Page 169 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes third party and the partners of the reconstituted firm. Such an agreement may be implied from
the course of dealings between the firm and the third party after he had knowledge of the
retirement.
Though a partner may retire, he cannot be expelled unless such a power is conferred by contract
between partners and is exercised in good faith (s. 33). A retiring partner is entitled to have a
share in the subsequent profits till his accounts are finally settled (s.37).

6.5.7 Minor as a Partner

Partnership, being a contract, a minor cannot enter into partnership, he being incapable of
contracting. An agreement with or by a minor is void ab initio. However, if all the partners agree,
a minor may be admitted to the benefits of an already existing firm. The rights and liabilities of
a minor partner are defined by s.30 as follows: (i) He has a right to such share of the property and
of the profits of the firm as may be agreed upon between the partners. (ii) He may have access to
and inspect and copy any of the accounts of the firm. (iii) Minor’s share in the property and the
profits of the firm is liable for the acts of the firm, but the minor is not personally liable for any
such act. (iv) He has no right, while he continues to be a partner, to file a suit against other
partners for accounts or for payment of his share in the profits or the property of the firm. He can
do so only when he wants to severe his connection with the firm. (v) When he files a suit for
severing his connection with the firm, his share shall be determined by valuation, according to
the principles laid down in s.48, for making accounts of a dissolved partnership. (vi) At any time
within six months of his attaining majority, or of his obtaining the knowledge that he had been
admitted to the benefits of partnership, whichever date is later, the minor may give public
notice that he has elected to become or that he has elected not to become a partner of the firm. If
he elects to be a partner, or if he fails to give public notice to the effect that he does not elect to
be a partner, he would be liable for the debts of the firm contracted since the time he was
admitted to the benefits of the partnership.

Notes The mode of giving public notice is laid down in s. 72. The notice is to be published
in the local Official Gazette and in at least one vernacular newspaper circulating in the
district where the firm has its place or principal place of business. In the case of a registered
firm, there is an additional compliance, i.e., a copy of the public notice is to be sent to the
Registrar of Firms.
Self Assessment

Fill in the blanks:
9. Sections 19 and 22 deal with the subject of …………………authority of a partner.
10. A …………………partner is one who does not take an active part in the business of the
firm.

6.6 Changes in a Firm

The Act contemplates the following changes in a firm: (i) change in the duration of a firm;
(ii) change in the nature of business or undertakings and (iii) change in the constitution of a firm.
A partnership may be entered into for a fixed period of time. When the fixed period is over, it
comes to an end. However, the partners may carry on the business even after the expiry of the
fixed period and the partnership becomes ‘partnership at will’. Section 12 (c) provides that

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