Partnership ACT 1932
This query is : Resolved
17 August 2009
Hi, experts my query is that a firm has two partners one partner is individual say A the another B is at of HUF capacity say B(Huf) now the B died on 16 feb that is before the expiry of financial year now my question is whether the senior member or another member of his HUF can join the firm as a partner without dissolving the partnership.
Or we have to first dissolve the firm and then we should write a fresh partnership deed.
If possible could we provided with a draft of that disssolution or a supplementary partnership deed
Or we have to first dissolve the firm and then we should write a fresh partnership deed.
If possible could we provided with a draft of that disssolution or a supplementary partnership deed
09 August 2024
When a partner in a partnership firm who is representing an HUF (Hindu Undivided Family) dies, the legal and operational aspects regarding the continuation or dissolution of the partnership depend on several factors, including the partnership deed and the provisions of the Hindu Law and the Indian Partnership Act, 1932.
### **1. Continuation of the Firm with the New HUF Member**
**Key Considerations:**
1. **Partnership Deed Provisions:**
- The partnership deed typically specifies what happens in the event of a partner’s death. If it mentions that a partner's legal representative or another member of the HUF can continue in the firm, then the firm can continue without dissolution.
2. **Legal Framework:**
- Under the Indian Partnership Act, 1932, the death of a partner representing an HUF does not necessarily lead to automatic dissolution of the firm. The firm can continue if the surviving partners and the legal heirs of the deceased HUF agree to continue the business.
3. **Addition of New Partner:**
- If the surviving members of the HUF or the legal heirs wish to continue in the firm, a supplementary partnership deed or an amendment can be drafted to reflect the new arrangement.
### **2. Drafting a Supplementary Partnership Deed**
If the surviving members of the HUF wish to continue in the firm, you would draft a **Supplementary Partnership Deed** to reflect the change in partnership composition. This document updates the partnership deed to include the new partner and adjust the profit-sharing ratios if necessary.
**Draft of a Supplementary Partnership Deed:**
```
**Supplementary Partnership Deed**
**This Deed of Supplementary Partnership** is made on this [Date] day of [Month, Year] between:
1. **[Partner A's Name]** (hereinafter referred to as "Partner A"), residing at [Address].
2. **[New Partner’s Name]**, representing the HUF of [Name of the Deceased Partner], residing at [Address] (hereinafter referred to as "New Partner").
**Whereas**:
- The original partnership deed dated [Original Deed Date] was executed between Partner A and [Deceased Partner’s Name] (represented by HUF).
- [Deceased Partner’s Name] passed away on [Date of Death].
- The surviving members of the HUF, namely [Names of Surviving Members], have agreed to continue the partnership.
**Now, Therefore, it is agreed as follows:**
1. **Continuation of the Firm:**
- The partnership firm, known as [Firm’s Name], shall continue with the addition of [New Partner’s Name] in place of [Deceased Partner’s Name].
2. **Profit Sharing Ratio:**
- The profit-sharing ratio shall be revised as follows:
- Partner A: [New Ratio]%
- New Partner: [New Ratio]%
3. **Capital Contribution:**
- The capital contribution of the New Partner shall be [Amount], and the existing capital accounts of Partner A and New Partner shall be adjusted accordingly.
4. **Other Terms:**
- All other terms and conditions of the original partnership deed, which are not amended by this Supplementary Deed, shall remain in full force and effect.
5. **Effective Date:**
- This Supplementary Deed shall come into effect from [Effective Date].
**In Witness Whereof**, the parties hereto have set their hands and seals to this Deed on the day, month, and year first above written.
**Partner A:**
Signature: __________________________
**New Partner:**
Signature: __________________________
**Witnesses:**
1. **[Witness 1’s Name]**
Signature: __________________________
Address: __________________________
2. **[Witness 2’s Name]**
Signature: __________________________
Address: __________________________
```
### **3. Draft of a Partnership Dissolution Deed**
If the partners decide to dissolve the firm and start anew, you would first draft a **Partnership Dissolution Deed** to officially dissolve the existing firm.
