Law of Law of PartnershipPartnership

Presented by:FAIZAN AHMED

Meaning &Definition of ‘Partnership’Meaning &Definition of ‘Partnership’ ‘’‘’PARTNERSHIP IS THE RELATION BETWEEN PARTNERSHIP IS THE RELATION BETWEEN

TWO OR MORE PERSONS WHO HAVE AGREED TWO OR MORE PERSONS WHO HAVE AGREED TO SHARE THE PROFITS OF A BUSINESS TO SHARE THE PROFITS OF A BUSINESS CARRIED ON BY ALL OR ANY OF THEM CARRIED ON BY ALL OR ANY OF THEM ACTING FOR ALL’’.ACTING FOR ALL’’.

Thus, Partnership is the name of legal relationship Thus, Partnership is the name of legal relationship between/among persons who have entered in to the between/among persons who have entered in to the contract.contract.

Maximum Limit on Number of PartnersMaximum Limit on Number of Partners

In case of partnership firm carrying on a banking In case of partnership firm carrying on a banking businessbusiness 1010In case of partnership firm carrying on any other In case of partnership firm carrying on any other businessbusiness 2020

If the number of partners exceeds the above mentioned limit, the partnership firm becomes an illegal association.

CHACTERISTICS OF CHACTERISTICS OF PARTNERSHIPPARTNERSHIP

Legal Entity:Legal Entity:A partnership has no separate legal entity apart from its A partnership has no separate legal entity apart from its members. It means the firm and partners are not separate from members. It means the firm and partners are not separate from one another.one another.

Agreement:Agreement:A partnership is a result of agreement between persons. An A partnership is a result of agreement between persons. An agreement may be written or oral. Only the persons who are agreement may be written or oral. Only the persons who are competent to contract can form a partnership. competent to contract can form a partnership.

Number of Partners:Number of Partners:There must be at least 2 persons to form a partnership. The There must be at least 2 persons to form a partnership. The partnership Act does not mention the maximum limit of partnership Act does not mention the maximum limit of persons who can be partners in a partnership firm. According to persons who can be partners in a partnership firm. According to section 14 of Companies Ordinance 1984, a partnership section 14 of Companies Ordinance 1984, a partnership consisting of more than 20 persons cannot be formed.consisting of more than 20 persons cannot be formed.

Existence of Business:Existence of Business:The partners must agree to carry on a business. If the purpose The partners must agree to carry on a business. If the purpose is something other than business, it is not partnership. is something other than business, it is not partnership. Therefore when there is no business, there is no partnership.Therefore when there is no business, there is no partnership.

Sharing of Profits:Sharing of Profits:The agreement between partners must be to share the profits The agreement between partners must be to share the profits of a business. The profit will be distributed amongst the of a business. The profit will be distributed amongst the partners according to their agreement. The partners will share partners according to their agreement. The partners will share the loss according to the agreed ratio.the loss according to the agreed ratio.

Mutual Agency:Mutual Agency:The business must be carried on by all the partners or any of The business must be carried on by all the partners or any of them acting for all the partners. Each partner acts as an agent them acting for all the partners. Each partner acts as an agent of other partners of the firm. Again, each partner acts as a of other partners of the firm. Again, each partner acts as a principal also because he binds himself to the activities of principal also because he binds himself to the activities of other partners. It means that the contract of agency exists other partners. It means that the contract of agency exists among partners.among partners.

Unlimited Liability:Unlimited Liability:The liability of partners is unlimited in case of debts. All the The liability of partners is unlimited in case of debts. All the partners are individually and collectively responsible for the debts partners are individually and collectively responsible for the debts of the business. It means that if there is any loss and the business of the business. It means that if there is any loss and the business sources are insufficient to meet the claims of the creditors, the sources are insufficient to meet the claims of the creditors, the private properties of the partners can be sold to meet the claims private properties of the partners can be sold to meet the claims of the creditors.of the creditors.

Capital:Capital:Generally, the capital of the firm is provided by all the partners. It Generally, the capital of the firm is provided by all the partners. It is not necessary to contribute equal capital. A person without is not necessary to contribute equal capital. A person without contributing any capital may also become a partner.contributing any capital may also become a partner.

Utmost faith:Utmost faith:A partnership business Is based on mutual confidence and trust of A partnership business Is based on mutual confidence and trust of the partners. The partners must be just and honest with each the partners. The partners must be just and honest with each other. They must disclose all facts and provide true accounts other. They must disclose all facts and provide true accounts relating to the business to each other. They must not make any relating to the business to each other. They must not make any secret profit.secret profit.

Management:Management:According to law, every partner can take part in the conduct According to law, every partner can take part in the conduct and management of the business of the firm. Generally, the and management of the business of the firm. Generally, the work is divided amongst partners according to their experience work is divided amongst partners according to their experience and knowledge.and knowledge.

Control:Control:Since partnership is formed by an agreement, its control Since partnership is formed by an agreement, its control depends on the terms of the agreement. Where all the depends on the terms of the agreement. Where all the partners can take active part in the conduct of the business, partners can take active part in the conduct of the business, the control remains with all of them and all major decisions are the control remains with all of them and all major decisions are taken with the consent of all the partners. Otherwise, control taken with the consent of all the partners. Otherwise, control may be given to one or more partners under the agreementmay be given to one or more partners under the agreement

Transfer of Interest:Transfer of Interest:A partner cannot transfer his share in the partners to an A partner cannot transfer his share in the partners to an outsider without the consent of all other partners. Thus, share outsider without the consent of all other partners. Thus, share in partnership is not freely transferable.in partnership is not freely transferable.

Duration:Duration:The partnership continues at the will of the partners. It The partnership continues at the will of the partners. It comes to an end if anyone of the partners dies or become comes to an end if anyone of the partners dies or become insolvent. However, if remaining partners agree to continue insolvent. However, if remaining partners agree to continue the business, the firm will not dissolve.the business, the firm will not dissolve.

Types of PartnershipTypes of Partnership

Partnership at Will Particular Partnership

On the Basis of Duration

Partnership at WillPartnership at Will

When there is no provision in partnership agreement When there is no provision in partnership agreement (known as partnership Deed, if in writing) for:(known as partnership Deed, if in writing) for: The duration of their partnership, orThe duration of their partnership, or The determination of their partnership,The determination of their partnership,

then the partnership is called ‘Partnership at Will’.then the partnership is called ‘Partnership at Will’. Special feature of Special feature of ‘‘Partnership at willPartnership at will’’ is that such firm is that such firm

may be dissolved by any partner by giving a notice in may be dissolved by any partner by giving a notice in writing to all other partners of his intention to dissolve the writing to all other partners of his intention to dissolve the firm firm

The firm will be dissolved from that date which is The firm will be dissolved from that date which is mentioned in the notice as the date of dissolution and if no mentioned in the notice as the date of dissolution and if no date is mentioned then from the date of communication of date is mentioned then from the date of communication of notice.notice.

Particular PartnershipParticular Partnership When a partnership is formed for a When a partnership is formed for a

Specific venture or undertaking, orSpecific venture or undertaking, or Particular period (fixed term)Particular period (fixed term)

then such partnership is called a ‘particular partnership’.then such partnership is called a ‘particular partnership’. Such partnership comes to an end on the completion of Such partnership comes to an end on the completion of

the venture or the expiry of time period.the venture or the expiry of time period. A particular partnership may be dissolved before the A particular partnership may be dissolved before the

expiry of the term or completion of the venture only by expiry of the term or completion of the venture only by the mutual consent of all the partners.the mutual consent of all the partners.

THE ENDTHE END