Registration and dissolution of a firm

Registration of firms

Application for registration (Section 58): (1) A firm may be registered at any time by sending it by post or by delivery to the Registrar of the area in which any place of business of the firm is situated or is proposed to be situated. together with a statement in the prescribed form and the prescribed fee, stating-

(a) Firm name

(b) the place or principal place of business of the firm,

(d) the date on which each partner joined the firm,

(e) the names in full and permanent addresses of the partners, and

(f) Duration of the firm.

The statement must be signed by all the partners or their agents specially authorized on this behalf.

(1) Every person who signs the statement shall also verify it in the prescribed manner.

(2) The name of a firm shall not contain any of the following words, namely:-

Note: 'Crown', 'Emperor', 'Empress', 'Empire', 'Royal', 'King', 'Queen', 'Royal', or expressing or enforcing the approval, approval, or patronage of the Government, excluding the State The Government by order in writing indicating its consent to the use of such words as part of the firm name.

Analysis:

The registration of a partnership is optional and one partner cannot compel another partner to join the registration of the firm. It is not necessary that the firm should be registered from the very beginning. When the partners decide to register the firm as per the provisions of section 58 of the Indian Partnership Act, 1932, they are required to file the statement in the prescribed form.

When the Registrar is satisfied that the above provisions have been complied with, he shall make an entry of this statement in the Register (called the Register of Firms) and record the statement.

Subsequent changes in the name, place, constitution, etc. of the firm, which may take place during its continuance, should also be registered.

Registration (Section 59): When the Registrar is satisfied that the provisions of section 58 (above provisions) have been duly complied with, he shall make an entry of the statement in a register called the Register of Firms, and record the statement.

The firm shall, when registered, use brackets and the word (registered) immediately after its name.

Analysis

When the Registrar is satisfied that the provisions of section 58 have been duly complied with, he shall record the entry of the statement in the register called the Register of Firms and file the statement. Then he will issue the certificate of registration. However, the registration in the form of an application in the prescribed form along with the prescribed fee is considered complete and necessary details relating to the details of the partnership are given to the Registrar. Recording of an entry in the Register of Firms is a routine duty of the Registrar.

Registration can be done even after the firm has filed a suit but in that case, it is necessary first, withdraw the suit and get the firm registered, and then file a fresh suit.

Late registration on payment of penalty (section 59A-1): If the statement in respect of a firm is not sent or delivered to the Registrar within the time specified in sub-section (1A) of section 58, the firm shall be registered, on payment of, to the Registrar, a fine of one hundred rupees per annum or a part thereof.

Analysis

In case of failure to send and deliver the statement within the time specified in sub-section (1A) of section 58, the firm may obtain registration by way of penalty to the Registrar on payment of one hundred rupees per annum or part thereof. Company.

Consequences of Non-Registration (Section 69)

Registration of firms is mandatory under English law. Therefore, there is a penalty for the non-registration of firms. But the Indian Partnership Act does not make the registration of firms mandatory nor does it impose any penalty for non-registration. However, under section 69, non-registration of partnership gives rise to a number of inefficiencies, which we shall discuss at present. Although registration of firms is not mandatory, yet

The consequences or disabilities of non-registration are motivating pressure for their registration. These inefficiencies are summarized as follows:

(i) no suit in civil court against the third party by the firm or other co-partners: The firm or any other person on its behalf shall not take action against the third party for breach of contract committed by the firm unless The firm is registered and the persons suing have been or are shown in the register of firms as partners in the firm. In other words, a registered firm can file suit only against third parties and the person suing has been in the register of firms as partners in the firm.

(ii) No relief to partners for set-off of claim: If action is taken against the firm by any third party, neither the firm nor the partners can claim any set-off if the suit value exceeds `100 or to take other action to enforce rights arising out of a contract.

(iii) the aggrieved partner cannot take legal action against another partner or firm: A partner (or any other person on his behalf) of an unregistered firm is prevented from taking legal action against the firm or any person who allegedly is on or alleged to be a partner in the firm. But, such a person may sue for the dissolution of the firm or for the accounts and recovery of his share in the assets of the firm where the firm is dissolved.

(iv) the Third-party can sue the firm: In the case of an unregistered firm, action can be taken against the firm by the third party.

Exception: The non-registration of the firm however does not affect the following rights:

1. Right of the third party to sue the firm or any partner. 2. Right of partners to sue for dissolution of the firm or for settlement of accounts of a

For the recovery of the dissolved firm, or the property of the dissolved firm.

3. Power of an official assignee, recipient of the Court, to release and act on the property of the insolvent partner.

4. Right to sue or claim set-off if the value of suit does not exceed Rs.100 in value.

5. The right to be sued and proceeded by the legal representatives or the heirs of the deceased partner of the firm for the accounts of the firm or for the recovery of the property of the firm.

