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In order to govern and guide partnership, the Indian Partnership Act, 1932 was enacted. Since public at large would be dealing with the partnership as customers, suppliers, creditors, lendors , employees or any other capacity, it is also very important for them to know the legal consequences of their transactions and other actions in relation with the partnership.Features of Partnership Act, 1932: Features of Partnership Act, 1932 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 Contract Act, 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 ,Meaning &Definition of ‘Partnership’: Meaning &Definition of ‘Partnership’ Section 4 of the Partnership Act, 1932 defines the term ‘Partnership’ as under: ‘’PARTNERSHIP IS THE RELATION BETWEEN TWO OR MORE 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/among persons who have entered in to the contract.Meaning of ‘Partner’ ‘Firm’ and ‘Firm Name’ : Meaning of ‘Partner’ ‘Firm’ and ‘Firm Name’ Section 4 of Indian Partnership Act, 1932 provides that: Persons who have agreed into partnership with one another are called individually ‘PARTNERS’ and collectively ‘FIRM’ and the name under which their business is carried on is called the ‘FIRM NAME’ “Partnership is thus Invisibility which binds the partners together and firm is the visible form of those partners who are thus bound together”.Maximum Limit on Number of Partners: 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 limit, the partnership firm becomes an illegal association. If an association of persons or firm having members or partners exceeding the Above limit will not be an illegal association if that firm’s objective is not to earn profit.PowerPoint Presentation: Two or more persons An agreement Sharing of profit Business Mutual agency Essential elements of Partnership For explanation go through the next slides: For forming a partnership the above elements should be present. Though each element is important, ‘Mutual Agency is the conclusive proofCharacteristics of Partnership: Characteristics of Partnership A partnership firm has the following characteristics: Two or more members Unlimited liability Voluntary registration Restriction on transfer of interest: Based on agreement Partners are competent to contract Partnership may be only for lawful business.Advantages of Partnership Firm: Advantages of Partnership Firm Easy to form : Availability of large resources: Better decisions: Flexibility in operations : Sharing risks: Benefits of specialization:Disadvantage of Partnership Firm: Disadvantage of Partnership Firm Unlimited liability: Uncertain . No transferability of share: Lack of harmony: Limited capital: Contd.Partnership deed: 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 t o have it in writing in order to avo8id 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. Contd .Contents of partnership Deed: 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 Bank Account firm Books of account Powers of partners Retirement and expulsion of partners Death of partner Dissolution of firm Settlement of disputesPowerPoint Presentation: Procedure for registration sending by post /delivering to the Registrar of Firms of the area a statement in the prescribed form and prescribed fee, Signed by all partners/ agents Required information; The firm name the place or principal place of business of the firm; the names of any other places where the firm carries on business; the date when each partner joined the firm; the names in full and permanent addresses of the partners; the duration of the firm Paying fees, Filing and certificate Wrong information(punishment) When any changesPowerPoint Presentation: Effect of non registration No suit in civil court by a partner against the firm or other partners.( a partner of an unregistered firm is not paid his share of profits, he cannot claim it through a suit in the court of law.) 2. No suit in a civil court by a firm against the parties. 3. The firm or its partners cannot make a claim of set-off or other proceeding based upon a contract.PowerPoint Presentation: Registration of firm In maharashtraTypes of Partnership: Types of Partnership Partnership at Will (Sec.7) Particular Partnership (Sec.8) On the Basis of DurationPartnership at Will [Sec.7 read with Sec.43)]: 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 notice.Particular Partnership [sec. 8]: 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 the mutual consent of all the partners.Contd.: Contd. 