**Draft of a Partnership Dissolution Deed:**
```
**Partnership Dissolution Deed**
**This Deed of Dissolution** is made on this [Date] day of [Month, Year] between:
1. **[Partner A's Name]** (hereinafter referred to as "Partner A"), residing at [Address].
2. **[Deceased Partner’s Name]**, representing the HUF of [Name of the Deceased Partner], residing at [Address] (hereinafter referred to as "Partner B").
**Whereas**:
- The partnership firm, known as [Firm’s Name], was formed on [Date of Formation] under the partnership deed dated [Original Deed Date].
- [Deceased Partner’s Name] passed away on [Date of Death].
- The partners have agreed to dissolve the partnership and settle all accounts.
**Now, Therefore, it is agreed as follows:**
1. **Dissolution of Firm:**
- The partnership firm known as [Firm’s Name] shall stand dissolved with effect from [Date of Dissolution].
2. **Settlement of Accounts:**
- All assets and liabilities of the firm shall be settled and divided as follows:
- [Details of Asset Distribution]
- [Details of Liability Settlement]
3. **Payment to Partners:**
- The final settlement of accounts shall be made to the partners in accordance with their respective capital accounts.
4. **Release of Claims:**
- The partners hereby release each other from any further claims or demands related to the partnership.
5. **Effective Date:**
- This Dissolution Deed shall be effective from [Effective Date].
**In Witness Whereof**, the parties hereto have set their hands and seals to this Deed on the day, month, and year first above written.
**Partner A:**
Signature: __________________________
**Partner B (or Legal Representative):**
Signature: __________________________
**Witnesses:**
1. **[Witness 1’s Name]**
Signature: __________________________
Address: __________________________
2. **[Witness 2’s Name]**
Signature: __________________________
Address: __________________________
```
### **Conclusion**
1. **Continuation without Dissolution:** If the partnership deed allows for the continuation with a new HUF member, a supplementary partnership deed should be drafted to reflect the change.
2. **Dissolution and Reformation:** If the firm is to be dissolved, a dissolution deed should be executed, and a new partnership deed should be drafted for the reconstituted firm.
Always ensure that any changes comply with the legal requirements and are documented properly. Consulting with a legal professional or chartered accountant is advisable for accurate drafting and compliance.
### **1. Continuation of the Firm with the New HUF Member**
**Key Considerations:**
1. **Partnership Deed Provisions:**
- The partnership deed typically specifies what happens in the event of a partner’s death. If it mentions that a partner's legal representative or another member of the HUF can continue in the firm, then the firm can continue without dissolution.
2. **Legal Framework:**
- Under the Indian Partnership Act, 1932, the death of a partner representing an HUF does not necessarily lead to automatic dissolution of the firm. The firm can continue if the surviving partners and the legal heirs of the deceased HUF agree to continue the business.
3. **Addition of New Partner:**
- If the surviving members of the HUF or the legal heirs wish to continue in the firm, a supplementary partnership deed or an amendment can be drafted to reflect the new arrangement.
### **2. Drafting a Supplementary Partnership Deed**
If the surviving members of the HUF wish to continue in the firm, you would draft a **Supplementary Partnership Deed** to reflect the change in partnership composition. This document updates the partnership deed to include the new partner and adjust the profit-sharing ratios if necessary.
**Draft of a Supplementary Partnership Deed:**
```
**Supplementary Partnership Deed**
**This Deed of Supplementary Partnership** is made on this [Date] day of [Month, Year] between:
1. **[Partner A's Name]** (hereinafter referred to as "Partner A"), residing at [Address].
2. **[New Partner’s Name]**, representing the HUF of [Name of the Deceased Partner], residing at [Address] (hereinafter referred to as "New Partner").
