Registration of Firms
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This article is written by Barathwaz T, third semester student of School of law Christ University, Bangalore.  

Introduction

Many young students and graduates dream of owning a firm, but what stops them from pursuing this lucrative and highly responsible career path? Is it the lack of clarity over the bigger picture as to how a law firm comes into existence. This is too minuscule, a hurdle to stop you from pursuing your dream. 

This article shall give you the clarity to start your firm and registered under the Indian Partnership Act. Join me as I take you through the process of registering your law firm under the Partnership Act. Without any further delay let’s cut to the chase.

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Firm meaning

Persons who have entered into a partnership with one another are called individually ‘Partners’ and collectively ‘A firm’ and the name under which their business is carried on is called the firm name.

When is partnership registered

The registration of a partnership is at the sole discretion of the partners. The Partnership Act does not demand registration as a mandatory process that has to be adhered to.

However, it is always advisable to register the firm under the act since it gives the firm other advantages that send an implied message of the act favouring registered firms than the unregistered. Only registered firms are considered legally existing.

The firm can be registered at any time before the existence or during the continuance of the partnership. However, if a firm wishes to enforce a legal right arising out of any legal document by filing a case, the firm shall do so only after the registration of the partnership deed is done.

Another instance where registration of the firm becomes compulsory is when the firm wishes to adopt a new form of organization such as LLP or company more easily. 

The firm is registered when the registrar of firms is satisfied with the compliance of section 58 of the partnership act. This compliance with section 58 shall be discussed in detail in the furtherance of the article. 

It is important to note that registration at the income tax department is still mandatory for both registered and unregistered firms by the registrar. 

Proof of registration

A certified copy of any entry relating to the firm in the Register of firms shall act as conclusive proof of the registration of the firm.

Any statement, notice of intimation recorded or noted in the registrar of firms shall be conclusive proof of any fact stated therein. 

Business name of the firm

  • The name of the partnership firm shall not be identical or similar to existing firms in the same business.
  • The name of the partnership firm may include names of the members included in the register of members.
  • The name of the partnership firm shall be of consonance with the provisions of The Names and Emblems (Prevention of Improper Use) Act, 1950. 
  • The name of the partnership firm may end with suffixes such as “and Company”, “and Co.” or “and Associates”.
  • The firms are restricted from using words that suggest, support or patronisation of the firm.
  • The name of the partnership firm may use “and/&” to differentiate principal name/centre name/surname of the accomplice of the business.
  • It is mandatory to use “and/&” either in the middle of the full first names and full centre names, full surnames of the partners or before the last full first name or full centre name or full surname of the accomplices. 

Every firm must adhere to the above-mentioned rules while considering the name for the business firm. Once a name is chosen go here to check for the availability of the chosen name. Use the same website for availability of trademark and domain name for the business name.

Once the business name is selected, register for the trademark to avoid other business misleading the public with the same name, it also provides for additional legal protection.

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Advantages of registration

Benefits to Partner

Any partner of the firm can sue the other partner, ex-partner or the firm when there is a dispute arising out of the partnership deed which is a contract or any right arising out of the partnership act for such purpose. On the contrary, the partner can’t exercise such powers if the firm is not registered.

If partners wish to file a suit against any third party to exercise any right arising out of a contract or any other legal instrument, it is necessary that the firm is registered and partner so doing must be a partner whose name is registered in the register of firms. The same does not apply for third parties to sue against a firm. 

However, this immunity does not apply in case of criminal liability of the partner against others. 

Partners of a registered firm can exercise their right to set-off debt against creditors.

Illustration: if x firm and a creditor y mutually owe Rs 20,000 to each other then the firm shall exercise the power of set-off their debt against y’s outstanding debt.

Benefits to creditors

A creditor shall on-demand request any partner to repay the debts of the firm. All the partners who have their names written on the deed are equally responsible to repay the debt to the third party. This allows the creditors to claim their money due to them by the firm.

Since creditors enjoy such benefits from the registered firm, the credibility of the firm increases drastically. Though both registered and unregistered firms are valid in the eyes of law, creditors prefer to advance loans to such type of firms.

Benefits to the work 

The partnership has its own advantages and disadvantages when the firm feels the disadvantages of the partnership form is greater than its advantages they tend to gravitate towards another form of organization. This process shall be undertaken only if the firm is a registered firm.

