KNOWLEDGE LEVEL, COMMERCIAL LAW LECTURE-2, 16 July 2011 PARTNERSHIP RIGHTS & LIABILITIES OF PARTNERS, MINOR, DISSOLUTION OF PARTNERSHIP

Sl. 1. Topic list Further study Rights of partners

Text-1 Commercial Law [Sen & Mitra] Text-2 Mercantile law [MC Kuchhal] 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Duties of partners Authority of partners Position of Minor in partnership Admission of partner Retirement of partner Expulsion of partner Death of partner Dissolution of partnership business Ground of dissolution Consequence of dissolution

Rights of partners 1. Conduct of business: right to take part in the business 2. Can express opinion 3. Access, inspection, copy: in the books of the firm 4. Equality of profit 5. Interest on capital: out of profits only 6. Interest on advance: @ 6% per annum 7. To get indemnity: in ordinary business conduct, in emergency 8. Application of property of firm: used by partner exclusively for busines s purpose 9. Partners authority: right to act on behalf of the firm 10. Power in an emergency 11. Reconstitution: by new partner, death, retirement, insolvency, expulsion 12. Dissolution: right to get the firm dissolve, right to get accounts and s urplus asset 13. Rights to carrying on a competing business: outgoing partner can

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Rights to share profit after retirement

Duties of partners 1. Justice, faithfulness, true accounts, full information 2. To pay indemnity: shall indemnify for any loss , fraud caused by him 3. To attend diligently 4. No remuneration: if nothing contained in contract 5. Equality of losses 6. No private benefit: cannot use firm s asset for his own 7. To account for secret profit: earn profit from transaction of firm, pay the profit to firm 8. Unlimited liability Authority of partners 1. m Partners to be agent of the firm: for the purpose of business of the fir

2. Authority in an emergency: to do all such acts for the purpose of protec ting the firm Position of minor in partnership Minor: Person aged below 18 years is treated as minor as per the law of parliament Minor in contract Act: As per section 11 of the contract Act a minor is not competent to enter into a c ontract. Minor in Partnership Act: As per section 30 of the partnership Act, 1932, cannot be a partner of a partner ship firm because an agreement by a minor is void. But if all the partners agree , a minor may be admitted to the benefits of an existing firm. Rights and liabilities of minor in partnership firm 1. 2. 3. 4. 5. dation. 6. apacity He He He He He can take the share of a profit \ benefit of the firm is not personally liable for any activity of the firm has access to the accounts of the firm can sue to separate himself from the relation of the firm can take the share of the assets of the firm at the time of its liqui

He cannot take part of conducting business as he has no representative c to bind firm

Admission of a partner New partner can be admitted with the consent of all existing partner with an agr eed terms and conditions.

Retirement of a partner Partner may retire with the consent of all the other partners, in accordance wit h the terms of agreement and where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire. Expulsion of a partner A partner can be expelled. Expulsion can be executed in following circumstances: 1. 2. s 3. Contract of partnership contains a provision of expulsion The power to expel is exercised in good faith by the majority of partner Due notice has given to expelled partner

Death of a partner Ordinarily the death of a partner has the effect of dissolving the firm. But it is competent for the partners to agree that the firm will continue to exist even after the death of partner. Where the firm is not dissolved by the death of a partner, the estate of the dec eased partner is not liable for any act of the firm done after his death.

Dissolution of firms Meaning of dissolution of firm: Dissolution of a firm means the end of a firm by the breakup of the relation of partnership between all the partners. Ground of dissolution:

1. By agreement: any time with consent of all partners 2. Compulsory dissolution: (a) by adjudication of all the partners (b) by happening of event which make firm unlawful

3. (a) (b) (c) (d)

Happening of certain contingencies: if constituted for fixed term, by the expiry of the term if constituted for one or more venture, by completion of thereof by the death of a partner by the adjudication of a partner as an insolvent

4. By notice : where partnership at will, giving notice in writing to all p artners 5. Dissolution by court: (a) insanity: if a partner has become of unsound mind (b) permanent incapacity: incapable of performing duties, e.g: permanent ill ness like paralysis (c) Guilty conduct: misconduct by partner likely to affect prejudicially th e carrying on of business (d) Persistent breach of agreement: partners willfully and persistently comm its breach of partnership (e) Transfer of whole interest to outsiders (f) Loss: commits continuous loss (g) Just and equitable clause: if the court considers it just and equitable to dissolve the firm. This clause gives discretionary power to the court. E.g.: deadlock in management

Consequences of dissolution: 1. Acts done after dissolution: until public notice given of dissolution, p artner continue to be liable to third parties 2. 3. 4. Winding up: upon dissolution, the firm comes to an end Continuing authority of partners for purpose of winding up Personal profit earned after dissolution : share it with other partners

5. Return of premium: while a partner paid a premium for entering into part nership for a fixed term and the firm is dissolved before the expiration of the fixed term, he shall be entitled to repayment of the premium 6. 7. Rescission for fraud or misrepresentation Right to restrain from use of firm name or firm property

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Agreement is restraint of trade

Congratulations on your promotion to Additional Managing Director of Mutual Trus t Bank Limited. Best wishes for continued success in future. Sincerely, Rezanur