**Whereas**:
- The original partnership deed dated [Original Deed Date] was executed between Partner A and [Deceased Partner’s Name] (represented by HUF).
- [Deceased Partner’s Name] passed away on [Date of Death].
- The surviving members of the HUF, namely [Names of Surviving Members], have agreed to continue the partnership.
**Now, Therefore, it is agreed as follows:**
1. **Continuation of the Firm:**
- The partnership firm, known as [Firm’s Name], shall continue with the addition of [New Partner’s Name] in place of [Deceased Partner’s Name].
2. **Profit Sharing Ratio:**
- The profit-sharing ratio shall be revised as follows:
- Partner A: [New Ratio]%
- New Partner: [New Ratio]%
3. **Capital Contribution:**
- The capital contribution of the New Partner shall be [Amount], and the existing capital accounts of Partner A and New Partner shall be adjusted accordingly.
4. **Other Terms:**
- All other terms and conditions of the original partnership deed, which are not amended by this Supplementary Deed, shall remain in full force and effect.
5. **Effective Date:**
- This Supplementary Deed shall come into effect from [Effective Date].
**In Witness Whereof**, the parties hereto have set their hands and seals to this Deed on the day, month, and year first above written.
**Partner A:**
Signature: __________________________
**New Partner:**
Signature: __________________________
**Witnesses:**
1. **[Witness 1’s Name]**
Signature: __________________________
Address: __________________________
2. **[Witness 2’s Name]**
Signature: __________________________
Address: __________________________
```
### **3. Draft of a Partnership Dissolution Deed**
If the partners decide to dissolve the firm and start anew, you would first draft a **Partnership Dissolution Deed** to officially dissolve the existing firm.
**Draft of a Partnership Dissolution Deed:**
```
**Partnership Dissolution Deed**
**This Deed of Dissolution** is made on this [Date] day of [Month, Year] between:
1. **[Partner A's Name]** (hereinafter referred to as "Partner A"), residing at [Address].
2. **[Deceased Partner’s Name]**, representing the HUF of [Name of the Deceased Partner], residing at [Address] (hereinafter referred to as "Partner B").
**Whereas**:
- The partnership firm, known as [Firm’s Name], was formed on [Date of Formation] under the partnership deed dated [Original Deed Date].
- [Deceased Partner’s Name] passed away on [Date of Death].
- The partners have agreed to dissolve the partnership and settle all accounts.
**Now, Therefore, it is agreed as follows:**
1. **Dissolution of Firm:**
- The partnership firm known as [Firm’s Name] shall stand dissolved with effect from [Date of Dissolution].
2. **Settlement of Accounts:**
- All assets and liabilities of the firm shall be settled and divided as follows:
- [Details of Asset Distribution]
- [Details of Liability Settlement]
3. **Payment to Partners:**
- The final settlement of accounts shall be made to the partners in accordance with their respective capital accounts.
4. **Release of Claims:**
- The partners hereby release each other from any further claims or demands related to the partnership.
5. **Effective Date:**
- This Dissolution Deed shall be effective from [Effective Date].
**In Witness Whereof**, the parties hereto have set their hands and seals to this Deed on the day, month, and year first above written.
**Partner A:**
Signature: __________________________
**Partner B (or Legal Representative):**
Signature: __________________________
**Witnesses:**
1. **[Witness 1’s Name]**
Signature: __________________________
Address: __________________________
2. **[Witness 2’s Name]**
Signature: __________________________
Address: __________________________
```
### **Conclusion**
1. **Continuation without Dissolution:** If the partnership deed allows for the continuation with a new HUF member, a supplementary partnership deed should be drafted to reflect the change.
2. **Dissolution and Reformation:** If the firm is to be dissolved, a dissolution deed should be executed, and a new partnership deed should be drafted for the reconstituted firm.
Always ensure that any changes comply with the legal requirements and are documented properly. Consulting with a legal professional or chartered accountant is advisable for accurate drafting and compliance.
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