A registered firm can claim tax benefits under the Income Tax Act, which can save a lot of bucks that can be otherwise utilized for the growth of the firm.

Benefits to an incoming partner

The incoming partner shall enforce his dues against the existing partners if defaulted. If there is no registration of the firm the same shall not be enforced against the existing partners.

Again, this increases the credibility of the firm in the eyes of others. This credibility is very important to the firm as an incoming partner does not only share the profits but also contributes additional capital to the firm. A simple registration can cost a fortune. The registration of partnership cost somewhere around Rs 3000 to 6000. 

Challenges of partnership

Problems with Partners

A partnership firm involves a lot of human interaction and working together with co-partners. Human relationships are complex and create a lot of friction. This human interaction makes it more complex than any other form of business model.

Exit from a partnership becomes difficult as the transfer of partnership share of a partner is subject to the agreement of the other partners. Upon approval of the other partners, the existing partners shall transfer his shares to someone.

Liability

The unlimited liability of a partner is a challenge to this form of business as a partner has to pay off the debts of the firm even at the cost of his personal property. A high degree of liability is expected from the partner.

Raising Capital

The most frequent challenge that is faced by a partnership firm is the limitation on the capital that shall be pooled. The firm can only raise capital from a limited number of partners. If a need arises new partners have to be invited, however, it is not an easy deal as a firm’s reputation and credibility has to be high.

Protecting your stake in a Partnership

The risk of personnel profit is always there in the partnership form of business. The active partner of a firm can always make a decision on behalf of other partners. Such decisions made always has the risk of personnel profiting which may affect the interest of the firm.

Public faith

Public faith in this form of business model always has not been very warm due to the above-mentioned challenges. But it shall be overcome by taking appropriate measures.

Indian Partnership Act

Nature of Partnership

The partnership is a form of organisation where two people come together to carry out a business jointly as per their contract. 

It is placed next in the pedestal of various organizations after sole proprietorship. It evolved as an improvement to the existing sole proprietorship form of business, it enabled firms to increase the capital and increase the amount of intellectual contribution to the firm. 

Essentials of Partnership

Contractual Relationship

A partnership firm operates fundamentally on the basis of a voluntary valid contractual relationship between the partners. 

This contractual relationship shall be either oral or written, sometimes there is no need of either of the above, just an existing mutual understanding will suffice for the same.

Two people or more

The Partnership act demands a mutual agency amongst two or more individuals. There must be more than one individual who is competent to enter into a contract to start a partnership firm.

This being the minimum number of partners required to start a partnership firm, there is a cap on the maximum number of partners who can enter into a contract under the Companies Act.

  • For a Banking business, the number of partners shall not exceed 10.
  • For any other business other than banking the number of partners shall not exceed 20.

Anything above this limit shall be deemed to be unlawful in the eyes of the law.

Profit-sharing

The association of partners in a partnership firm is for the sharing of profit. The profit earned by a firm in the financial year shall be apportioned on a ratio that is pre-determined on the deed or in case of no such arrangement the apportionment shall be done equally. 

If unfortunately no profit is shared with a person he shall not deserve the title of an accomplice, hence he shall also not be entitled to any misfortune there off.

Mutual Agency

The partnership is a mutual agency wherein partners carry out the business or one partner acts for them all as an agent. One partner acts a principle and all others are agents. 

An act done by one partner shall attract liability from all other partners due to this degree of relationship of mutual agency.

Carrying on of a Business

Every Partnership firm must be established with the aim of running a business. This business shall be in any form such as a trade, profession or any form of occupation.

Such business undertaken shall be for the motive of profit-making. Any activity that does not involve the profit-making motive. It is not considered to be a partnership. Any activity of charitable nature shall not qualify as Partnership. 

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Criteria of Partnership

The minimum number of partners that is essential to make a partnership association is 2. However, the Companies Act to make a cap as to the maximum number of partners that can be involved in a partnership firm.

  • For a Banking business, the number of partners shall not exceed 10.
  • For any other business other than banking the number of partners shall not exceed 20.

If this limit is exceeded the firm shall be registered as a company under the companies act if not the firm shall be deemed to be unlawful.