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.Kinds of Partners : Kinds of Partners Active / actual partners: Sleeping/ dormant partners: Sub partner: Nominal Partner: In coming partners Outgoing partners Partners in profits only Partner by estoppel /holding outMINOR AS A PARTNER (Sec. 30): MINOR AS A PARTNER (Sec. 30) Agreement with or by a minor: Void special provision for minors: Partnership is already exist All the partners mutually agree Admitted to the benefits of the firmsPowerPoint Presentation: Sec. 30: Rights and Liabilities of minor partners Right to share of the property as agreed Total access Minor’s share in property and profits of the firm is liable for acts of the firm, minor is not personally liable. Cannot file a suit against the other partners for accounts or for payment of his share. Can do so for severing his connection with the firm. He cannot declared insolvant on declaration of firm’s insolvancy Minor attaining majority.Minor attaining majority.: Minor attaining majority. Retrospective effect (remain) Public notice (not) Copy of notice send to registrar of firm Copy is published in news paper A copy published in the local official gazatteProperty of firm: Property of firm Originally brought Property acquired with partnership money Property acquired by purchase Googwill of the firmGENERAL DUTIES OF A PARTNERS: GENERAL DUTIES OF A PARTNERS A. Absolute Duties carry on the business with common advantage just and faithful render true accounts to provide full information To indemnify for loss caused by fraud liable jointly and severally not to assign his interestPowerPoint Presentation: B. Qualified duties Not to carry on business competing with the firm indemnify the firm for wilful neglect carry out the duties diligently to work without remuneration to contribute to losses Partners use firms property exclusively for the firm to account for personal profits derivedRights of Partners : Rights of Partners Right to take part in the conduct of the business. Right to be consulted. Right to access the books. Right to share the profits. Right to interest on capital Right to interest on advances. Right to indemnity .Rights of Partners: Rights of Partners 8. No liability for any act of the firm done before one becomes a partner. 9. Not to be expelled. 10. Right to resist the introduction of a new partner. 11. Right to retire. 12. Right to carry on competing business after ceasing to be a partner. 13. Right of outgoing partner to share subsequent profits in certain cases.Relationship of partners with third parties: Relationship of partners with third parties 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- PrincipalAuthority of partners : Authority of partners EXPRESS AUTHORITY (AGREEMENT ) IMPLIED AUTHORITY (CARRYING ON THE BUSINESS , TRADING) RESTRICTION ON IMPLIED AUTHORITY TO OPEN BANK A/C TO ACQUIRE IMMOVABLE PROPERTY TO ENTER INTO PARTNERSHIP ON BEHALF OF THE FIRM TO COMPROMISE CLAIM TO SUBMIT A DISPUTES RELATING TO THE FIRM’S BUSINESS RESTRICTION ON MUTUAL AGREEMENT PARTNER’ S AUTHORITY IN ANY EMERGENCYRe construction of a firm: Re construction of a firm (a)Incoming partners (b)Outgoing partners Death of a Partner Insolvency of a partner Expulsion of a Partner Retirement of a Partner: Transfer of partner ‘s sharePublic notice : Public notice PUBLIC NOTICE IS REQUIRED ON RETIREMENT ON DISSOLUTION OF THE FIRMS ON EXPULSION ON MINOR PARTNERS PUBLIC NOTICE IS REQUIRED ON ON DEATH OF PARTNERS ON PARTNER’ S INSOLVANCYDissolution of firm: Dissolution of firm (a) Voluntary/Without the order of the court By agreement Compulsory dissolution Happening of certain contingencies By noticeDissolution of firm: Dissolution of firm (b) Dissolution by Court Insanity Permanent incapacity Misconduct Persistent breach of agreement 5) Transfer of interest 6) Business working at a loss 7) Any other ground which renders it just and equitable that the firm should be dissolv ed.Consequence of dissolution: Consequence of dissolution Continuing liability of partner Continuing authority of partners for winding up Liability to share personal profits Return of premium Where contract rescinded for fraud Right to impose restriction: agreement to goodwill Right to restrain from uses of firm name or firm propertyPowerPoint Presentation: Settlement of accounts Sale of goodwill of firm after dissolution You do not have the permission to view this presentation. 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