The Founding Stone : Partnerships – II
After a quick glance on the partnership in previous article : The Founding Stone : Partnerships – I (If you missed just have a look over it till we pause further discussion) Now expecting that you returned with a fair definition of Partnership, we can move further.
A new Kind of partner : Partner by Holding Out
According to Partnership Act 1932 under Section: 28 On Holding Out
So who is partner in holding out? (LAYMAN TERMINOLOGY)
When a person is represented (held out) as a partner and he does not deny this even after becoming aware of it, he becomes liable to third parties who lend money or grant credit to the firm on the basis of such representation. Suppose A tells B in the presence of C that C is a partner in the firm ‘ABC Enterprises’. C is actually not a partner and does not deny A’s statement. B grants a loan of Rs 50,000 to ABC Enterprises on the impression that C is a partner. Later on the firm is unable to repay the loan. C becomes liable to B and here C is a partner by holding out
A partner can utilize his stake for raising finance
Under ‘Rights of transferee of a partner’ s interest’ Section 29 in The Indian Partnership Act
Registration Process of Firm
This is stated in section 58 of Indian Partnership Act
Under Section 58 of the Act, a firm may be registered at any time (not merely at the time of its formation but subsequently) by filing an application with the Registrar of Firms of the area in which any place of business of the firm is situated (or proposed to be situated). The application shall contain the following particulars:(a) the firm name,(b) the place or principal place of business of the firm,(c) the names of any other places where, the firm carries on business,(d) the date when each partner joined the firm,(e) the names in full and permanent addresses of the partners, and(f) the duration of the firm. The statement shall be signed by all the partners, or by their agents specially authorized in this behalf.
Recording of alterations in firm name and principal place of business.
Stamping the partnership Deed
Dissolution of Partnership Firm
- With the consent of all partners or in accordance with a contract between partners
- If the firm agreement was for a fixed period and processing dissolution after expiry term
- By providing notice in writing to other partners, if the partnership is at will, his intention to dissolve the firm
- 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.
Settlement of Dissolution
This is mentioned in section 46 of Indian Partnership Act of 1932
“Right of partners to have business wound up after dissolution. On the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representatives according to their rights.”
Section 48 defines broadly the partners rights and claims as
Mode of settlement of accounts between partners. In settling the accounts of a firm after dissolution, the following rules shall, subject to agreement by the partners, be observed:-
- Losses, including deficiencies of capital, shall be paid first out of profits, next out of capital, and, lastly, if necessary, by the partners individually in the proportions in which they were entitled to share profits.
- The assets of the firm, including any sums contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order:-
- in paying the debts of the firm to third parties
- in paying to each partner rateably what is due to him from the firm for advances as distinguished from capital;
- in paying to each partner rateably what is due to him on account of capital; and
- the residue, if any, shall be divided among the partners in the proportions in which they were entitled to share profits.
Selling of Goodwill
At the time of dissolving a firm’s business, the partners must bear in mind that they are entitled to sell the goodwill of the firm. As per Section 55, after dissolution, the goodwill of the firm can be sold either separately or along with other property of the firm, subject to contract between the partners.