Partnership Act 1932 in pakistan

“PERFORMANCE OF OBLIGATION” IS NECESSARY FOR “PARTNERSHIP”

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Table of Contents PARTNERSHIP ACT 1932............................................................................................. 5 PRELIMINARY.............................................................................................................. 5 DEFINITIONS:.............................................................................................................. 5 Definition of "partnership", "partner", "firm" and "firm name"...................................5 ESSENTIAL ELEMENTS OF PARTNERSHIP.....................................................................6 FEATURES OF PARTNERSHIP FORM OF BUSINESS ORGANIZATION..............................7 A.

Two or more Members:......................................................................................... 7

B.

Agreement:.......................................................................................................... 7

C. Lawful Business:................................................................................................... 7 D.

Competence of Partners:...................................................................................... 8

E.

Sharing of Profit................................................................................................... 8

F.

Unlimited Liability................................................................................................ 8

G. Voluntary Registration.......................................................................................... 8 H. No Separate Legal Existence................................................................................ 9 I.

Principal Agent Relationship................................................................................. 9

J.

Restriction on Transfer of Interest........................................................................9

K.

Continuity of Business.......................................................................................... 9

Partnership not created by status:............................................................................. 9 Mode of determining existence of partnership:........................................................10 Act not applies to certain relationships:...................................................................10 Partnership at will:.................................................................................................... 10 Particular Partnership:.............................................................................................. 10 CLASSIFICATION OF PARTNERSHIPS..........................................................................11 i.

Family Partnership:............................................................................................. 11

ii.

General Partnership:.......................................................................................... 11

iii. Implied Partnership:........................................................................................... 11 iv. Limited Partnership:........................................................................................... 11 v.

Particular Partnership:........................................................................................ 11

vi. Partnership at will:............................................................................................. 11 vii.

Partnership in Commendams:.........................................................................12

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viii.

Special Partnership:........................................................................................ 12

ix. Secret Partnership:............................................................................................. 12 x.

Statutory Partnership:........................................................................................ 12

xi. Universal Partnership:........................................................................................ 12 ADVANTAGES OF PARTNERSHIP FIRM........................................................................13 DISADVANTAGE OF PARTNERSHIP FIRM....................................................................13 PARTNERSHIP DEED.................................................................................................. 14 CONTENTS OF PARTNERSHIP DEED..........................................................................14 FORMATION OF PARTNERSHIP...................................................................................15 a)

Establishment:................................................................................................... 15

b) Term:.................................................................................................................. 15 c)

Name:................................................................................................................ 15

d) Place of Business:.............................................................................................. 15 e) New Partners:..................................................................................................... 15 DETERMINATION OF PARTNERSHIP...........................................................................16 General:...................................................................................................................... 16 Dissolution:.................................................................................................................. 16 Determination:.............................................................................................................. 16 RELATIONS OF PARTNERS TO ONE ANOTHER...........................................................17 General Duties of Partners........................................................................................ 17 Duty to Indemnify For Loss Caused By Fraud:..........................................................17 Determination of Rights and Duties of Partners By Contract Between The Partners: ................................................................................................................................. 17 Agreements in Restraint Of Trade:............................................................................17 The conduct of the business:............................................................................................. 17 MUTUAL RIGHTS AND LIABILITIES............................................................................. 18 RIGHTS AND DUTIES OF PARTNERS AFTER A CHANGE IN THE FIRM.........................19 RIGHTS OF PARTNER................................................................................................. 19 Right to Manage Business:............................................................................................... 19 Partner’s authority in emergency:....................................................................................... 20 DUTIES OF PARTNERS............................................................................................... 21 I.

Duty to carry on business:.................................................................................21

II.

Duty to maintain true accounts:.........................................................................21

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III.

Duty to keep secrecy:...................................................................................... 21

IV.

Duty to provide information:...........................................................................21

V.

Duty to compensate:.......................................................................................... 21

VI.

Duty to abide by the decisions:.......................................................................21

VII.

Duty to share the loss:.................................................................................... 21

VIII.

Duty not to use firm property for his own.......................................................21

IX.

Sincere and faithful:........................................................................................ 21

X.

Duty to indemnify for willful neglect:.................................................................22

XI.

Duty not to carry other business.....................................................................22

XII.

Duty to pay profit to firm:...............................................................................22

XIII.

Duty to be liable jointly and severally:............................................................22

XIV.

