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Nature of partnership the law of partnership

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Nature of partnership the law of partnership

  1. 1. THE LAW OF PARTNERSHIP Nature of Partnership Prepared for: Dr. Mohammad Monirul Islam Assistant Professor Department of International Business Faculty of Business Studies University of Dhaka Group – 01 Department of International Business MBA (Evening) Program – Fall 2020
  2. 2. Prepared by: Saima Tasnim Pinky (802031021) Fahema khan (802031025) Md. Rakibul Hasan Rubbi (802031033) THE LAW OF PARTNERSHIP Group – 01 Nature of Partnership
  3. 3. Partnership When two or more persons join hands to set up a business and share its profits and losses, they are said to be in partnership. “Partnership created by agreement between parties” The Indian partnership Act - 1932 Group - 01 In section 04 of the Indian Partnership Act 1932 defines partnership as 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” M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 )
  4. 4. Group - 01 Three essential elements ……PARTNERSHIP (as defined in the Act) Must have three agreements - • Two or more persons • Share profits of a business • Carried on by all or any of them acting for all. M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 )
  5. 5. Group - 01 Characteristics……PARTNERSHIP (as defined in the Act)  Voluntary Agreement  Sharing of Profits  Mutual Agency M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 )
  6. 6. Group - 01 Voluntary Agreement M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 ) The first elements shows the voluntary contractual nature of Partnership, and it can only arise by an agreement, express or implied, between two or more persons. “A partnership cannot be formed with more than ten persons in banking and twenty persons in other types of business.” All the process must be registered under a Partnership Act. The relation of partnership arises from contract and not from status. (Section -05,1932)
  7. 7. Group – 01 Money is an effective, powerful and simple motivator. Self-evidently, money motivates and extra money motivates people to work extra hard. It makes people more committed. Case study: Musical Club If two or more persons join together to form a music club it is not a partnership because there is no business in this case. But if two person or more persons join together to give musical performances to the public place with a view to earning profit, there is a business and a partnership is formed. Sharing of Profits M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 )
  8. 8. Group – 01 Mutual Agency M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 ) It is the third element, and most important feature of partnership. It states that persons carrying on business in partnership are agents as well as principals. A business firm is carried on by all or by any one or more of them on behalf of all. In all matters, Partners are connected with an agent/ authority, which have Power of Attorneyto act on behalf of all.
  9. 9. Group – 01 Mutual Agency M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 ) The law of Partnership has therefore been called a branch of the law of agency. A good example of mutual agency is when you select an insurance representative. You are authorizing the insurance representative to act on your behalf when dealing with agency underwriting and insurance companies. An insurance representative is there to walk you through the process and explain in detail your options; they do not make the sole decision. They know agency underwriters are there to make paperwork more difficult so they are there to make it easier to understand. You have a mutual agency.
  10. 10. Group – 01 Who can be a partner ??? M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 )  Person  Minor  Person of Unsound mind  Woman  Company
  11. 11. Group – 01 Who can be a partner ??? M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 )  Person, who has the capacity to enter into a contract.  Minor, a minor cannot be a partner. But in an existing partnership, a minor could be admitted into a firm if all partners of the firm agree. (Minor Admitted as a partner – details in Sec. 30, 1932 Act)
  12. 12. Group – 01 Who can be a partner ??? M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 ) Person of Unsound mind Sound mind - • Purpose of the making a contract • Capable to understand about Business (Indian Contract Act 1872, Sec. 12) A person who is usually of unsound mind, but occasionally of sound mind, may take a contract when he is of sound mind. A patient in a lunatic asylum, who is, at intervals, of sound mind, may contract during those intervals. Example: A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind. A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts. Example: Unsound minds are like- • Idiots • Lunatics • Drunken or Intoxicated persons A p e r s o n w h o i s o f u n s o u n d m i n d c a n n o t b e a p a r t n e r.
  13. 13. Group – 01 Who can be a partner ??? M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 ) a woman can be a partner, married or unmarried. Of course, a woman cannot be a partner if she is a minor or she is of unsound mind. Woman
  14. 14. Group – 01 Who can be a partner ??? M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 ) Company The liability of the members of a firm under the Partnership Act, for the debts of the firm, is unlimited. But a company cannot incur unlimited liability. A Company cannot become a partner of a firm.
