In a registered Partnership Firm, there is a defined list of member partners who constitutes to become the entire Firm. These member partners are liable for every action of the partnership firm. They have their profit-sharing arrangement detailed in the Partnership agreement. They jointly own the estate of their partnership firm registration.
Every action taken by any member partner reflects the registered Partnership firm. Also, if any member partner(s) dies or leaves the Firm, the Authority will dissolve the entire Partnership Registration Firm. This is an abrupt termination of a well-functioning partnership arrangement.
Therefore we have put forth some rules and regulations from the Partnership Act of 1932. These regulations are to handle the absence, leave, introductions, retirement, or even death of a member partner(s) to ensure the existence of partnership post the incident. In this article, we discuss some of the regulations put forth by the Partnership Act to handle the incoming or outgoing of a member partner(s).
How does a Partnership Firm add a Partner to it?
Any individual(s) who wants to become a member partner of an existing partnership firm registration has to observe the following regulations:
- The person introduced as a partner in a Partnership Registration must consent from all the existing partners.
- The introduced person in a Partnership Registration is not liable for any act of the Firm that it does before his coronation as a member partner.
What happens if a Partner retires from a Partnership Firm?
- If a member partner(s) wishes to withdraw from the registered Firm must do so
- with the consent of all the other partners,
- following a unison agreement by the partners, or
- where the partnership is at will by giving notice in writing to all the other partners of their intention to retire
- The retired partner must remain liable to the third party for the Firm's acts after retirement unless the Firm publishes the public notice of the withdrawal by them or other existing partners.
- The retired partner will not be liable to any third parties if the latter deals with the Firm without knowing that the former was a member partner.
How does a Partnership Firm expuls its member partner?
- The Firm must mention the power of expulsion in the Partnership Deed between the member partners.
- Most partners must exercise the power of expulsion against the partner in the line of fire.
- The expulsion must be exercised in good faith. It must be done in the best interest of the Partnership Firm registration certificate.
- The to-be expulsed partner must be issued a notice.
- The to-be expulsed partner must be given the reasonable opportunity of being heard.
- All the provisions of the retired partner apply to an expelled partner as if he was a retired partner too.
What if a member Partner becomes Insolvent?
If a member partner in a firm becomes insolvent, he ceases to be a partner. The MCA made the adjudication order with effect on the date of the order. This is irrespective of whether the MCA dissolves the Firm or not.
Suppose the deed mentions the arrangement between the partners. It also notes that the Authority will not dissolve the Firm by adjudicating a partner as insolvent. In that case, the estate of the adjudicated partner is not liable for any act of the Firm.
Partnership Dissolution on Member Partner’s demise
If the death of a partner does not dissolve a firm, the estates of the deceased partner are not liable for any act of the Firm after his death. Generally, the death of a member partner would result in the dissolution of the partnership. However, this rule is subject to a contract between the parties. The partners of a Partnership Registration can agree that the death of a partner will not have the effect of dissolving the partnership.
The Firm must not issue any notification to the public or the individuals who deals with the Firm about the former partner's estate. The Authority can also absolve the Firm from liability from future obligations of the Firm. This exception applies to a Partnership Registration with more than two member partners.
To learn more about the online registration of Partnership Firm or Partnership Firm registration fee, connect with the Partnership Firm registration process experts at Registrationwala.
