CORPORATE LAW

Week 5

Law of Partnership
By Muhammad Naveed Chohan

Department of Management Sciences

Wednesday, May 02, 2012 1

Outline
Introduction to Partnership Kinds of Partners and Partnerships Formation of Partnership Dissolution of Partnership

Wednesday, May 02, 2012

Introduction to Partnership
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 one of them acting for all [Sec. 4 of Partnership Act 1930] Partnership is the relation existing between persons to make contracts who agree to carry on a lawful business with a view to private gain [Prof. Haney]

Wednesday, May 02, 2012

Introduction to Partnership
Characteristics of Partnership:
Legal Entity Agreement Number of Partners Existence of Business Sharing of Profits Mutual Agency Unlimited Liability Capital Utmost Good Faith Management Control Transfer of Interest Duration
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Wednesday, May 02, 2012

Kinds of Partners
Active Partner Sleeping Partner

Nominal Partner
Senior Partner Junior Partner

Partner in Profits Only

Secret Partner Minor Partner

Wednesday, May 02, 2012

Kinds of Partners
Minor Partner
a.
b. b. c.

Position During Minority

Right to receive agreed share Right to inspect and take copies of the accounts No personally liable for debts Can not take part in management Right to sue other partners for profits Can not be declared insolvent Position after Majority Decision should be within six months after attaining majority Public Notice Decision to Become a Partner Decision not to Become a Partner

Wednesday, May 02, 2012

Types of Partnerships

1.

General Partnership
Liability of all the partners is unlimited Creditors can recover their dues even from personal property of all the partners Every partner has equal right to take part in the management of the firm Partnership at will: (Sec.7 of Partnership Act 1932)

If no provision is made in the agreement regarding the duration of the partnership, it is called partnership at will
General Partnership treated as partnership at-will: Partnership is for Unlimited period, for limited period but continued.

2.

Particular Partnership:

Limited Partnership

Wednesday, May 02, 2012

Types of Partnerships

Limited Partnership
Under Partnership Act 1907 of England One or more partners have limited liability and at least one has unlimited liability Characteristics of the Limited Partnership: One or more partners have limited liability At least one has unlimited liability Formation under Partnership Act 1907 of England Must be registered Limited partner cannot take part in management No return of capital until he remains in partnership Can inspect accounts Can give suggestions and recommendations New partner can be admitted Minimum 20 persons 10 for banking business

Wednesday, May 02, 2012

Formation of Partnership
Important Points before Formation of Partnership
Selection of partners with care Object should be lawful Discussion of rights and duties with care Registration of firm

Wednesday, May 02, 2012

Formation of Partnership
STEP 1 Formation of Partnership Deed Registration of Partnership
Submission of Application

STEP 2

Penalty for False Particulars

Certification U/S 59

Change of Particulars
Wednesday, May 02, 2012 10

End of Week #5 Lecture Presentation Thanks for Patience

Wednesday, May 02, 2012

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