Advantage of Partnership over a company

  • To establish a partnership firm a simple contract will do, but in the case of a company, there is a high degree of compliance procedures that are to be undergone. It needs a lot of time and effort to incorporate a company.
  • Internal affairs of a firm can be resolved by simple consensus by the partners, whereas in the case of a company there is a high degree of statutory and institutional regulations that are to be complied with.
  • The procedure of dissolution of the partnership in a partnership is as simple as an agreement between the partners, whereas in case of a company there is a high degree of statutory and institutional regulations that are to be complied with.
  • All revenue that is earned out of a partnership will be shared only by the limited number of partners. Therefore there is a high level of incentive for the partners to work harder. In a company, this is not the case. Most of the profit earned will be retained as reserves. There is less incentive.

Features

LLP

Partnership

Company

Limited Liability

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Legal Entity

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Perpetual Succession

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Capita Contribution

Acc. to the Agrt.

Acc. to the Agrt.

Share subscription

Minimum No of Members 

2

2

2

Participation in the Management

Acc. to the Agrt.

Acc. to the Agrt.

Board of Directors

Maximum No of Members 

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20

PVT ltd – 50

PUB ltd – ХХ

Importance of Partnership 

There are certain very important and essential characteristics that make partnership form of organization very important and better than other forms.

  • Mutual agency of a partnership enables a partner to run the organization on behalf of other partners. Each partner is an agent and a principal to each other. Acts of one partner are binding and liable by other partners.
  • Decision making and control in case of a partnership firm are that the partners shall make decisions based on mutual consent amongst the partners and decide upon. The decision making power is contained within the partners.
  • Risk bearing and Profit sharing in case of a partnership is according to the predetermined ratio of apportionment. The partners share their losses also in the same way.
  • Continuity of a partnership becomes impossible when there is a death, retirement, insolvency or insanity to anyone partner. If the rest of the partners wish to continue the partnership they may do so by enforcing a new agreement.

Procedure of Registering a Partnership firm

Step 1: Selection of name 

Choose a name that is very different, unique and easy to remember that will represent the business. As discussed earlier in this article the business name of the firm has to satisfy those conditions to be eligible to qualify as a proper business name. It is highly recommended to check for existing trademark applications to avoid overlapping.

The guides for a proper business name is restated again for your convenience.

  • The name of the partnership firm shall not be identical or similar to existing firms in the same business.
  • The name of the partnership firm may include names of the members included in the register of members.
  • The name of the partnership firm shall be of consonance with the provisions of The Names and Emblems (Prevention of Improper Use) Act, 1950. 
  • The name of the partnership firm may end with suffixes such as “and Company”, “and Co.” or “and Associates”.
  • The firms are restricted from using words that suggest support or patronisation of the firm.
  • The name of the partnership firm may use “And”/”&” to differentiate principal name/centre name/surname of the accomplice of the business.
  • It is mandatory to use “and”/”&” either in the middle of the full first names and full centre names, full surnames of the partners or before the last full first name or full centre name or full surname of the accomplices.

Refer this link to know more about the common reasons for rejection of the names proposed 

Step 2: Draft the Partnership Deed

The next important part of the registration process is preparing the partnership deed. The partnership deed is a mother document of the partnership. Hence there is a need for foolproof drafting. 

Components of a basic Partnership deed is as follows.

  1. Firm’s name.
  2. Name, address and details of the partners.
  3. Date of commencement.
  4. The ratio of apportionment of profits and losses.
  5. Interest on capital.
  6. The proportion of capital contribution by the partners.
  7. Salary payable.
  8. Settlement of outstandings with executors of dead. 
  9. Method to compute the goodwill.
  10. The procedure of admission of partner and retirement of a partner.

In case if there is no partnership deed then the following rules will apply irrespective of the approval or disapproval by partners.

  1. Equally distributed profit and loss.
  2. No salary shall be provided to any partner.
  3. There shall be no interest on capital paid.
  4. No interest shall be attracted when a drawing is made.
  5. On mutual agreement, the firm shall pay interest of 6% p.a to the partner who has an advanced loan.

The basic structure of a Partnership Deed shall be referred from this link (or) this link.

However, there are several other important clauses to make the partnership deed watertight and also to avoid litigation in the future.