As regards the question of whether in the case of a registered firm (whose business was carried on by the death of a partner after his dissolution), any subsequent transaction or transaction by the remaining partners without notice can go. The Registrar of Firms, changes in the constitution of the firm, decided that the remaining partners should sue in respect of such subsequent deals or transactions, even if the firm was not re-registered after such dissolution and the partner No notice was given. to the registrar.

The test applicable in these cases was whether the plaintiff satisfies only two requirements of section 69(2) of the Act, viz.

(i) the suit should be instituted by or on behalf of the registered firm;

(ii) The person suing was shown as a partner in the register of firms. In view of this state of law, the suit is going on by B and C against X and on behalf of A & Co.

Now, in the above example, what difference would it make, if in 2019 B and C had taken a new partner, D, and then filed a suit against X without a fresh registration?

Where a new partner is introduced, the fact is to be notified to the Registrar who shall record the notice in the entry relating to the firm in the Register of Firms. Therefore, the firm cannot sue as the name D (of the new partner) is not entered in the register of firms. It was pointed out that in the second requirement, the phrase "persons suing" shall have the meaning of persons whose names appear as partners in the register and who must be all partners in the firm as on the date of the suit.

Dissolution of the firm | Partnership (Sections 39-47)

According to section 39 of the Indian Partnership Act, 1932, the dissolution of partnership among all the partners of a firm is called 'dissolution of the firm'.

Analysis

Thus, dissolution of the firm means the discontinuance of the legal relationship existing between all the partners of the firm. But when only one or more of the partners retires or becomes incapacitated from acting as a partner by reason of death, insolvency, or insanity, the partnership, that is, the relationship between such partner and the others is dissolved, but the rest continue. can decide. In such cases, in practice, there is no dissolution of the firm. The particular partner goes out, but the remaining partners carry on the business of the firm, it is called dissolution of the partnership. On the other hand, in case of dissolution of the firm, the whole firm is dissolved. The partnership comes to an end between each of the partners of the firm.

Methods of Dissolution of a Firm (Section 40-44)

The dissolution of a partnership firm can take place in any of the following ways:

1. Dissolution without Court Order or Voluntary Dissolution:

It has the following four types:

(i) Dissolution by Agreement (Section 40): A firm can be dissolved with the consent of all the partners or as per a contract between the partners.

Analysis

Section 40 empowers the partners to dissolve the partnership with the consent of all the partners or in accordance with the contract between the partners. 'Agreement between partners' means an agreement already made.

(ii) Compulsory Dissolution (Section 41): A firm is compulsorily dissolved by decision of all the partners or of all the partners but as insolvent; Or

By the happening of any event which makes it unlawful for the partners to carry on the business of the firm or for the partners to carry on it in partnership.

However, when more than one separate adventure or undertaking is undertaken by the firm, the illegality of one or more shall not cause the dissolution of the firm in respect of the lawful exploits and undertakings of the firm.

(iii) Dissolution on the occurrence of certain contingencies (section 42): Subject to a contract between the partners, a firm may be dissolved on the occurrence of any of the following contingencies-

(iv) dissolution by notice of partnership at will (section 43):

(1) Where the partnership is at will, the firm may be dissolved by any partner by giving notice in writing to all the other partners of his intention to dissolve the firm.

(2) If the date is mentioned in the notice: from the date mentioned in the notice as the date of dissolution of the firm, or if no date is so mentioned, from the date of communication of the notice.

(2) Dissolution by Court (Section 44):

The Court may, on the suit of a partner, dissolve a firm on any of the following grounds:

(a) Insanity/perverted mind: Where one partner (not the sleeping partner) has become of unsound mind, the court may dissolve the firm on the trial of the other partners or by the next friend of the insane partner. Temporary illness is not a ground for the dissolution of the firm.

(b) Permanent incapacity: When a partner, other than the partner suing, becomes permanently incapacitated in any way from performing his duties as a partner, the court may dissolve the firm.

Such permanent disability may be due to physical disability or disease etc.

(c) Malpractice: Where a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the business, the court may having regard to the nature of the business, order the dissolution of the firm. It is not necessary that the misconduct must be related to the conduct of the business. The important point is the adverse effect of malpractice on business. The nature of business in each case will determine whether an act is a misconduct.

(d) Persistent breach of agreement: Where a partner other than a partner is suing, knowingly or persistently breaches agreements relating to the management of the affairs of the firm or the conduct of its business, or otherwise conducts himself in matters relating to business that it is not reasonably practicable for the other partners to carry on business in partnership with him, the court may, at the instance of either partner, dissolve the firm. The following falls under the category of breach of contract:

Embezzlement,
Keeping erroneous accounts.
Holding more cash than allowed
Refusal to show accounts despite repeated requests etc.