Duty not to transfer his rights:........................................................................22

RELATION OF PARTNER WITH THIRD PARTY..............................................................23 RELATIONS OF PARTNERS TO THIRD PARTIES...........................................................24 Partner to be agent of the firm:................................................................................ 24 Implied authority of partner as agent of the firm:....................................................................24 PARTNER OBLIGATIONS............................................................................................. 25 A.

Practice Development:....................................................................................... 25

B.

Management Contribution:................................................................................. 25

C. Skill and Knowledge Transfer:.............................................................................26 D. Personal Economic Contribution:........................................................................26 DISSOLUTION OF PARTNERSHIP................................................................................28 CIRCUMSTANCES OF DISSOLUTION:..........................................................................28 STEPS TO BE TAKEN ON DISSOLUTION:....................................................................29 BIBLOGRAPHY........................................................................................................... 30

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PARTNERSHIP ACT 1932 PRELIMINARY 1. Short title, extent and commencement.—(1) This Act may be called the Partnership Act, 1932. [(2) It extends to the whole of Pakistan.] (3) It shall come into force on the 1st day of October, 1932, except section 69, which Shall come into force on the 1st day of October, 1933.

DEFINITIONS: In this Act, unless there is anything repugnant in the subject or context  An "act of a firm" means any act or omission by all the partners or by any partner or  Agent of the firm which gives rise to a right enforceable by or against the firm,  "Business" includes every trade, occupation and profession;  "Prescribed" means prescribed by rules made under this Act;  "Third party" used in relation to a firm or to a partner therein means any person who is not a partner in the firm; and  Expressions used but not defined in this Act and defined in the Contract Act (IX of 1872) shall have the meanings assigned to them in that Act.

Definition of "partnership", "partner", "firm" and "firm name" “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. Persons who have entered into partnership with one another are called individually “partners" and collectively "a firm" and the name under which their business is carried on is called the "firm name".

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ESSENTIAL ELEMENTS OF PARTNERSHIP

Essential elements of Partnership

Two or more

Sharing of profit

Mutual agency

Persons

Business An agreement

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FEATURES OF PARTNERSHIP FORM OF BUSINESS ORGANIZATION After having a brief idea about partnership, let us identify the various features of this form of business organization.

A. Two or more Members: You know that the members of the partnership firm are called partners. But do you know how many persons are required to form partnership firm? At least two members are required to start a partnership business. But the number of members should not exceed 10 in case of banking business and 20 in case of other business. If the number of members exceeds this maximum limit then that business cannot be termed as partnership business. A new form of business will be formed, the details of which you will learn in your next lesson.

B. Agreement: Whenever you think of joining hands with others to start a partnership business, first of all, there must be an agreement between all of you. This agreement contains        

The amount of capital contributed by each partner; Profit or loss sharing ratio; Salary or commission payable to the partner, if any; Duration of business, if any ; Name and address of the partners and the firm; Duties and powers of each partner; Nature and place of business; and Any other terms and conditions to run the business.

C. Lawful Business: The partners should always join hands to carry on any kind of lawful business. To indulge in smuggling, black marketing, etc., cannot be called partnership business in the eye of the law. Again, doing social or philanthropic work is not termed as partnership business.

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D. Competence of Partners: Since individuals join hands to become the partners, it is necessary that they must be competent to enter into a partnership contract. Thus, minors, lunatics and insolvent persons are not eligible to become the partners. However, a minor can be admitted to the benefits of partnership i.e., he can have a share in the profits only.

E. Sharing of Profit The main objective of every partnership firm is sharing of profits of the business amongst the partners in the agreed proportion. In the absence of any agreement for the profit sharing, it should be shared equally among the partners. Suppose, there are two partners in the business and they earn a profit of Rs. 20,000.They may share the profits equally i.e., Rs. 10,000 each or in any other agreed proportion, say one forth and three fourth i.e. Rs 5,000/- and Rs. 15000/F. Unlimited Liability -Just like the sole proprietor the liability of partners is also unlimited. That means, if the assets of the firm are insufficient to meet the liabilities, the personal properties of the partners, if any, can also be utilized to meet the business liabilities. Suppose, the firm has to make payment of Rs. 25,000/- to the suppliers of goods. The partners are able to arrange only Rs. 19,000/- from the business. The balance amount of Rs. 6,000/- will have to be arranged from the personal properties of the partners.