  • Capital Contribution clause is a covenant in the Partnership deed as to the capital contribution by the partners. It is not compulsory for all the partners to contribute initially, it is just a mutual agreement. 

The contribution need not be limited to only cash but also assets. Such contributions shall be measured so as to record the proportion of contribution.

  • Duty and Responsibility clause is very essential because partners come together to form a partnership. Each partner might have a different set of goals and aspirations to achieve, to avoid any deviations in this regard the clause has to be elaborate enough to outline the duties and responsibility of every partner in every aspect.
  • Profit-sharing clause outlays the proportion in which the profit shall be shared. The sole objective of any firm is profit sharing. Likewise, the loss is also apportioned in the same ratio.

The ratio shall be decided by the partners themselves. The customary practice being that the apportionment ratio is based on the capital contribution done by the partners.

  • Dispute Resolution is always essential as disputes do always arise no matter how much ever the partners try to avoid it. But, the resolution method has to be decided early on in the deed. 

For petty matters, it shall be small voting, for a much bigger problem it shall be arbitration or approaching courts. It is always appreciated to go to arbitration first and the same shall be drafted in the deed.

  • Result of violation is a clause which entails the consequence of the breach of the deed or any violation thereof. As a customary practice on the occurrence of any such incident, the partners will surrender their stake to someone the firm decides and not sue the firm for the same.
  • Leaver clause helps the firm to retain the partners in a long term relationship with the firm. This clause gives the authority to hold back a part of capital by the firm, irrespective of the reason for which the partner has left. 
  • Non- Compete clause demands the partners not to get involved in a similar type of business or to disclose any trade secrets or strategies to its competitors or for the purpose of personnel profit. It protects the proprietary interest of the firm partners.
  • Admission of a new partner should be a dedicated clause. As it might harm the interest of the existing partners, a proper procedure as to how a new partner is admitted has to be written down to avoid future disputes. Introduction of a new partner means a share in the pie that is available to the existing partner. There are high chances of problems being created by this process, it is better to have this clause.

Image result for partnership deed

Source – http://bit.ly/2C1c79m 

Step 3: Notarize and Execute the Deed

Once the deed is ready it shall be reviewed by the partners and if necessary by experts to avoid any technical error. The final Deed shall be printed on a non-judicial stamp paper with a value of 100/- or more depending upon the value of properties that are present in the deed. The parties are thus requested to verify the state stamp duty act of the respective state in which it is registered. 

The process of E-Stamping shall be done to avoid the pain of stamping physically. Stock Holding Corporation of India Limited is the new recording agent of E-Stamping process in India.

Another way of executing the deed is by franking. It is a process which renders the document stamped and carry the same effect of the stamping. Before parties sign the deed it shall be taken to the nearest bank and requisite amount shall be paid. The bank shall stamp the deed stating that the stamp duty has been paid.

All the partners or their authorised agents have to sign the deed in the presence of the other partners and the witness. It is a customary practice that every partner retains a copy of the original signed deed for their reference. Then the signature of the witness is obtained.

The partnership act does not require the deed to be notarized but it is advisable to notarize the deed because it adds more credibility to the deed. Litigations questioning the genuineness of the deed shall be avoided just by notarizing it. It is a mere customary practice of this industry.

Go here to see a fully executed partnership deed.

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Step 4 : Application of PAN

The partnership firm is not a separate entity as a Joint Stock Company which is separate from that of the owners or shareholders. However, still, the partnership firm has to acquire a separate PAN for the purpose of compliance with the statute. 

Acquiring of PAN can be done before or after the registration of the firm. However, in certain states, it is mandatory to acquire PAN before the registration process is done. Even if the firm is not registered the PAN has to be acquired by the firm. 

Go here to apply for PAN online. One authorised partner will have to sign in the application process using a digital signature.

Step 5: Registration of the Partnership Deed

As per section 58 and Rule 3 of the Indian Partnership Act 1932, Form 1 has to be filled by the partners. Go to https://bit.ly/33Wj3ka to download the form. The form contains the following information.

  1. Name of the firm. (full name)
  2. Full name, address and details of the firm.
  3. Duration of the firm.
  4. Location of the firm.
  5. Other places where the business transaction occurs.

