Chp 34 - Law of Partnership

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1

Law of Partnership


2

Types of business

• Sole proprietorship in Pakistan

• Partnership in Pakistan

• Limited liability company in Pakistan


3

Why Partnership?

• Easy Formation• More Capital• Better Management• Skilled Employees• Easy Dissolutions


4

Introduction

Partnership is governed in

Pakistan, through the provision of

the “Partnership Act, 1932.”


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Meaning

A Partnership is a Voluntary association of Two or more persons, who contribute , Money, property , time , skill to carry on

business for profit and to share the losses of the business.


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Definition

“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.” Sec-4.


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Definition

• Prof Haney:

“ Partnership is the relation between persons to make contracts who agree to carry on a lawful business with a view to gain.”


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Characteristics

• Legal Entity.A Partnership has no separate legal entity apartform its members.Firms and the partner are not separate fromone another.The rights and liabilities of the firm areconsidered the rights and liabilities of thepartner.


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• Unlimited Liability– In case of loss if the business sources are

insufficient to meet claim of the creditors, the private properties of the partners can be sold.

• Agreement– A partnership is the result of an agreement

between persons.


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• Control– Depends on the Terms of the Agreement.

• Mutual Agency– Each partner acts as agent of the other

partners of the firm. Because he binds himself to the activities of other partner.

• Numbers of Partners.– At least 2 persons– Maximum 20 persons


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Sharing of Profits• Share the profit of the business according

to their agreement.

• If no agreement then Equally.

• Loss according to agreed ratio.


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Partnership Deed

• The Partnership agreement in writing is called Partnership Deed.

• The Partnership deed contains the Provisions:

1. The Name of Firm.2. The names and address of all Partners.3. The nature of Business of A firm


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4. The ratio of sharing the ration and losses.

5. The Rights , duties and Liabilities of a Partner.

6. The restrictions on partners , if any.7. The Rules regarding the Admission ,

Retirement , death and Expulsion of partner from frim.


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8. The keeping of proper books of accounts and preparation of Accounts.

9. The Circumstance under which the firm shall dissolve.

10.The Methods of Solving disputes among the partners and appointment of Arbitrator.


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Kinds of Partners

• Liability• Participation in Management• Shares of Profit , Etc… any other basis


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• Active PartnerTakes an active part in the ManagementPublic Notice before RetirementAlso known as Working Partner.

• Sleeping Partner/ Dormant Partner Does not take an Active Part in

Management, Notice is not required in case of Retirement, Also liable.


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• Partners in Profits only. Shares the Profit of the firm. Not liable for the Losses

• Secret Partner Whose membership Kept secret from

Outsiders


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• Senior Partner Key role in Management , due to

experience ,age, capability , and other skills. Besides that investment more in the Business.

• Junior PartnerLess experience , small investment,


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Minor Partner

Competent to contract 18 age

With the Consent of all the Partners

He may be admitted to the benefits ofPartnership by an agreement with his guardian.


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• Nominal Partner One who lends his name and reputation to

the firm, does not invest, does not participate, he is liable.


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Types of Partnership

• Partnership-at-will• No provision is made in the agreement

regarding the duration of firm.• Formed for Unlimited Period.

• Project complete after it continues.• Notice of Termination , given by any

partner at any time.


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Particular Partnership

• Formed to do a particular business. Or

• For a particular period.

• A Partnership is dissolved immediately on he completion of the particular business.


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Limited Partnership. (England based)

• Some Partners may be with Limited Liability

• At least on have unlimited Liability• Registered Firm• Limited partner inspects the books


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DISSOULTION OF FIRM

• BY AGREEMENT• COMPULSORY• CONTINGENT• BY NOTICE• BY THE COURT

– Insanity , Permanent Incapacity , misconduct, – Breach , Transfer of interest,– Continuous losses , Just and Equitable

Chp 34 - Law of Partnership

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