This document summarizes key aspects of partnership law in Nepal, including the definition of a partnership, elements required to form one, rights and duties of partners, dissolution of partnerships, and effects of non-registration. It defines a partnership as a business with 2+ people who have agreed to share profits under a single name. Essential elements are an agreement to share profits from a business carried on by all or any partners. The document outlines partners' rights like access to books and duties like acting in the firm's best interest. Dissolution can occur through consent, notice, or events like death or insolvency of a partner. Non-registration prevents suits and claims involving the firm.

1. Unit IV: Law of Partnership

2. • Meaning, definition, and nature of
partnerships;
• formation of partnerships; rights, duties, and
• liabilities of partners;
• dissolution of partnership firm

3. Preamble:
Whereas it is expedient to provide for legal
provisions on partnership for the interest and
convenience of general public; Now, therefore
be it enacted by His Majesty the King Mahendra
Bir Bikram Shah Dev on the advice and with the
consent of the Rastriya Panchayat.

4. Definition of partnership(3)
(1) Any business registered in a record of the
Government of Nepal by the persons who have
agreed to share the profit of the business
carried on by them in a single name under an
agreement (Kabuliat) made with each other
which entitles all partners to take part in all
business for each partner or entitles any of
them for the same on behalf of all others.

5. (2) Persons who have entered into an agreement
of partnership shall be called "partners" in
relation to each partner and shall be called
"firm" in a collective form and the name under
which their business in carried on is called the
“name of firm".
(3) No partnership firm shall be a person except
partners.

6. a. There must be a contract
b. Between two or more person
c. Who agree to carry on a business
d. With the objective of sharing profit
e. The business must be carried on by all or any
of them acting for all

7. Essential elements
1. There must be an agreement enter into by
two or more persons
2. The agreement must be to share the profits
of business
3. The business must be carried on by all or any
of them acting for all

8. Business carried on by joint family
shall not be partnership:
• The relationship between members of a joint
Hindu family governed by the Mitakshara
school of Hindu law is determined by birth
and not by agreement.
Therefore a joint family firm is not a partnership
under the Act

9. • The test of true partnership were first laid down
by the House of Lords in the case of
Cox V Hickman
In that case, a debtor transferred his business to
trustees with instructions to carry on the business
and use the profits for paying his creditors.
• It was held that the creditors were not partners
of the business.

10. Formation of Partnership firm
• A firm shall have to be registered in the record
of the concerned Department within a period
of Six months from the date when the
partners enter in to the agreement of
partnership pursuant to this Act
• In order to register a firm an application in the
format shall be submitted before the
concerned Department, stating the required
details, along with the fees.

11. Required details
• Full Name of the firm
• The Principal place of business of the firm,
• The objectives of the firm including the short
description of the nature of the goods or
services, as the case may be, which the firm
intends to run the business,
• The full name, surname and permanent address
of the partners,
• The matter of restriction imposed on the power
of a partner, if any,

12. Required details
• The types of partnership and the capital
subscribed by each partner,
• The name of a partner or partners, who
represent the firm,
• The mode to share the profit and loss between
/among partners,
• The mode to calculate the profit of a firm.
• Any other matters prescribed by the concerned
Department stating which should be set out in
the application.

13. Rights, duties and liabilities
• Subject to the provision of the act, the mutual
rights and duties of the firm may be
determined by the contracts of the partners,
and such contract may be expressed or may
be implied by the course of dealing.

14. Rights, duties and liabilities
• Rights
- Right to take part in the conduct of the
business,
- Right to be consulted,
- Right to access to books of accounts,
-Right to share the profits,
- Rights to interest in the capital,
- Rights to interests on advances,
- Rights to indemnity

15. Rights, duties and liabilities
-Duties
- Absolute duties: imposed by law
(a) duty to carry on the business on the
greatest common advantages
(b) duty to be just and faithful inter-say
(c) duty to render true accounts
(d) duty to provide true information's
(e) duty to indemnify for lost caused by
frauds
(f) duty to be liabily jointly and severally

16. Rights, duties and liabilities
Duties
- Qualified duties: depend upon the contracts
(a) duty to attend diligently to his duties,
(b) duty to work without remunerations
(c) duty to contribute the losses
(d) duty to indemnify for willful neglects
(e) duty to use the firms property
exclusively for the firm

17. Liability of a partner
• Every partner shall be liable jointly or
personally with all the other partners for all
the acts of the firm done while he/she was a
partner.
• person who is newly introduced as a partner
into a firm shall not be liable for any act of the
firm done before he/she became a partner.

18. Dissolution
Firm may be dissolved with the consent of all the partners or in
accordance with an agreement concluded between/among the
partners.
• Dissolution by notice
• After the expiry of the term the firm shall, ipso facto, be dissolved:
 dissolved immediately, upon the death of a partner
 upon the adjudication of a partner as an insolvent for being unable to
pay back the debt of the creditor.
• If a partner lodges a complaint with the concerned Department
along with the evidence stating that there is unnecessary delay to
settle the accounts of a firm, the concerned Departments may, in
order to carry out the task for dissolution of the firm, appoint
Liquidator or Liquidators.

19. Firm may be dissolved at any time(31)
• If a partner has become incapable of performing his/her
duties of the firm as referred to in the agreement; or
• If any other partner fails to pay the amount to be paid to
the firm, or
• if he/she transfers his/her/ interest in the firm to a third
party without the consent of all the other partners; or
• If the interest of any other partner is attached (Bhari
Bharau) by the court; or
• If a partner commits an act of fraud or an act of serious
recklessness in the business of the firm; or
• If a penalty of imprisonment is imposed to any other
partner.

20. Appeal procedure
• A partner, who is not satisfied with the
decision made by the concerned Department,
may file an appeal before Court of Appeal
within a period of Thirty Five days from
receiving the notice of such decision.

21. Effects of non-registration
• No suit in a civil court by the partner against
the firm or other copartners.
• No suit in a civil court by firm against third
parties
• The firm or its partners cannot make a claim
of set-off or other proceeding based upon a
contract.

22. • Partnership and certain similar organization
a. Partnership and co-ownership
b. Partnership and club
c. Partnership and company
d. Partnership and a joint Hindu Family