G. Voluntary Registration It is not compulsory that you register your partnership firm. However, if you don’t get your firm registered, you will be deprived of certain benefits, therefore it is desirable. The effects of nonregistration are: 

Your firm cannot take any action in a court of law against any other parties for settlement



of claims. In case there is any dispute among partners, it is not possible to settle the disputes



through a court of law. Your firm cannot claim adjustments for amount payable to or receivable from any other parties.

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H. No Separate Legal Existence Just like sole proprietorship, partnership firm also has no separate legal existence from that of it owners. Partnership firm is just a name for the business as a whole. The firm means the partners and the partners collectively mean the firm.

I. Principal Agent Relationship All the partners of the firm are the joint owners of the business. They all have an equal right to actively participate in its management. Every partner has a right to act on behalf of the firm. When a partner deals with other parties in business transactions, he/she acts as an agent of the others and at the same time the others become the principal. So there always exists a principal agent relationship in every partnership firm.

J. Restriction on Transfer of Interest No partner can sell or transfer his interest to any one without the constant of other partners. For example - A, B, and C are three partners. A wants to sell his share to D as his health does not permit him to work anymore. He cannot do so until B and C both agree.

K. Continuity of Business A partnership firm comes to an end in the event of death, lunacy or bankruptcy of any partner. Even otherwise, it can discontinue its business at the will of the partners. At any time, they may take a decision to end their relationship.

Partnership not created by status: The relation of partnership arises from contract and not from status And in particular the members of a Hindu undivided family carrying on a family business as such, or a Burmese Buddhist husband and wife carrying on business as such are not partners in such business

Mode of determining existence of partnership: In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be

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had to the real relation between the parties as shown by all relevant facts taken together

Act not applies to certain relationships: Nothing contained in this act shall apply to a relationship created by any agreement between Banking company and a person or group of persons providing for sharing of profits and losses arising from and relating to the provision by the Banking Company of finance to such person or group of persons

Explanation For the purpose of this section, “Banking Company” and finance “shall have the same meanings as in the Banking tribunal’s ordinance, 1981

Partnership at will: Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership the partnership is "partnership at will".

Particular Partnership: A person may become a partner with another person in particular adventures or undertakings.

CLASSIFICATION OF PARTNERSHIPS i.

Family Partnership: One which family members control by being partners.

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ii.

General Partnership: A partnership in which the parties carry on all their trade and business. It may be for the joint benefit and profit of all the parties concerned.

iii.

Implied Partnership: One which is not a real partnership but which is recognized by the court as such because of the conduct of the parties; in effect, the parties are estopped from denying the existence of a partnership.

iv.

Limited Partnership: A partnership consisting of one or more general partners, jointly and severally responsible and who are not liable for the debts of the partnership beyond the fund so contributed.

v.

Particular Partnership: One existing where the parties have united to share the benefits of a single individual transaction or enterprise.

vi.

Partnership at will: One designed to continue for no fixed period of time, but only during the pleasure of the parties and which may be dissolved by any partner without previous notice.

vii.

Partnership in Commendams: A partnership formed by a contract by which one person or partnership agrees to furnish the other a certain amount or property on condition of receiving a share in the profits.

viii.

Special Partnership: At common law, one formed for the prosecution of a special branch of business, as distinguished from the general business of the parties.

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ix.

Secret Partnership: One where the existence of certain persons as partners is not avowed to the public by any of the partners.

x.

Statutory Partnership: A statutory creation in some states which resembles a corporation more than a partnership, but which has many attributes of the limited partnership.

xi.

Universal Partnership: One in which the partners jointly agree to contribute to the common fund of the partnership the whole of their property, of whatever character, and future, as well as present

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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

    

Unlimited liability: Uncertain. No transferability of share: Lack of harmony: Limited capital:

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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 to 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 Stamp Act, and duly signed by all the partners.

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 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 UNIVERSITY OF CENTRAL PUNJAB

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 Settlement of disputes

FORMATION OF PARTNERSHIP

a) Establishment: Subject to the terms and conditions hereof, the parties hereto agree to carry on the Business in partnership.

b) Term: Subject to the provisions of this Agreement, the Partnership shall commence as of the Effective Date and shall continue for a term ending on the earlier of: 

The date on which the Partnership is voluntarily dissolved by unanimous agreement of



the Partners; or The date on which the Partnership is dissolved by operation of law

c) Name: The name of the Partnership shall be and/or such other name or names as the Partners may from time to time agree upon in writing and no party shall carry on business under such name except as a Partner of the Partnership.

d) Place of Business: The place of business of the Partnership shall be at such place or places as the Partners shall from time to time hereafter determine.

e) New Partners: No person shall be admitted as a Partner except with the unanimous consent in writing of the Partners.