  15. 15. Group – 01 Who can be a partner ??? M d . R a k i b u l H a s a n R u b b i ( 8 0 2 0 3 1 0 3 3 ) An Alien, it means a citizen of a foreign state. Contracts with aliens are valid. But an alien enemy cannot enter into a contract of partnership with a citizen of India.
  16. 16. Group – 01 S a i m a T a s n i m P i n k y ( 8 0 2 0 3 1 0 2 1 ) Partnership Co- ownership Each partner is the agent of the others. Co-ownership is not the agent of the other owners. The rights of a Co-owner can’t be affected by any act done by the others. Partnership always arise out of agreement. Co-partnership may arise by agreement or by operation of law . A partner can transfer his interest, under certain circumstances, but transferee can never become a partner of the business without the consent of the consent of the other partners. A Co-owner can transfer his interest to a third party without the consent of the other co-owners. A partnership always implies a business. Co-ownership may exit without any business. There must be sharing of profits. It may exit without business, the question of sharing profit or losses is immaterial in co-ownership. A partner has a lien on partnership assets for moneys spent by him for the partnership. It has no lien under similar circumstances. Partnership & Certain Similar Org.
  17. 17. Group – 01 S a i m a T a s n i m P i n k y ( 8 0 2 0 3 1 0 2 1 ) Partnership & a Club 1.Club is not a business – There is no motive to earning profit and sharing them. 2.Not a Agent – A member of a club is not the agent of the other members, a member is not responsible for the debts of the club unless he participated in the transaction. 3.Existence of the club – The death or resignation of a member does not affect the existence of the club.
  18. 18. Group – 01 S a i m a T a s n i m P i n k y ( 8 0 2 0 3 1 0 2 1 ) Partnership & Company 1. Registration 2. Minimum number of member 3. Maximum number of members 4. Legal Status 5. Authority of members 6. Contractual capacity 7. Management 8. Length of Existence 9. Liability of members 10. Liability of firm & Company 11. Transferability 12. Statutory obligations
  19. 19. Group – 01 S a i m a T a s n i m P i n k y ( 8 0 2 0 3 1 0 2 1 ) Partnership & a Joint Hindu family Firm Point of Difference Partnership A Joint Hindu Family Method of creation It’s created by Agreement. It’s created by operation of law. Authority of members Every partner has authority to bind the firm by his actions & can participate in the business of the firm. The Manager or Karta has authority to bind the members by all acts. Positon of minors A minor can’t be a member except in one special case. In Joint Hindu Family, minors are the member of the firm from the date of birth. Position of Women A women can be a partner under act. Women can’t be a partner but this view is changing. Death of Partner In partnership Business, death of a partner dissolves the firm, unless otherwise agreed by the partners. The death of a member of the joint Hindu family firm has no effect on the firm.
  20. 20. Group – 01 S a i m a T a s n i m P i n k y ( 8 0 2 0 3 1 0 2 1 ) Partnership & a Joint Hindu family Firm Point of Difference Partnership A Joint Hindu Family Dissolution & accounts A partner of a firm under similar circumstances can. A member of a joint family firm when serving his connection with the firm can’t ask for accounts of a past profits and losses. Law Partnership is governed by the Partnership Act. A Joint Hindu Family is governed by Hindu Law. Partnership The Karta of a joint Hindu family & an undivided member of that family can join a partnership. The Hindu undivided family cannot as such enter into a contract of partnership with another person or persons.
  21. 21. Group – 01 S a i m a T a s n i m P i n k y ( 8 0 2 0 3 1 0 2 1 ) Partnership forbidden by Law • Number of Partners • An Agreement to form a partnership
  22. 22. Group – 01 F a h e m a k h a n ( 8 0 2 0 3 1 0 2 5 ) Classes of Partners Partners can be classified as below: • Active Partner • Dormant, Sleeping or Nominal Partner • Sub Partner
  23. 23. Group – 01 F a h e m a k h a n ( 8 0 2 0 3 1 0 2 5 ) Classes of Partnership Partnership can be classified as below: • Partnership-at-will • Particular Partnership – Joint venture • Limited Partnership
  24. 24. Group – 01 F a h e m a k h a n ( 8 0 2 0 3 1 0 2 5 ) Fixed time term Partnership property The Property of the firm includes all property , rights and interests in property originally brought into the stock of the firm or acquired by purchase or otherwise by or for the firm or for the purposes and in the course of the business of the firm and includes also the good will o the business.
  25. 25. Group – 01 Fixed time term F a h e m a k h a n ( 8 0 2 0 3 1 0 2 5 ) Goodwill Goodwill may be described as the advantage which is acquired by a firm (over and above) the value of the stock-in-trade and the capital and fund) from the connections it has built up with it’s customers and the reputation it has gain.
  26. 26. Group – 01 The Partnership Agreement F a h e m a k h a n ( 8 0 2 0 3 1 0 2 5 ) The agreement to carry on business in Partnership may be oral or in writing. If it is in writing, the terms are incorporated is called the deed of the partnership or the articles of Partnership.
  27. 27. Group – 01 Registration of Firms Time for Registration Consequences of Non-registration (Sec. 69) F a h e m a k h a n ( 8 0 2 0 3 1 0 2 5 )
  28. 28. Group – 01 “Q” n “A” Thank You!!

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