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Theindianpartnershipact1932 120305114812-phpapp02 (1)

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Partnership act & company law
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Theindianpartnershipact1932 120305114812-phpapp02 (1)

  1. 1. The Indian Partnership Act, 1932
  2. 2. INTRODUCTION  The law of partnership is contained in the Indian Partnership Act, 1932, which came into force on 1st October, 1932  A contract of partnership is a special contract. Where the partnership act is silent on any point, the general principles of the law of contract apply (Section 3)  This Act extends to whole of India(except the state of Jammu & Kashmir)
  3. 3. Meaning and Definition of “Partnership”  Section 4 Para 1 of the of the Indian partnership Act 1932, defines partnership as:  “ 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”.  Thus, partnership is the name of legal relationship between or among persons who have entered into a contract.
  4. 4. Two or more persons An agreement Sharing of profit Business Mutual agency Essential elements of Partnership
  5. 5. Features of Partnership Act, 1932 7/4/2015 5 • Indian Partnership Act, 1932 is a Central Act. (made by Parliament • This Act deals with special type of contract.( contract of partnership) • Provisions regarding contract of partnership were earlier contained in the Indian ContractAct, 1872. • This Act extends to the whole of India except the state of Jammu and Kashmir. • This Act came in to force on 1.10.1932, except section 69 which came into force on the 1st Day of October, 1933.
  6. 6. Maximum Limit on Number of Partners  Section 11 Companies Act provides that the maximum no. of persons, a firm can have: In case of partnership firm carrying on a banking business 10 In case of partnership firm carrying on any other business 20 If the number of partners exceeds the aforesaid limit, the partnership firm becomes an illegal association.
  7. 7. Characteristics of Partnership 7/4/2015 7 Apartnership firm has the following characteristics: 1. Two or more members 2. Unlimited liability 3. Voluntary registration 4. No separate legal existence 5. Restriction on transfer of interest: 6. Based on agreement 7. Partners are competent to contract 8. Partnership may be only for lawful business.
  8. 8. REGISTRATION • It is not compulsory to register the firm. However there are serious effects of non-registration. 1. No suit to enforce a right arising from a contract or conferred by the Indian Partnership Act shall be instituted in any court by or on behalf of any person suing as partner in a firm against the firm or any person alleged to be or to have been a partner in the firm, unless the firm is registered and the person suing is or has been shown on the Register of firms as a partner in the firm 2. Similarly, no suit to enforce a right rising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered. 7/4/2015 8
  9. 9. Real test of partnership [Sec. 6]  The true test of partnership is the existence of ‘Mutual Agency’ relationship, i.e. the capacity of a partner to bind other partners by his acts done in firm’s name and be bound by the acts of other partners.  Sharing of profit is an essential element of partnership but it is not a conclusive proof of partnership.  Mutual agency only exists for partners acting within the scope of normal business operations and dealings.  Thus partnership can be presumed when  a. There is an agreement to share the profits of business and  b. The business is carried on by all or by any of them acting for all.
  10. 10. Meaning of Mutual Agency Mutual agency refers to the relationship of principal and agent Among partners Example in case of firm of A,B and C When A acts A- Agent B and C- Principal When B acts B- Agent A and C- Principal When C acts C- Agent A and B- Principal
  11. 11. Types of PARTNERS  Actual partner  Sleeping partner  Nominal partner(does not contribute any capital;but lends his name and credit to the firm)  Sub-partner  Partner in profits only  Minor as a partner
  12. 12. Kinds of Partnership Partnership at Will Particular Partnership On the Basis of Duration On the Basis to the extent of the business Partnership for a fixed period General partnership
  13. 13. Kinds of Partnership  Partnership at will :- According to SECTION-7 of the act, it is a partnership when:- 1. No fixed period has been agreed upon for the duration of the partnership and 2. There is no provisions made as to the determination of the partnership.  Partnership for a fixed period :- Where a provision is made by a contract for the duration of the partnership, the partnership is called ‘partnership for a fixed period’.  Particular partnership :- a partnership may be organized for the prosecution of a single adventure as well as the conduct of a continuous business.  General partnership :- where a partnership is constituted with respect to the business in general, it is called a general partnership.
  14. 14. Partnership deed  A partnership is formed by an agreement. This agreement may be in writing or oral. though the law does not expressly require that the partnership agreement should be in writing, it is desirable to have it in writing in order to avoid any dispute with regard to the terms of the partnership. The document which contains the term of a partnership as agreed among the partners is called “partnership deed”.  The partnership Deed is to be duly stamped as per the Indian Stamp Act, and duly signed by all the partners.