Go here to see how a final version of form 1 looks. 

The registration is done by the registrar of Firms (ROF) in the jurisdiction of the place of operation of the business. The following documents are necessary for the registration of the firm:

  1. Duly filled form 1 attached with a Rs 3 court fee stamp or Original Deed.
  2. Photocopy of the duly prepared Deed on a minimum Rs 200 stamp paper.
  3. Registered property documents photocopy.
  4. Affidavit or NOC on Rs.10 and Rs.5 Notary stamp If the place is rented. 
  5. Ownership proof of other places.
  6. Address proof and PAN of the partners (self-attested version)
  7. Rent or lease agreement of the business place if any.
  8. Two passport size photo of each partner.
  9. Identity proof of the partners. (any)
  10. Utility bills of the registered office.

It is preferable that the notarized version of the above said documents shall be encouraged to avoid any disqualification by the ROF on grounds of genuinity. 

Step 6: Receiving Certificate

Once the registrar is satisfied with the documents submitted, he shall intimate any outstanding fees or stamp duty that has to be paid. The fees vary according to the area, it is better to ask the registrar in advance for any such fees that have to be paid. 

Once this process is over the certificate will be mailed to the business address. The firm does not have to wait to operate until the certificate is received as the registration itself is not compulsory.

Other registrations

Shop and Establishment Registration

The registration under Shops and Establishment Act differs from state to state and is regulated by the respective state’s Labour Department. It is applicable for all entities who do not come under the ambit of The Factories Act, 1948. This is to prevent the rights of the employees.

Any establishment commercial in nature includes shops, educational institutes, hospitals, societies, etc. The exception is given to the factories as it is governed by the Factories act.

Approach the state’s Labour department for applying for registration.

Documents Required:

  1. PAN Card / Aadhar Card.
  2. Registration fee as per state regulation.
  3. PAN of the firm.
  4. Utility Bills.
  5. NOC of the owner if the place is rented.
  6. Partnership Deed.
  7. Other documents as per the state’s Labour Department.

Trade License

This license shall be obtained by the firm if involved in any trade-related activity to protect the interest of the public at large and to protect them from the harmful trade-related activity of the established trade. This license also ensures compliance with other laws that are applicable to the specific establishment.

The license shall be obtained from the specific municipal corporation under whose jurisdiction the entity falls under. However, the license is not compulsory in some states. Please refer to the specific state acts to ensure so is the fee. 

Documents Required:

  1. PAN Card / Aadhar Card.
  2. Registration fee as per state regulation.
  3. PAN of the firm.
  4. Utility Bills. (Premise proof)
  5. NOC of the owner, if the place is rented.
  6. Partnership Deed.
  7. Cancelled cheque leaf of the firm.
  8. Bank Statement of the firm.
  9.  Site plan of the establishment.
  10. Other documents as per the respective municipal jurisdiction.

Professional tax registration

For the purpose of the Professional Tax Act, partner of a firm is considered as a professional. Such a partner must obtain the registration 30 days from such an appointment. This ensures that the professional tax is deducted from the source salary of the employee.

Every employer must collect the tax from the employee or customarily it is cut at the source and the same amount shall be paid to the respective state department. After which the return of the professional tax must be filed. For which registration under Professional Tax Act is a must.

Documents Required:

  1. PAN Card / Aadhar Card.
  2. Salary and Attendance Register.
  3. Attested PAN of the firm.
  4. Partnership Deed.
  5. Cancelled cheque leaf of the firm.
  6. Bank Statement of the firm.
  7. Other documents as per the respective States’ tax department.
  8. NOC of the owner if the place is rented.

GST Registration

The new GST laws tax all entities and persons who are involved in the sale of goods or services. Whosoever hit the threshold of 20,00,000 (1000000 for North Eastern states) in turnover shall register under this law. The registration is compulsory within 30 days of hitting the threshold. If the business activity is involved in the supply of service or good inter-state it is a must to register under the law. The registration is done online but is very complicated.

Documents Required:

  1. PAN Card / Aadhar Card.
  2. Attested PAN of the firm.
  3. Certificate of registration of the firm.
  4. Bank Details.
  5. The digital signature of the partners.
  6. Other documents based on the type of application.