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DETERMINATION OF PARTNERSHIP General: Except as expressly permitted in this Article 5, or as otherwise unanimously agreed to in writing by the Partners, no Partner may sell, assign, convey, transfer, mortgage, charge or otherwise encumber all or any part of its share or interest in the Partnership.

Dissolution: The Partnership shall be dissolved at any time by unanimous resolution of the Partners passed at a meeting of the Partners called for that purpose. The Partnership may also be terminated by unanimous agreement in writing signed by all of the Partners.

Determination: In the event of the dissolution of the Partnership, the Partnership shall terminate and a proper accounting shall be made of the capital and income accounts of each Partner and the profit or losses of the Partnership to the date of dissolution by the Accountants. The assets of the Partnership shall be liquidated and the proceeds of such liquidation shall then be distributed as follows, unless the Partners otherwise unanimously agree:

  

firstly, to repay all costs, debts, expenses, liabilities and obligations of the Partnership; secondly, to pay to each Partner its share of the capital; and Thirdly, to divide the surplus, if any, between the Partners in the proportions in which they are entitled to share in profits.

In the event that such liquidation proceeds shall not be sufficient to satisfy the liabilities of the Partnership, each of the Partners shall contribute its pro rata share, as determined in accordance with their individual Capital Accounts of the Partnership, of such further funds as shall be necessary to satisfy in full, the liabilities of the Partnership.

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RELATIONS OF PARTNERS TO ONE ANOTHER General Duties of Partners. Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner or his legal representative.

Duty to Indemnify For Loss Caused By Fraud: Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.

Determination of Rights and Duties of Partners By Contract Between The Partners: Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing. Such contract may be varied by consent of all the partners, and such consent may be express or may be implied by a course of dealing.

Agreements in Restraint Of Trade: Notwithstanding anything contained in section 27 of the Contract Act, 1872 such contracts may provide that a partner shall not carry on any business other than that of the firm while he is a partner

The conduct of the business:  Every partner has a right to take part in the conduct of the business;  Every partner is bound to attend diligently to his duties in the conduct of the business;

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 Any difference arising as to ordinary matters connected with the business may be decided by a majority of the partners, and every partner shall have the right to express his opinion before the matter is decided, but no change may be made in the nature of the business without the consent of all the partners  Every partner has a right to have access and to inspect and copy any of the books of the firm.

MUTUAL RIGHTS AND LIABILITIES Subject to contract between the partners  A partner is not entitled to receive remuneration for taking part in the conduct of the Business;  The partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm;  Where a partner is entitled to interest on the capital subscribed by him, such interest shall be payable only out of profits;  A partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six per cent per annum;  the firm shall indemnify a partner in respect of payments made and liabilities incurred by him (i) In the ordinary and proper conduct of the business, and (ii) In doing such act, in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances; and  A partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm

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RIGHTS AND DUTIES OF PARTNERS AFTER A CHANGE IN THE FIRM  where a change occurs in the constitutions of a firm, the mutual rights and duties of the partners in the reconstituted firm remain the same as they were immediately before the change as far as may be;  Where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, so far as they may be consistent with the incidents of partnership-atwill  Where a firm constituted to carry out one or more adventures or undertakings carries out other adventures or undertakings, the mutual rights and duties of the partners in respect of the other adventures or undertakings are the same as those in respect of the original adventures or undertakings

RIGHTS OF PARTNER Right to Manage Business: Every partner has right to take part in the management of business. Right to express opinions: Every partner has right to express his opinions relation to business matters. Right to access the accounts books. Every partner has right to access the account books of firm. Right to share the profit: Every partner has right to share the profit of the business. Right to interest on capital: Every partner can charge interest on capital contributed by him. Right to interest on advances: Every partner has right to interest on advances at the of 6% per annum.