  15. 15. Contents of partnership Deed A partnership deed may contain any matter relating to the regulation of partnership but all provisions in the deed should be within the limits of Indian Partnership Act, 1932. However, A Partnership Deed should contain the following clause:-  Nature of business  Duration of partnership  Name of the firm  Capital  Share of partners in profits and losses
  16. 16. Contd………  Bank Account firm  Books of account  Powers of partners  Retirement and expulsion of partners  Death of partner  Dissolution of firm  Settlement of disputes
  17. 17. Advantages of Partnership Firm  Easy to form: Like sole proprietorships, partnership businesses can be formed easily without any compulsory legal formalities. It is not necessary to get the firm registered. A simple agreement or partnership deed, either oral or in writing, is sufficient to create a partnership.  Availability of large resources: Since two or more partners join hands to start a partnership business, it may be possible to pool together more resources as compared to a sole proprietorship. The partners can contribute more capital, more effort and more time for the business. Contd.
  18. 18. Cntd……… • Better decisions: The partners are the owners of the business. Each of them has equal right to participate in the management of the business. In case of any conflict, they can sit together to solve the problem. Since all partners participate in the decision-making process, there is less scope for reckless and hasty decisions. • Flexibility in operations: A partnership firm is a flexible organization. At any time, the partners can decide to change the size or nature of the business or area of it’s operation. There is no need to follow any legal procedure. Only the consent of all the partners is required. contd.
  19. 19. Disadvantage of Partnership Firm  Unlimited liability: All the partners are jointly liable for the debt of the firm. They can share the liability among themselves or any one can be asked to pay all the debts even from his personal properties depending on the arrangement made between the partners.  Uncertain life: The partnership firm has no legal existence separate from it’s partners. It comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership.  No transferability of share : If you are a partner in any firm, you cannot transfer your share or part of the company to outsiders, without the consent of other partners. This creates inconvenience for the partner who wants to leave the firm or sell part of his share to others.
  20. 20. Contd………..  Lack of harmony: In a partnership firm every partner has an equal right to participate in the management. Also, every partner can place his or her opinion or viewpoint before the management regarding any matter at any time. Because of this, sometimes there is a possibility of friction and discontent among the partners. Difference of opinion may lead to the end of the partnership and the business.  Limited capital: Since the total number of partners cannot exceed 20, the capital to be raised is always limited. It may not be possible to start a very large business in partnership form.
  21. 21. 7/11/2014 2 1     
  22. 22.    7/11/2014 2 2
  23. 23.     7/11/2014 2 3
  24. 24.  7/11/2014 2 4   
  25. 25.   7/11/2014 2 5    
  26. 26. RIGHTS OF THE PARTNERS 7/4/2015 26 • Subject to a contract to the contrary a partner has the following rights. 1. To take part in the conduct and management of the business 2. To express opinion in matters connected with the business. He has a right to be consulted and heard in all matters affecting the business of the firm 3. To have free access to all the records, books of account of the firm and take copy from them. 4. To share in the profits of the business. Every partner is entitled to share in the profits in proportion agreed to between the parties.
  27. 27. Partnership at Will [Sec.7 read with Sec.43)] • When there is no provision in partnership agreement (known as partnership Deed, if in writing) for: – The duration of their partnership, or – The determination of their partnership, then the partnership is called “Partnership at Will”.  Special feature of Partnership at will is that such firm may be dissolved by any partner by giving a notice in writing to all other partners of his intention to dissolve the firm  The firm will be dissolved from that date which is mentioned in the notice as the date of dissolution and if no date is mentioned then from the date of communication of n7/4o/2t0i15ce. 3
  28. 28. Particular Partnership [sec. 8] • When a partnership is formed for a • Specific venture or undertaking, or • Particular period (fixed term) then such partnership is called a "particular partnership". • Such partnership comes to an end on the completion of the venture or the expiry of time period. • If such partnership is continued after the expiry of term or completion of venture, it is deemed to be a partnership at will. • A particular partnership may be dissolved before the expiry of the term or completion of the venture only by mutual consent of all the partners. 4
  29. 29. Contd……….. 7/4/2015 29 • Sec. 17 (b) of the Act provides that if a firm ,constituted for a fixed term, continues to carry on business after the expiry of that term, then the partnership will become partnership at will AND mutual rights and duties of partners will remain same as they were before the expiry.

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