Partnership arrangements in Pakistan are governed by the Partnership Act, 1932. This Act outlines the legal framework for the formation, conduct, and dissolution of partnerships. The Act includes detailed provisions regarding:
- Definition and Nature of Partnership: It defines what constitutes a partnership, the rights and duties of partners, and the legal status of the firm.
- Formation of Partnership: It provides the requirements for forming a partnership, including the necessity for an agreement between the partners.
- Relations of Partners to One Another: It details the mutual rights and duties of partners, including their obligations to be honest, diligent, and to act in the best interests of the partnership.
- Relations of Partners to Third Parties: It describes the authority of partners to bind the firm, liability of partners for acts of the firm, and the firm’s liability for wrongful acts or omissions of partners.
- Incoming and Outgoing Partners: It outlines the procedures for introducing new partners and the retirement or expulsion of existing partners.
- Dissolution of a Firm: It specifies the various modes of dissolving a partnership, including dissolution by mutual agreement, compulsory dissolution, and dissolution by court order.
- Registration of Firms: It provides for the registration of firms and the legal effects of registration or non-registration.
The Act provides a comprehensive legal framework to ensure that partnership arrangements are fair, transparent, and legally enforceable. The full text of the Partnership Act, 1932 can be found in legal databases and official publications of Pakistan’s legislative documents.
In Pakistan many businesses are registered as partnerships. A partnership may be formed between two or more persons not exceeding twenty in number.
A partnership is formed by a deed of partnership on a Stamp paper worth Rs 1000, it may be registered with local area Firm Registrar but registration is not mandatory. Registration is required to protect one’s legal right should a dispute arise between partners otherwise in case of the firm is not registered with competent authority it will not be competent to sue for enforcement of right from contract except as regards suit or claim of set-off not exceeding Rs. 100.
Partnership has been defined under Section 4 of Partnership Act as
‘”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”.