Partnership Act MBA PPT

7/31/2019 Partnership Act MBA PPT

1/21

PATNERSHIP ACT 1932 Partnership: A relation between persons who have

agreed to share the profits of a business carried on by all

or any one of them acting for all .

ESSSENTIAL ELEMENTS OF A PARTNERSHIP FIRM:

1) There must be a contract .

2) Association of two are more persons .

3) Carrying on business : includes trade, occupation orprofession. Cannot be a charitable work or divide goodspurchased among themselves.

4) Business must be carried on : continuity, not futuredate.

5) Sharing of profits.

6) Mutual agency : carried on by all or acting for others.


2/21

FORMATION OF PARTNERSHIP FIRM Basic facts of partnership:

1) Mutual Confidence and Utmost Good Faith .

2) All Essential elements of Valid Contract is must . 3) Mutual Rights and Obligations of Partners in form of

Partnership Deed .

4) Partnership firm must be registered, otherwise the firmwill not be able to enforce its legal remedies against

outsiders .

PARTNERSHIP DEED: The document in writingcontaining the important terms of partnership as agreed by

the partners between themselves. Drafted, stamped &signed .


3/21

HANDLING OF PARTNERSHIP DEED :

a) It should be drafted with care and be signed by all thepartners .

b) It must be stamped according with Indian stamp act .

c) Each partner should have a copy of deed .

d) The firm should be registered and a copy of the deedshould be filled at the time of registration with register offirms .


4/21

THE PARTNERSHIP DEED SHOULD COVER : The contentsof the partnership deed .

1) Name, name of firm, addresses of partners .

2) Nature of business, town, place carried it . 3) Date commencement of partnership .

4) Duration of partnership (may /may not ) .

5) Amount of capital by partners and method of raising

finance in future . 6) Ratio of sharing profits or loss .

7) Salaries, commission e.t.c if any payable to partners .

8) Interest on partners, partners loan and interest .

9) The method of preparing accounts and arrangement ofaudit and safe custody of cash .

10) Division of tasks and responsibility i.e. the duties,powers, and obligations .

s


5/21

11) Rules to be followed incase of retirement, death andadmission of partners .

12) Expulsion of partners in case of gross breach of dutiesand fraud .

13) Clearly provides that the deed may provide that apartner shall not carry on any business other than that ofthe firm while he is a partner . But agreement is restrain oftrade are void .


6/21

DURATION OF PARTNERSHIP: Which may be classified asfollows:

1) Partnership for a firm term .

2) Particular partnership : Adventure or undertaking . 3) Partnership at will .

CLASSES OR KINDS OF PARTNERS:

1) Active, Actual or Real Partners :Partner underagreement .

2) Sleeping or Dormant : Name not appear or not active,

but liable .

3) Silent partners : By agreement _ no say in management .

4) Partnership in profits only : But liable to third parties .

5) Sub Partners : Share his profits with an outsider iscalled Sub partner .


7/21

6) Nominal partner : But liable for all acts of firm .

7) Partner By Estoppel or Holding Out : Any one who by

words spoken or written or by conduct represent himself,or knowingly permit himself to be represented to be apartner in a firm is liable as a partner in that firm toanyone.

CONSEQUENCE OR EFFECTS ON NON_REGISTRATION:

1) No suit can be filled by a partner against the firm orother copartners .

2) No suit by the firm against third parties .

3) The firm or its partners cannot make a claim of set off orother proceedings .

EXCEPTIONS : * Unregistered firm is not an illegal firm,optional.

* Can file a suit for dissolution .


8/21

RIGHTS , DUTIES AND LIABILITIES : RIGHTS OF A PARTNER :

1) Rights to take part in the conduct of the bus .

2) Right to be consulted .

3) Right to access to books .

4) Rights to share the profits . 5) Right to interest on capital .

6) Right to interest on advances .

7) Right to indemnified .

8)Joint owner of partnership property .

9) Right not to be expel .

10) Right to retire .

11)No liability before joining .


9/21

DUTIES OF A PARTNER : Duties of a partner can beclassified in to two heads .

A) ABSOLUTE DUTIES : B) QUALIFIED DUTIES :

A) ABSOLUTE DUTIES :

1) Duty to carry on the business to the greatest commonadvantage .

2) Duty to be just & faithful .

3) Duty to render true accounts . 4) Duty to provide full information .

5) Duty to indemnify for loss caused by fraud .

6) Duty to be liable jointly & severally .

7) Duty not to assign his interest .


10/21

B)QUALIFIED DUTIES :

1) Duty to attend diligently .

2) Duty to work without remuneration .

3) Duty to contribute losses .

4) Duty to indemnify the willful neglect .

5) Duty to use firms property exclusively for the firm .

