Private company's partnership with its directors

Dear Shilpa,

A company can be a partner since there is no restriction under the Partnership Act. Only that it should be authorised under its MoA and AoA and also the DCA has clarified as under:

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."

Thanks Ankit

From the above case, it can be concluded that Company can enter into a Partnership provided its MOA & AOA authorises it.

But is there any prohibition on entering into a partnership by a Company with its Directors?

With regards

Shilpa

You are welcome Shilpa.

I dont think there is any restriction in such a partnership also....since both..the company as well as the directors are eligible to become partners, they can enter into the same...

however, you should maintain an arms legth in the transactions....

Thanks again..

Suggestions of other professionals are welcomed.

With regards

Shilpa

you are welcome...

Please let me know whether for such partnership special resolution is needed or not