, is not liable under this
section for acts done after the date on which he ceases to be a partner.
(Laws of Bangladesh, 2013)

 When the firm is dissolute the firms property will be used to pay up the
outstanding debt. The remaining property will be distributed equality
Firstly profits will be used to settle the outstanding debts. Then the firms
assets and lastly the partners assets to pay up the outstanding debts. (Sen &
mitra, 2012)

Source: http://companysecretarybd.blogspot.com/2014/01/company-registration-procedurein.html?m=1

Registration of Firms in Bangladesh

Meeting of Promoters.
Age of Majority: this means that the person must be eligible meaning that the person
must be the age of 18 or above.
Sound Mind: the person should not be mentally disabled.
Been Disqualified By Law/Court: this means that the person should not have any past
records where he/she has been convicted by the law.
Requisit Amount of Shares: the person must have the necessary amount of shares of
the new company required for him to become the Chairman or Board of Directors.
Bankrupt or Insolvent: the person should not be bankrupt or be insolvent.
TIN: TIN stands for Tax Identification Number. This provides the history of ones income
tax payment records.

Step 2
Name Booking:
In this step the members of the board books the name of the new
company in RJSC (Registrar Of Joint Stock Company). This step is
crucial as it will make the company identifiable from other
companies.

 STEP-3
Prepare Memorandum of Association (MOA) as per to Company
Act 1994: the Memorandum of Association is a documents that
shall provide with the information of the duties of the Board of
Directors. This document will inform others about each Board of
Director and their position in the company and what work are
they obliged to do in the company.

STEP-4
Prepare Article of Association (AOA) as per to Company Act 1994: the Article of Association is another
document required to start uo a company. In the document of the Article of Association is states of how
to do the things. The Article of Association states:
How to run the company
Share Capital of the company
Duty of the Directors
How to conduct a meeting
Total shares of the company
Minimum shares required by a person to become a member of the board
Rights of share holders
How to dissolute the company
How to create the audit of the company

 STEP-5
Collect Incorporation Certificate: the Incorporation Certificate is a
document that is to be collected from the RSJC (Registrar of Joint Stock
Company). This document is a license issued by the RSJC (Registrar of Joint
Stock Company) and it gives the investors the permission to form the
company. In this stage the RSJC (Registrar of Joint Stock Company) may ask
the Board of Directors to provide them with the Memorandum of
Association and the Article of Association of the company.

 STEP-6
Apply for Trade License: the Board of Directors of the company mus apply for Trade License. The application
of the Trade License has to be done in the office of the City Corporation. There are two City Corporation
Office in Dhaka, Bangladesh. The Trade License gives the comapny the permission of trading their and others
product with their consumers and suppliers.

STEP-7
Apply for Income Tax Certificate: This document is apart from the Board of Directors Tax Identification
Number (TIN). This document is for the company and solely to its self. This document shall hold the record of
the income of the company and the tax that the company shall pay.

STEP-8
Apply for VAT Certificate: the VAT Certificate is a document required to open a
company in Bangladesh. This document shall keep the record of the
expenditures made by the comapany and how much Value Added Tax (VAT) the
company has to pay. This is based on a certain percent upon the expenditures of
the company. And this cartificate is to be collected from the Registrar of Joint
Stock Company (RJSC) Bangladesh.

 STEP-9
Open a Bank Account: the new company must now select their preferred bank
where they shall recieve the maximum offers and create an account.