6) Duty to account the personal profits derived .

7) Duty not to compete with the business of the firm .

LIABILITIES OF PARTNERS TO THIRD PARTIES :

1)The liabilities of partners of third parties are divided intothree categories .

1) Liability of a partner for acts of firm .

2) Liability of the firm for wrongful acts of a partner .

3) Liability of the firm for misapplication by partners .


11/21

LIABILITY OF A RETIRING PARTNER : This can be

discussed in two heads : A partner is said to retire when the surviving partners

continue to carry on the business. A public notice is givenof retirement.

1) Liability Before Retirement : A retiring partnercontinue to be liable for all the acts of the firm done beforehis retirement or acts pending at the time of his retirementunless he is discharged from his liabilities.

2)Liability After Retirement : A retired partner is notliable for the act of the firm done after his retirement. Buthe continues to be liable till the public notice of retirementis given


12/21

DISSOLUTION OF FIRM : A) Dissolution by the court .

B) Dissolution without the court order.

B) Dissolution Without The Court Order:partnership firm may be dissolved in any one of thefollowing :

1) Dissolution by agreement .

2) Dissolution by notice.

3) Dissolution on the happening of certaincontingencies :

a) By the expiry of the term fixed . b) By the completion of the adventure or undertaking .

c) By the death of a partner . &

d) By the insolvency of a partner .


13/21

4) Compulsory Dissolution : A firm is compulsorily

dissolved :

a) Business becomes Unlawful . b) one or all insolvent .

B) Dissolution by the court : Dissolution of a firm bythe court is necessitated when there is a difference ofopinion between the partners regarding the matter of

dissolution. The court may order to dissolve the firm in thefollowing ground.

i) When a partner become unsound mind.

ii) Permanent Incapacity of a partner. Iii) Partners misconduct towards court and other

partners.


14/21

iv) Persistent Breach of Agreement:

V) Transfer of interest partner without consent

of other partners. Vi) Continuous loss in the business:

Vii) When the court considers Just and

Equitable: e.g. deadlock in the management.


15/21

CONSEQUENCES FOLLOWINGDISSOLUTION OF FIRM: Can be studiedunder three heads:

A) Rights and Liabilities of partners afterdissolution.

B) Mode of settling Accounts uponDissolution.

C) Rules as Regard Sale of Goodwill.


16/21


17/21

B) Mode of Settling Accounts UponDissolution:

The partnership Act incorporates various sectionslaying down the rules for the settlement of theaccounts:

1) Losses: losses suffered by the firm shall be paid

first out of Profits, next out of Capital and lastly by thepartners individually.

2) Application of Assets: Assets distributed in thefollowing order:

Paying debt due to third parties>Advances made bypartners>Capital due to partners> Surplus if anydivided as per their ratio.

G V M


18/21

Garner Vs Murray : In case a partner is insolvent and he is not in a

position to contribute towards deficiency of his

capital account the solvent partners shouldcontribute to the deficiency of capital.

Facts of the case; garner ,Murray and Wilkin werepartners

Sharing profit s equally, but the capitalcontributed by by garner is than Murrays capital.After dissolution of the firm, the assets areinsufficient to pay capital in full.

It was held that the principle of division was foreach partner to be treated as liable to contributean equal third share, even though capitalcontribution is unequal but profit sharing ratio was

equal.

C S O GOO


19/21

C) SALE OF GOODWILL AFTERDISSOLUTION: Goodwill of a firm is the wholeadvantage whatever it may be, of the reputation and

connection of the firm which may have been built upby years of honest work.

Lord Macnavghten Goodwill is the advantage which

is acquired by a business beyond the mere value ofcapital, Stock, Fund and property employed there in,in consequences of general public patronage andencouragement which it receives from constant and

habitual customers

R l l ti t l f G d ill


20/21

Rules relating to sale of Goodwill:

i) Goodwill can be included in the Assets , and itmay be sold either separately or along with

other property of the firm. ii) after the goodwill has been sold any partner

of the dissolved firm can a) carry on competing

business and b0 advertise such business. Iii) In absence of any contract , the seller of

goodwill , that is partners of the dissolved firmcannot a0 Use the firm name; b) represent

themselves as carrying on the business of thedissolved firm; and c) cannot solicit thecustomers of the old firm.

P bli N ti


21/21

Public Notice:

The partnership Act require the giving of publicnotice in each of the following cases:

a) when a minor is admitted to benefit ofpartnership.

b) When a partner retires from a partnership

firm. c) When a partner is expelled from a

partnership firm.

d) When a partnership firm is dissolved. If public notice is not given the parners shall

continue to be liable for any act done by any ofthem before the dissolution.

Partnership Act MBA PPT

Documents

Transcript of Partnership Act MBA PPT