Indian Partnership Act, 1932 clearly states that there must be an agreement between the partners of a partnership firm by a contract, and the partnership agreement must comply with essentials of a valid contract, and the partners must be competent to contract and the object of partnership should not be forbidden. We at Wazzeer have received an ample number of questions on Counsel Application, where partners have shared some really critical issues faced by partners in their respective partnership firms, well I am going to add a snapshot of those conversations to the end of this blog. Coming to the essence of this blog, arm to help you Check if your Partnership Deed is Valid.
Partnership Deed may be oral but to avoid future disputes it is always advisable to have it in writing. Note, before the partnership is actually started Partnership Deed should be in place. Thus, the written document is a wise choice.
First and Foremost, the Partnership Deed must be properly drafted and stamped according to the provisions of the Indian Stamp Act. Each partner should be given a copy of the deed and if the firm is to be registered, a copy of the deed should be filed with the Registrar of Firms.
Entrepreneurs, in general, have little to no expertise to validate a contract (only document that would actually safeguard the dream venture and yourself). So, We at Wazzeer are providing you simple and easy tricks, just like correcting a 6th class going student test papers, you will now be able to validate the Partnership Agreement.
A typical partnership deed contains the following covenants, check if these are in place and order:
- The firm name and business to be carried on under that name.
- Names and addresses of partners.
- Nature and scope of business and address(s) of business place(s).
- Commencement and duration of the partnership.
- The capital and the contribution made by each partner.
- Provision for further capital and loans by partners to the firm.
- Partner’s drawings.
- Interest on capital, loans, drawings and current account.
- Salaries, commission, and remuneration to partners,
- Profit (or loss) sharing ratio of partners.
- The keeping of proper books of accounts, inspection, and audit, Bank Accounts, and their operation.
- The accounting period and the date on which that accounts are to be prepared.
- Rights, powers, and duties of the partners.
- Whether and in what circumstances, notice of retirement or dissolution can be given by a partner.
- Provision that death or retirement of a partner will not bring about dissolution of partnership,
- Valuation of goodwill on retirement, death, dissolution etc.
- The method of valuation of assets (and liabilities) on retirement or death of any partner.
- Provision for the expulsion of a partner.
- Provision regarding the allocation of business activities to be performed by individual partners
- The arbitration clause for the settlement of disputes. The terms contained in the partnership deed may be varied with the consent of all the parties, and such consent may be express or implied by a course of dealing. [Section 11(1)]
Actual queries regarding Partnership firm, Partnership Deed, and disputes between partners: