Pakistan study notes for Matric, Intermediate, B.A, B.COM BSC, M.A, BCS. Free Pakistani Urdu educational school, colleges and University notes.

RIGHTS OF PARTNERS

RIGHTS OF PARTNERS

1. Right to take part in conduct of business. Section 12(a)

2. Right to be consulted Section 12(c)

3. Right to access to accounts Section 12(d)

4. Right to share in profits Section 12(b)

5. Right to interest on capital Section 13(c)

6. Right to interest on advances Section 13(d)

7. Right to be indemnified Section 13(e)

8. Right of joint ownership of partnership property Section 14

9. Right as agent of the firm R Section 19

10. Right to act in emergency Section 21

11. No new partner to be introduced Section 31 (1)

12. No liability prior to joining firm Section 31(2)

13. Right to retire Section 32(1)

14. Right not to be expelled Section 33(1)

15. Right to carry on competing business Section 36(1)

16. Right after retirement to share profit Section 37

 

1. Right to take part in management-Section 12(a):

Partnership business is the common business of all partners. Every partner has a right to take part in the conduct and management of the business of the firm because such right is the personal right of a partner and cannot be taken away. The mere tact that a partner has mortgaged his interest in the partnership to another partner does not preclude him from taking part in the management of the business. Where by an agreement a partner agrees not to take pan in the management of the business, it is not competent for him to interfere in partnership business without the consent of all other partners.

2. Right to be consulted-Section 12(c):

Every partner has an inherent right to be consulted and heard in all matters affecting the business of the partnership.

Where there is a difference of opinion among the partners in respect of any matter connected with the business, it may be decided as:

a. in case of ordinary matter of routine: by a majority of the partners provided they act in good faith and every partner has expressed his opinion before matter is decided, if the partners are equally divided in opinion those who are against the proposition in dispute will have their way i.e. the particular decision will not be carried.

 

b. in case of matter of importance where the matter is of importance and affects the policy and nature of the business, or relates to an alteration in the partnership constitution, a majority will not be sufficient, and unless all the partners agree, no change can be effected. So even one dissenting partner can prevent the change.

 

Remember matters of importance are; to change line of business, to select place of business to enlarge business requiring additional business, to sell business, introduce new partner, expel any partner.

 

3. Right of access to account-Section 12(d):

Every partner, active or dormant, has a right to have free access (a) to all records, books and accounts of the business, (b) to inspect or examine and (c) to copy the same, either personally or through an agent to which other partners have no particular objection, Section 12(d).

A minor admitted to the benefits of partnership has only a right of access (a) to accounts, (b) inspect them and (c) copy them, but not to books, Section 30(2).

The right is to be exercised bona fide. Neither the partner nor agent is entitled to make use of information obtained for an improper purpose. If a partner has expressly agreed that he will accept the accounts as correct without any investigation, he will be bound by that agreement. A transferee of a partner’s interest in the firm is not entitled during continuance of partnership to sue for accounts or inspect the books of the firm.

 

4. Right to share profit-Section 13(b):

Every partner has a fight to share equally the profits earned by the firm, irrespective of the amount of capital contribute by each. In the absence of any agreement specifying their share, whether the partners have contributed the capital equally or unequally, whether they are or are not on  per as regards skill, connections or efficiency, whether they have or have not labored equally for the benefit of the firm, they shall will be considered equal.

 

5. Right to interest or: capital-Section 13(c):

Every partner is entitled to receive interest on capital subscribed by him either during continuance or dissolution of partnership only when there is an agreement between the partners or a trade custom to that effect, or rules of equity. Stunt: agreement may be express or implied, or inferred from the course of dealings between the partners or other facts and circumstances. Again interest is payable only out of profits, if any, unless agreed to be paid even in the absence of profits. Where interest is payable on capital it stops running at the date of dissolution unless otherwise agreed.