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Right to be indemnified: Every partner has right to be indemnified by the firm in respect of payment by him. Case law P. L. D 1958 Kar 251 any partner obtaining credit on his own behalf cannot bind other partners and they are not liable. Partner’s authority in emergency: Partner has right to act in emergency to protect the firm from loss. Conditions (i) there must be an emergency. (ii) The act must be done for the purpose of protecting the firm from loss. (iii) The act must be such as a person of ordinary prudence, would have done in his own case acting under similar circumstances. Right to give consent for new partner: Every partner has right to prevent the introduction of a new partner unless he consents to that. Right to retire: Every partner has right to retire from the firm. Right not to be expelled: A partner cannot be expelled from firm by any majority of partners provided the decision is made in good faith and there is a provision in contract. Right to carry on competing business: Every outgoing partner has a right to carry on a business similar to that of the firm subject to certain restrictions. Right of dissolution of firm: Every partner has right to file suit for dissolution of firm. Right to restrain from use of firm name or firm property: Every partner has the right to see that the property of the firm is used only for the purpose of partnership. Right of the partner who leaves the firm due to any reason is entitled to claim any share according to the agreement.

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DUTIES OF PARTNERS I.

Duty to carry on business: Every partner is bound to carry on the business of the firm to common advantage.

II.

Duty to maintain true accounts: Every partner must render true and proper account to his co-partner.

III.

Duty to keep secrecy: It is duty of every partner that he should maintain the secrecy for the business.

IV.

Duty to provide information: Every partner should provide all the necessary information about the business to co-partners.

V.

Duty to compensate: It is duty of every partner to compensate any loss incurred by him.

VI.

Duty to abide by the decisions: Every partner should abide by the decision taken by the majority of the partners.

VII.

Duty to share the loss: Every partner shall bear the loss equally borne by the firm irrespective of their capital contribution.

VIII.

IX.

Duty not to use firm property for his own. It is the duty of every partner of the firm to hold and use the property of the firm only for the purpose of business. Sincere and faithful: Every partner should be just and faithful to the other partners. UNIVERSITY OF CENTRAL PUNJAB

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X.

Duty to indemnify for willful neglect: Every partner shall indemnify the firm for any loss caused to it by his willful neglect in the conducted of business of firm.

XI.

Duty not to carry other business. It is the duty of a partner not to carry other business.

XII.

Duty to pay profit to firm: If a partner earns profit from any source of the firm it should be paid to firm.

XIII.

Duty to be liable jointly and severally: Every partner is liable jointly and severally for all the acts of the firm.

XIV.

Duty not to transfer his rights: A partner cannot transfer his rights and interest in the firm to an outsider to make him partner in the business without the consent of others partners

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RELATION OF PARTNER WITH THIRD PARTY

Mutual agency refers to the relationship of Principal and agent among partners

Example in case of

When A acts

When B acts

When C acts

A- Agent

B- Agent

C- Agent

B and C-

A and C-

A and B-

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RELATIONS OF PARTNERS TO THIRD PARTIES Partner to be agent of the firm: Subject to the provisions of this Act a partner is the agent of the firm for the purposes of the business of the firm

Implied authority of partner as agent of the firm: Subject to the provisions of section 22, ³ the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his "implied authority". In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to 

Submit a dispute relating to the business of the firm to



arbitration. Open a banking account on behalf of the firm in his own



name, Compromise or relinquish any claim or portion of a claim

    

by the firm, Withdraw a suit or proceeding filed on behalf of the firm, Admit any liability in a suit or proceeding against the firm, Acquire immovable property on behalf of the firm, Transfer immovable property belonging to the firm, or Enter into partnership on behalf of the firm

PARTNER OBLIGATIONS

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Law firms continue to struggle in order to define the obligations of partners. A partner is not fulfilling his or her obligations as an owner of the business if he or she does not meet all the minimum requirements. I hope that you will be able to use these suggestions in thinking about your partnerships, how they operate and how individual partners contribute. In my opinion, partners in law firms have to act like true owners in a business and should be concerned with production, sales, management and profitability. Client-Determined Service Quality: This means that clients, prospective clients and internal clients (other partners) must receive the level of attention, treatment, timely service, etc., that they expect from every partner.

A. Practice Development: Every partner should energetically participate in practice development efforts for one’s self and for or with others. There are things that any lawyer can do to help develop the firm’s practice. Not everyone should aspire to becoming a traditional rainmaker. However, there must be ongoing efforts in practice development by all owners in order to increase or maintain business. Strategies such as writing to demonstrate competency, speaking and effective networking, crossselling and similar activities are still effective means of practice development.

