As a partner in a legal (corporate) partnership under the Partnership Act, 1932, your rights and liabilities are outlined comprehensively. The Act governs the relations between partners, their conduct in business, and their liabilities towards each other and third parties.
Rights as a Partner
- Participation in Business: Every partner has the right to take part in the conduct of the business of the firm. This includes access to and inspection of the firm’s books (Section 12) .
- Equal Share in Profits and Losses: Partners are entitled to share equally in the profits earned and are liable to contribute equally to the losses sustained by the firm, unless otherwise agreed (Section 13(b)) .
- Indemnity and Advances: The firm must indemnify partners for payments made and liabilities incurred in the ordinary course of business, and partners making advances beyond their capital contributions are entitled to interest on such advances (Section 13(e) and 13(d)) .
- Remuneration: Partners are generally not entitled to remuneration for participating in the business unless there is an agreement to the contrary (Section 13(a)) .
- Property Rights: The property of the firm includes all property brought into the stock of the firm and acquired by the firm. This property is held exclusively for the purposes of the business (Sections 14 and 15) .
Liabilities as a Partner
- Liability for Firm’s Acts: Every partner is jointly and severally liable for all acts of the firm done while they are a partner. This includes liability for wrongful acts and misapplications of money or property by other partners (Sections 25, 26, and 27) .
- Indemnity for Fraud: A partner must indemnify the firm for any loss caused by their fraud in the conduct of the business (Section 10) .
- Accountability for Personal Profits: Partners must account for any personal profits derived from transactions related to the firm or from using the firm’s property or name (Section 16) .
- Emergency Acts: Partners have the authority to do acts in emergencies to protect the firm from loss, binding the firm to such actions (Section 21) .
- Duty to Render Accounts: Partners must render true accounts and full information of all things affecting the firm to any partner or their legal representative (Section 9) .
Relations with Third Parties
- Agency: Every partner is an agent of the firm for the purpose of the business. The firm is bound by the acts of a partner carried out in the usual course of business (Section 18) .
- Implied Authority: Partners have implied authority to bind the firm unless expressly restricted by the partnership agreement (Section 19) .
- Notice and Admissions: Notice to a partner operating in the ordinary course of business is deemed as notice to the firm, and admissions made by a partner are binding on the firm (Sections 23 and 24) .
Outgoing and Incoming Partners
- Retirement: A partner may retire with the consent of all partners or according to an express agreement. Retired partners continue to be liable for acts done before their retirement unless a public notice is given (Sections 32 and 45) .
- Expulsion: A partner can be expelled in good faith under the powers conferred by the partnership agreement (Section 33) .
- Insolvency and Death: The estate of an insolvent or deceased partner is not liable for acts done after the insolvency or death (Sections 34 and 35) .
These provisions ensure that the partnership operates smoothly, with clear guidelines on the responsibilities and protections for partners. It is advisable to have a written partnership agreement to outline specific terms and conditions that might not be fully covered under the Partnership Act, 1932.
