we have a partnership firm with two partners. one partner wants to resign voluntarily and another partner will come in simultaneously to ensure continuation of the firm as a partnership. Deed is not registered. what procedure to be followed. please guide
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Partners resignation and simultaneous addition of new partner
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| Yes, simultaneous resignation of one partner and admission of a new partner is legally permissible. It is a double reconstitution in a single step. Here is the process: 1. Legal Basis: The Indian Partnership Act, 1932 allows reconstitution of a firm by mutual consent of all partners. Retirement (Section 32) and admission (Section 31) can happen simultaneously. 2. Steps: Step 1: Obtain written consent/resignation letter from the outgoing partner Step 2: Execute a Supplemental Deed of Reconstitution covering both: (a) retirement/resignation of outgoing partner and (b) admission of new partner with their capital contribution, profit sharing ratio, and rights/duties Step 3: Settle the outgoing partner's capital account, loan account, and profit up to the date of retirement Step 4: New partner contributes capital (via banking channel for audit trail) Step 5: Get the deed notarized (and registered if immovable property is involved) 3. Taxation Issues (Critical): - Section 9B of IT Act: If the outgoing partner takes any asset (other than cash) against their share, it is deemed as a transfer by the firm and triggers capital gains for the firm - Section 45(4): Reconstitution triggering revaluation of assets may result in deemed capital gains for the firm - Get proper tax advice before finalizing the settlement amount and mode of payment to outgoing partner 4. GST/Other Registrations: Update partner details in GST registration within 15 days of change. File updated partnership deed with relevant regulators (banks, MSME, professional bodies). 5. New Partner Liability: New partner is not liable for acts of the firm BEFORE their admission — clearly document this in the deed. |
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