 

6. Right to interest on advances Section 13(d):

Every partner who has contributed, for the purpose of business, a loan or advance beyond the amount of his agreed capital. He is entitled to interest therein at a rate agreed upon and when no rate is stipulated, at the rate of 6% p.a. Such interest is payable as business expense not only out of the profits of the business but also out of the partnership property. A partner is not entitled to any interest on his share of undrawn profit left in the business, unless the agreement allows interest thereon.

 

7. Right to be indemnified-Section 13(e):

Every partner has a right to be indemnified by the firm in respect of (a) all payments made by him and (b) personal liabilities incurred by him in the conduct of the business. A partner is entitled, in the absence of an agreement to the contrary, to be indemnified by the firm for all acts done by him in, the course of partnership business, for all the payments made by him in respect of partnership debts or liabilities, expenses and disbursements made in an emergency for protecting the firm from loss, if he acted as a person of ordinary prudence would do in similar circumstances in his own case, A partner will not be indemnified for losses caused to him in the conduct of the partnership business if they are attributable to his own willful neglect or frau.

 

8. Right to joint ownership of partnership property Section 14:

A partner has a right on the entire partnership property as joint owner or co-owner. Each partner has equal interest in the entire property. No partner has a right to treat partnership property as his individual property, Section 15. Every partner is entitled to have the partnership property held and used by the partners exclusively for the purposes of the business of the firm, Section 14.

 

9. Right as agent of firm-Section 19:

Every partner has a right to act as an agent of the remaining partners and bind them by his acts. Under section 18 every partner for the purpose of business of the firm is the agent of the firm. Any act of a partner done to carry on, in the usual way business of the kind carried on by the firm, Section 19.

10. Right to act in emergency-Section 21:

Every partner can bind the firm by the acts done by him in an emergency, with a view to protect the firm from any loss. But such partner has acted as a reasonable person would have acted under similar circumstances. And under section 13(2)(ii) a partner is entitled to be indemnified –by the firm in respect of payments made and liabilities incurred by him in protecting the property of the firm in an emergency.

 

11. Right to prevent introduction of new partner Section 31(1):

Every partner has a right to prevent the introduction of a new partner into the firm without his consent. If an express prior contract permits such introduction no partner can interfere.

 

12. No liability before joining firm-Section 31(2):

A partner will not be liable for any debts or liabilities of the firm before he became a partner unless he agrees with his co-partners to be so liable. An incoming partner has a right to make himself liable for debts incurred by the firm prior to his admission therein.

 

13. Right to retire-Section 32(1):

A partner has a right to retire (a) with the consent of all the other partners, or (b) in accordance with an express agreement between the partners, or (c) when the partnership is at will, by giving notice to all other partners of his intention to retire.

14. Right not to be expelled-Section 33(1): A partner has a right to continue in partnership and not to be expelled therefrom by any majority of the partners. However, power of expulsion can be exercised only when (a) it is conferred by a contract, (b) exercised by majority bona fide and (c) in good faith, and not with a view to get any advantage.

 

15. Right to carry on competing business-Section 36(1):

An outgoing partner has a right to carry on a competing business but without using the (a) firm name, or (b) representing himself as carrying on the business of the firm, or (c) soliciting the firm’s customers. If there is an agreement which restrains him from carrying on a similar business for a specified period within specified local limits he cannot do such business.

 

16. Right of outgoing partner to share subsequent profit-Section 37:

An outgoing partner has a right to opt sharing in subsequent profits pending settlement of his account. When a partner ceases to be a partner in a firm and the remaining partners carry on the business with the property of the firm without any final settlement of outgoing partners account the outgoing partner or his estate, in the absence of a contract to the contrary, is entitled, at his option, to

(a) share in the profits as is proportionate to his share in the property of the firm, or

(b) Interest at 6% p.a. on the amount of his share in the property of the firm.

 

The above rule applies when

a. a partner dies

b. a partner retires

c. a partner is expelled

d. a partner becomes insane

e. a partner becomes insolvent

f. a partnership is dissolved .

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