Dear All,
Can a Partnership deed contain subjective clause for interest on capital.
E.g. No Interest will be provided to the partner's for initial contribution of capital. Thereafter, if additional funds are required for the business, then all the partners will contribute the capital in equal proportion. It will also be interest free. However, if any partner could not contribute his share of capital, then the remaning partner who will be contributing his share of capital will get interest @ 24% on that excess contribution.
Suppose, There are 3 partner A, B & C
Initially, A & B contribute Rs. 5 lakhs each. (Interest Free)
After that, Rs. 6 Lakhs was required for the business. So, now A, B & C all have to contribute Rs. 2 Lakhs each. But C could contribute only Rs. 50000.00. Hence, his remaning share of capital Rs. 1.50 Lakhs has been contributed by A & B equally i.e. Rs.75000 each.
Hence, A & B will get Interest @ 24% on this Rs.75000.00
1. Is there any problem in including this type of clause in partnership deed from any point of view?
2. Further, if that 0% interest becomes 12% then what will be the scenario?
Regards,
CA Milan Agrawal
CAclubindia
