Relations of Partner Flashcards
Fraud by one partner
If a partner commits fraud then he must indemnify the other partners for any loss caused to them + If the fraudulent act is separable from the firm then the partners can throw all the consequences on the partner who committed the fraud.
General duties of partner
The partners must act in the firm to their greatest common advantage, render all information affecting the firm, render true accounts and act in good faith.
Agreement of restraint of trade
The partners may not be allowed to engage in any other business other than that of the partnership whilst he is a partner.
Conduct of business
Right to take part in conduct
Right to be consulted
Right to access the books of accounts
Right of legal representatives
Right to take part in conduct of the business
Every partner has a right to take part in the conduct of the business. Unless there is a contract to the contrary.
Right to be consulted
Every partner has the right to express his opinion over a topic. On routine topics the agreement of majority partners may suffice. However if there has to be a change in the nature of the business then the consent of all the partners is required.
Right to access the books
All partners have a right to access, inspect and copy the books of accounts of the firm.
The right has to be exercised bona fide
Right of legal representatives
On the death of a partner, his legal representatives or heirs have the right to access, inspect and copy BoA. (bona fide)
MUTUAL RIGHTS AND LIABILITIES (PROVISIONS)
Right to remuneration
Right to interest on loans
Right to interest on capital
Right to profits
Right to be indemnified
Right to indemnify the firm
Right to remuneration
No partner is entitled to a remuneration for taking part in the conduct of the business unless
- it is expressly included in the contract to pay him remuneration or
- it is customary to pay the partner who takes part in the conduct of the business a remuneration
Right to share profits
- Unless there is an agreement to the contrary, the profits of the firm are shared equally between the partners and they must contribute equally to any loss sustained by the firm.
Interest on capital
Interest on capital is only paid if
- there is an express agreement to that effect
- it is customary to pay a partner interest on the money brought by him to the business
- it is required for statutory compliance
Interest on advances
Is payable at 6% p.a.
Right to be indemnified
A partner who has incurred liabilities or made payments has a right to be indemnified for them if they were made
- in the ordinary course of business
- in a state of emergency to protect the firm from loss as a man of ordinary prudence would have done
Property of the partnership comprises of
- Property, rights and interest brought by partners as contribution.
- Property, rights and interest acquired by the firm in course of business
- Goodwill of the firm
personal profits earned by the business
- If a partner earns any personal profits from any business transaction, use of partnership property, business connection then he has to account for and pay the profits to the firm.
- If a partner is engaged in a business of a similar nature as that of the partnership then he has to account for and pay back all the profit which he has earned through that business to the firm.