FSSAI Registration

Under the Food Safety and Standards Act, 2006 all entities who are involved in the process of “food business” is required to get registered under this act. Irrespective of the firm being for profit or not, it shall apply to both private and public entities. However, this registration is very subjective to the type of activity and the location.

If the firm reaches the threshold of 12,00,000 in the financial year, it shall obtain the FSSAI State License. Any operation in the inter-state level, Export and Import shall obtain the FSSAI Central License.

Documents Required:

  1. Application Form.
  2. Declaration form.
  3. PAN Card / Aadhar Card.
  4. Passport size photo of the partners.
  5. Attested PAN of the firm.
  6. Certificate of registration of the firm.
  7. Bank Details.
  8. Turnover forecast.
  9. Digital signature of the partners.
  10. Other documents based on the type of application.

Drug License

The Drug License is granted by the competent authority under the Drugs and Cosmetic Act, 1940 to conduct business related to medicines, drugs or cosmetics. Without obtaining this license business of such a nature can’t be conducted. This act also covers AYUSH medication, for professionals involved in these drugs will also have to obtain this license.

Documents Required:

  1. Partnership Deed.
  2. PAN Card / Aadhar Card.
  3. Attested PAN of the firm.
  4. Certificate of registration of the firm.
  5. Bank Details.
  6. Cancelled Cheque leaf.
  7. Biodata of the partners.
  8. Other documents based on the type of application.

Private Security Agency License

The Private Security Agencies Regulation Act, 2005 (PSARA) is the act that governs the regulation of entities involved in the private security agency business. The registration under this act is a must for all the firms that are involved in this type of business.

Documents Required:

  1. Certificate of registration
  2. Address Proof.
  3. Documents related to Security Guard.
  4. PAN of the firm.
  5. Income Tax Return of each partner.
  6. Passport size photo.
  7. MOA of the firm and the training institute.
  8. Any other documents demanded by the state officials.

Import Export Code

This IEC code is a 10 digit alphanumeric code associated with the PAN. It is mandatory for all businesses who are involved in Import and Export activity. The IEC shall be applied to the Director General of Foreign Trade. All the Import and Export need to acquire this IEC but, when it comes to the Import and Export of the specific commodity that affects the national interest, the license shall be obtained with specifying the reason for the same.

Documents Required:

  1. IEC questionnaire to be filled.
  2. PAN of the firm and of all the partners.
  3. Cancelled Cheque.
  4. Digital signature of all the partners.
  5. Address proof. (utility bills)

Furnishing false particulars

A person shall be imprisoned for up to 3 months or a fine or both in case of furnishing information that is false or at least known to be not to be true, relating to the documents, statements or any records thereby provided to the registrar.

Rectification of mistakes

The registrar has all the powers to rectify any mistake relating to or inconsistent with the statements filed by the partners and so shall make necessary changes in the register as well. 

Rectification shall also be made at the request of the partners regarding any record or statement filed to the registrar regarding the firm. The registrar is entitled to do so under sec. 64 of the act.

Subsequent alterations after the registrations

Any alterations or change in the deed shall be notified to the registrar timely by means of the relevant forms. This need may arise when the business firm wishes to move their place of business, change the name of the business firm or any change that will affect the original Partnership deed has to be notified to the registrar. However, it is to be noted that the mutual agreement between the partners. Follow the steps below to do the same.

Alterations with respect to Firm’s name – Nature of business – location of the business

Such alterations shall be made by sending the Application Form within 90 days since the date of alteration along with the specified alteration fee, signed and verified by the partners.

If the registrar is satisfied then he makes the relevant alterations in the register.

Use this link to download the form.

Alterations with respect to branches.

Such alterations related to branches such as discontinuing of operation in a branch or starting of operation in a new branch shall be made by sending the Application Form within 90 days since the date of such change along with the specified alteration fee, signed and verified by the partners and the same shall be noted by the registrar in his register.

Use this link to download the form 

Alterations with respect to partners details.

Such alterations with respect to partners details such as a change in the name of the partner or the permanent address of the partner shall be made by sending the Application Form within 90 days since the date of such change along with the specified alteration fee and the same shall be noted by the registrar in his register.

Use this link to download the form 

Alterations with respect to the Constitution of the firm.