B. Management Contribution: Every partner has an obligation to participate in (some portion of) management to ensure the effective, efficient running of the professional and business sides of the practice. Law firms increasingly have management needs that did not exist ten years ago. Some of these needs are ongoing, such as those of a practice leader, others are ad hoc, such as someone assigned to evaluate the firm’s insurance plan

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C. Skill and Knowledge Transfer: Every partner should, through formal and informal means (mentoring, CLE, briefing/debriefing, training, programs, etc.) participate in the development of younger attorneys into effective practitioners. The transfer of knowledge and know-how regarding technical and practical law practice is poorly attended to in many law firms. This increasingly frustrates younger lawyers, resulting in lawyers who do not gain skill as rapidly as they should and, therefore, are not as valuable (economically) in the marketplace. A trend among (some) corporate counsel, is not to allow law firms to use young associates, because these associates are not perceived to add value. The faster the skills of new lawyers can be built, the quicker the market will recognize the associates’ value.

D. Personal Economic Contribution: Each owner should seek to produce working attorney revenue, on a yearly basis, in an amount that would cover his or her compensation plus allocated overhead and an added profit factor. At a time when leverage in law firms is increasingly difficult to achieve, when there is immense pressure on hours, rates and realization, it is necessary for all lawyers to be economically viable (from a productive perspective). The objective is for each owner to meet the economic threshold and participate in the profits available from other sources in the firm, i.e., associates, paralegals and other partners. As a practical manner, not every owner will be a break-even “by the numbers.” This may be satisfactory for a select number of partner as long as that attorney is deemed (by the firm) to add value in other ways. Ideally, these “other ways” can and should be quantified. However, there may be instances – and for the sake of the firm’s profitability relatively few instances – where a partner’s qualitative contributions may be acknowledged by lawyer management and a significant majority of partners in terms of their contribution to the firm. However, absent clearly adding value in other ways, an owner must be economically viable “by the numbers.”

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DISSOLUTION OF PARTNERSHIP When the business of the firm is closed down and the relation of partners comes to an end, the firm is said to have been dissolved. There is a distinction between the dissolution of partnership and dissolution of firm. When one or more partners sever their connections with the firm but the remaining partners continue to carry on business, it is the dissolution of partnership. But when there is a complete breakdown of relations among all the partners and the business is closed down, it is termed as dissolution of the firm, in this chapter; we shall deal with accounts of the relationship when the firm is dissolved

CIRCUMSTANCES OF DISSOLUTION:

   

The dissolution of partnership takes place under the following circumstances. When the firm was constituted for a fixed term, on the expiry of that term. On the completion of particular venture, if constituted for a purpose. On the death of a partner. On the insolvency of a partner. On the retirement of a partner. o A firm is dissolved under the following circumstances: When all the partners agree to dissolve the firm. When all the partners of all partners except one are declared insolvent. When all business of the firm becomes unlawful. When the partnership is at will, on any partner giving notice in writing to all the other



partners of his intention to dissolve the firm. When the court orders the dissolution of the firm.

     

Under the following circumstances, the court will order the dissolution of the firm.  When a partner becomes of unsound mind.  When a partner has become permanently incapable of performing duties  When a partner is guilty of misconduct which is likely to affect business.  When a partner persistently commits breach of partnership agreement  When a partner has transferred whole of his interest in the firm to a third party  When the business cannot be carried on except at a loss. UNIVERSITY OF CENTRAL PUNJAB

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 On any other ground which appears to the court just and equitable

STEPS TO BE TAKEN ON DISSOLUTION: The above provisions of the partnership Act suggest the following steps to be taken on 

dissolution of the firm. All the assets of the firm, including goodwill are sold or disposed of in any other way

 

(E.g. a partner may take over an asset) The amount so realized is applied in paying off third party liabilities in the first balance. If any one or more partners have advanced loan to the firm in addition to his capital, then



these loan are repaid next after repayment of third party liabilities. Now, partners will be paid what is due to them on capital accounts. If the surplus is not



enough to return the full amount of capital, then the partner are paid ratably Surplus, if any, left after returning capitals is paid to the partners in their profit sharing ratio

UNIVERSITY OF CENTRAL PUNJAB

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BIBLOGRAPHY http://biztaxlaw.about.com/od/startingapartnership/f/partneragree.htm http://www.tahseenbutt.com/business_formation_pakistan.html http://www.scribd.com/doc/31412139/Partnership-in-Pakistan http://www.joelarose.com/articles/defining_partner_obligations.html

UNIVERSITY OF CENTRAL PUNJAB

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