(e) Transfer of interest: Where the suit is filed by a partner other than the partner, who has transferred his entire interest in the firm to a third party or has been permitted by the court to charge or sell his share, the amount of arrears In realization of land revenue payable by a partner, the court may dissolve the firm at the instance of any other partner.

(f) Perpetual/permanent loss: Where the business of the firm cannot be carried on except at a loss in the future, the court may order its dissolution.

(g) Just and equitable ground: Where the Court considers any other ground to be just and just for the dissolution of the firm, it may dissolve a firm. The following are cases of just and equitable grounds:

(i) Deadlock in management.

(ii) Where the partners are not talking among themselves.

(iii) Loss of substrate.

(iv) Gambling on a stock exchange by a partner.

Consequences of Dissolution (Section 45-55)

Consequent to the dissolution of a partnership firm, the partners have certain rights and obligations, which are as follows:

discussed:

(a) Liability for acts of partners committed after dissolution (section 45):

(1) Notwithstanding the dissolution of a firm, the partners shall continue to be liable to third parties for any act done by any of them before the dissolution, unless public notice has been given, then Till now the firm had a function. dissolution.

Provided that where a partner dies, or who is declared insolvent, or the property of a partner, who does not know the person acting with the firm to be a partner, retires from the firm, not liable under For acts done after the date on which he ceases to be a partner.

(2) The notice under sub-section (1) may be given by any participant.

Analysis

Section 45 has two purposes: 1. It seeks to protect the third party dealing with the firm which had no prior notice of dissolution and

2. It also seeks to protect the partners of a dissolved firm from liability to third parties.

However, there are exceptions to the rule as stated in the above example, i.e. where the dissolution has not been reported, there shall be no liability for subsequent acts in such a case:

(a) the property of a deceased partner,

(b) an insolvent partner, or

(d) Right of partners to cease business after dissolution (section 46): Every partner or his representative on the dissolution of a firm is entitled, against all other partners or their representative, to enforce the property of the firm. In payment of the debts and liabilities of the firm, and to distribute the surplus among the partners or their representatives according to their rights.

(D) continuing right of partners for purposes of winding up (section 47): the right of each partner to bind the firm after the dissolution of a firm, and other mutual rights and obligations of the partners, to continue notwithstanding the dissolution, so far as may be necessary to conclude the cases of Firm and Transaction started to complete but was incomplete at the time of dissolution but not Otherwise:

Provided that the firm is in no case bound by the acts of a partner who has been declared insolvent, But this proviso does not affect the liability of any person who after the judgment has represented himself or has knowingly permitted himself to be represented as a partner of the insolvent.

(d) the manner of settlement of partnership accounts (section 48): In the settlement of the accounts of a firm after dissolution, subject to agreement by the partners, the following rules shall be observed:-

(i) the loss, including the loss of capital, shall be paid first out of profits, thereafter by capital, and finally, if necessary, paid by the partners individually in the proportion in which those profits were entitled to share;

(ii) the assets of the firm, including any sums contributed by the partners to meet the shortfall of capital, should be applied in the following manner and order:

(a) in paying the debts of the firm to third parties;

(b) in paying to each partner the amount due to him from the capital;

(d) The balance, if any, shall be divided among the partners in the proportion in which they were entitled to share the profits.

Section 48 analysis

It may be noted that prima facie, the accounts between the partners shall be settled in the manner prescribed by the partnership agreement. The above rules apply subject to any agreement between the partners. The rules laid down in section 48, simply specify, what shall be the manner of settlement of accounts in the ordinary course of business. But if the partners express, by their agreement, a different intention as to the manner in which the loss shall ultimately be incurred or the manner in which capital or advance payments shall be made to a partner, such intention shall be given effect to.

However, no such agreement can affect the rights of the creditors of the firm.

The significance of the foregoing provisions is that if the assets of the firm are not sufficient to pay the liabilities of the firm, including the amounts due to each partner on account of capital, each partner has to individually contribute for losses including deficiencies. will be liable. of capital, in the proportion in which he is entitled to share profits.

If in the above example, the agreement provides that the surplus assets on dissolution shall be divided among the partners according to their respective interests in capital and on the dissolution of the firm, the capital deficiency was found, then the assets shall be divided between The ratio of their capital to the partners with the result that X's assets will be the main losers.

(e) Payment of firm debts and of separate debts (Section 49): Where there are joint debts due from the firm and also separate debts due from any partner:

(i) the property of the firm shall be applied in the first instance in payment of the debts of the firm, and if there is any surplus, then the share of each partner shall be applied to the payment of his separate debts or paid to him;

(ii) the separate property of any partner shall be applied first in the payment of his separate debts and surplus, if any, in the payment of debts of the firm.

Registration and dissolution of a firm | Partnership Act