Such alterations with respect to Constitution of the firm such as dissolution or alteration in the constitution of the firm shall be made by sending the Application Form within 90 days since the date of such change along with the specified alteration fee and the same shall be noted by the registrar in his register.

Use this link to download the form for alterations in the constitution of the firm. Use this link to download the form for dissolution of the firm https://bit.ly/2MPDOIC

Alterations with respect to minor partner attaining the age of majority.

When a minor partner on the attainment of majority wishes to continue his partnership or if he wishes to get retired shall notify the registrar of the same with the application form stating his position related to the firm. The registrar shall make the necessary change with respect to the same.

Use this link to download the form for alteration related to minor partners. 

How to make changes in the Partnership Deed?

Reasons for change in the Partnership Deed

Change in Business

If a firm discontinued operation of a certain business vertical, discontinued operation from a certain branch or alteration amounting addition, it shall amount to change in the Partnership deed. 

Change in Name

If the firm decides to change the name of the firm or alter it. It shall amount to change in the Partnership deed with the mutual consent of all partners. Such change would lead also lead to change in PAN and other necessary change. 

Change in Business place

If the firm decides to change the business place. It shall amount to change in the Partnership deed with the mutual consent of all partners. Such change would lead also lead to change in PAN and other necessary change. 

Change in Capital Contribution

Any change related to capital contribution such as the addition of capital, Change in capital contribution ratio and withdrawal of capital of the firm shall attract change in the partnership deed.

Change in Management Structure

When firms decide to alter the management responsibilities it shall directly affect the Duty and Responsibility clause of the partnership deed. If a person designated or alterations relating it shall also lead to amendment of the deed.

Change in partnership duration

If the partners wish to increase or decrease the duration of the partnership by means of mutual consent amongst all, it shall be amended in the deed.

Any other alteration that leads to alteration of the clauses in the Deed.

Procedure to amend

The partners may alter the deed if they agree to it mutually. The same shall be carried out by way of executing a Supplementary Deed. The following are the steps.

  • Prepare Supplementary Deed:

Based on the requirement of the change partners shall prepare the necessary supplementary deed incorporating the change which they wish to make. All the partners must mutually agree to the deed so prepared and solicit their signature on the same. Once the final draft is made it shall be executed.

  • Execute the Final draft of the Supplementary Deed:

The execution shall be deemed to be in 2 different ways one being for change in capital and other being for any other change other than the capital change.

For a change in the capital, the payable stamp duty shall be calculated as per the amount of change with respect to the relevant state acts.

If execution is of the second way that is any other change other than the capital change then the stamp duty payable will be Rs. 100.

The partners of the firms should solicit their signature on the relevant page and their initials on all other pages. Then the Supplementary Deed has to be attested by two witnesses and then notarized by a competent person.

  • Registering with the Registrar of firms:

The supplementary deed has to be filed with the same registrar with whom the initial registration was made. Along with the supplementary deed the application of modification has also to be furnished. There are other documents that are required. 

  • Original deed 
  • Supplementary deed (executed)
  • Identity proof (if new partners are added)
  • Utility bills(if the operation of the business is moved to a new place)

Common reasons for rejection by Registrar to register firms

  • The business place of the firm does not come under the jurisdiction of the registrar.
  • If anyone partner refused to solicit his / her signature.
  • Flaws in the documents submitted or any question of ingenuity arising.
  • If a partner is not competent to contract.
  • If NoC is not obtained genuinely.
  • If the name of the firm is not in conformity with the rules.
  • If the relevant amount of stamp duty is due.
  • If there is any malpractice sensed in the execution of the deed.
  • If the deed is printed on the wrong stamp paper.
  • In some states, the PAN has to be attained before the registration is done, in that case, the registrar may decline.
  • Furnishing false particulars in the Partnership Deed.
  • Any mistake as to particulars in the Partnership Deed.
  • Or any other grounds that registrar deems fit under the state act or rules.

References

  1. http://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf
  2. https://www.toppr.com/guides/business-studies/forms-of-business-organisations/partnership-deed-and-registration/
  3. http://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf
  4. http://legislative.gov.in/sites/default/files/A1950-12_0.pdf
  5. http://legislative.gov.in/sites/default/files/A1950-12_0.pdf

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2 COMMENTS

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