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Corporate law

Souvik Kumar Ghosh (CA Final) (1368 Points)

29 November 2011

Can a company, who is partner, share profits, interest on capital & other remuneration from a partnership firm ?

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12 Replies

Yogesh Bhandari (CA FINAL Student) (429 Points)
Replied 29 November 2011

yes, a company can do so, and many of companies do it.

Smriti Dhawan (Company Secretary ) (347 Points)
Replied 29 November 2011

Companies can enter into partnership if they are so authorized by their memorandum of association. Otherwise company entering into a partnership with some other person or some other company would be Ultra vires

Charu Srivastava (Company Secretary) (4210 Points)
Replied 29 November 2011

Agree with Smriti,

Company can enter into partnership provided authorised by article and it will enjoy the same rights as other patners.

Mahesha (Manager-Sourcing) (110 Points)
Replied 30 November 2011

Below is the circular related to Company entering in to partnership...

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Whether a company can enter into a partnership or not is no longer open to doubt. The Deptt. of Company Affairs has in its Circular No. 1-81 (20-1-81-CL-V),dated 14-9-1981 expressed the following view:

"A question has been raised whether an incorporated company can enter into a partnership with some other person or some other company. The matter has been examined by this department in consultation with the Department of Legal Affairs and I am directed to say that prima facie a company entering into a partnership with some other person or some other company would be ultra vires and will be against the principle that a particular company or an incorporated body cannot lawfully employ funds for purposes not authorised by its constitution which would normally be the memorandum and the articles of association. However, a company or an incorporated body, if so authorised by its constitution, can enter into partnership with an individual person or with another company irrespective of nationality and residence. This would, however, require the company to adopt very special articles since many of the provisions of the Partnership Act would be difficult to apply to such a partnership. In view of this, while considering applications for registration of firms with bodies corporate as partners under the Indian Partnership Act, 1932, the State Governments should examine the applications before them and find out whether the memorandum and articles of association of the applicant incorporated companies contain any special articles which authorise the incorporated companies to enter into partnerships and the articles also take care of the possible anomalies which have been pointed out in the Calcutta High

Court's ruling in the case of Ganga Metal Refining Company P. Ltd. v. Income-tax Commissioner West Bengal, (1968) 38 Com Cases 117 : AIR 1967 Cal 429."

In short we can say that companies can enter into partnership if they are so authorized by their memorandum of association. Otherwise company entering into a partnership with some other person or some other company would be ultra vires.

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2 Like

Viral Thaker (Company Secretary) (78 Points)
Replied 30 November 2011

Thank u Mahesh Sir

ashish gupta (Teaching for CA CS Students ) (281 Points)
Replied 03 December 2011

Hi, wheather qualification shares requires to hold by directors during his whole directors ship? or he can sell same also?

Charu Srivastava (Company Secretary) (4210 Points)
Replied 03 December 2011

Yes Mr. ashish...

First of all the provision of qualication Shares are not mandatory unless provided in the Articles of Association. yes the Director should hold qualification throughout its directorship .

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 03 December 2011

Dear Mahesha, Thanks for sharing the above case law.....

Smriti Dhawan (Company Secretary ) (347 Points)
Replied 03 December 2011

If Articles of the company require to hold a specified number of qualification Shares by Director of the Company he has to obtain it within two months after his appointment as director and nominal value of the qualification shares shall not exceed five thousand rupees.

Director of the Company who is required to hold qualification shares as per Articles of the Company ceases to hold, the qualification shares at any time during his directorship, his office will become vacant as Director of the Company.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 03 December 2011

It shall be the duty of every director who is required by the Articles of the Company to hold a specific share qualification and who is not already qualified in that respect, to obtain his qualificaion within two months after his appintment as director.

Any provision in the Article shall be void if it requires a person to hold the qualificaiton shares before his appointment as a director or to obtain it within a shorter time than two months after his appointment.

The nominal value of qualification shares shall not exceed five thousand rupees, or the nominal value of one share whiere it exceeds five thousan rupees.

The provision of qualificaiton share shall not appply on a private company unless it is a subsidiary of public company.

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