RECONSTITUTION OF PARTNERSHIP DEED

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RECONSTITUTION OF PARTNERSHIP DEED

This deed of partnership made and executed on this the day of .. . . . . .  .

. . … .  . .. . . at Bangalore By and Between:

1. . . . . . . ……………………………. Hereinafter referred to as the first

party.

2. . . …………………………………. Hereinafter referred to as the second

party/retiring partner.

3. . . ………………………………….. hereinafter referred to as the third

party/retiring partner.

4. . . . . . . .. . . . . . . . . . . . . . .. . hereinafter referred to as the fourth party/incoming partner.

(The terms fist, second, third and fourth parties shall wherever the context to request mean and include their respective heirs, legal representatives, administrators, executors and assigns) of the each part shall witnesseth:

Whereas the parties 1 to 3 herein have been carrying on business as partners of the firm under the name and style of . . . . . . . . . . . . . . . . . ..

. . . . . . . . . . .. .. The parties 2 to 3 herein have expressed their desire to retire from the firm and the fourth party herein as offered to come in as a partner to continue the business of …. . . ………………………………

Upon the parties 2 and 3 herein offering to retire from the firm the accounts of the firm have been drawn.

Whereas the party of the third part has lent substantial amount of money to the firm to meet the exigencies of the business apart from contributing to the capital of the firm. The parties 1 and 4 herein have decided to continue the business in the same products in which the firm was dealing and to take over the liabilities of the fir, all the assets together with goodwill and name. Hence this re-constitution deed.

NOW THEREFORE THIS DEED OF PARTNERSHIP SHALLWITHNESSETH:

1.   Name of the Firm:

2.   Place  :

3.   PURPOSE:

Manufacture and sale of electrical varnishes of all grades, polymers resins and such other products which may be decided by the partners from time to time. To engage in trading activities in dyes, chemicals pigments etc.,..

4. DURATION OF PARTNERSHIP:

The duration of partnership will be AT WILL. However, it shall not be dissolved for atleast five years or with the consent of both continuing partners.

5. CAPITAL:

First and fourth parties herein who will be contributing Rs… . . . . . each towards the share capital.

6. SHARING RATIO:

50:50 each between two partners out of the profits and losses.

7. BANK ACCOUNT:

The firm shall have in its name such Bank Accounts as may be necessary with any Bank, wither schedule, Co-Operative or Nationalised Bank and the Bank Accounts shall be operated by the Managing Partner.

8. MANAGEMENT:

Sri. . . . . . . . . the first party herein shall be the managing partner of the firm he shall carry on day to day affairs of the firm in the best interest of the partners with the assistance of the other partner. Matters relating to line of business, finances, place of business, salaries, appointments etc., shall be decided from time to time by the managing partner.

9. FURTHER INVESTMENT:

In case of necessity the partners have agreed to invest money for effectively running the unit. Such additional investment shall be treated as loan and such lending partner will be entitled to 18% p.a. interest on such amount.

10.  In case of death, insolvency, lunancy or retirement of any one of the partner of the firm, the firm shall not automatically get dissolved. The

surviving partner will be entitled to continue the firm either by taking new partners or without inducting anybody.

11. BORROWINGS:

The partners may, by mutual consent, borrow the funds from any bank, society, co-operative Bank, financial institution or individuals for the purpose of running the business and in such cases all the partners will jointly and severally be responsible for the repayment of loans or credit facilities availed by the firm. No partner will be entitled to borrow money in the name of the firm individually and all security documents shall be signed both partners.

12. REMUNERATION:

The partners will be entitled to draw a sum of Rs. . . . . . . each for the services rendered by them to the firm and the same shall be subject to revision by mutual consent depending on the financial position of the firm. However, if the firm is not in a position to repay the loan or instalments top the creditors from out of the income of the firm the partners will not draw their salaries.

13.  The partners will not be entitled to withdraw the capital contributed by them till such time the loans contracted by the firm is fully discharged.

14.  The Books of Accounts of the firm shall be maintained by the managing partner with the assistance of such staff, employees or agent as my be appointed by the fir,. The second partner and managing partner will be entitled to sign all the bills, vouchers and other papers required to to signed in daily transaction to carry on smooth business.

15.  No partner shall contract any loan individually or incur liability without written concurrence of the other partner and if any such commitment is made contrary to the above only such partner making commitment will answer the same.

16.  APPOINTMENTS:

All appointments of consultants, staff, employees, agents, dealers, tax consultants, auditors, advocates etc., shall be made by mutual consultation between the partners.

17.  The Managing partner shall maintain proper books of accounts regularly and the same shall be kept in its registered office or at the factory which shall be made available for inspection by the other partner at all times. He account books so maintained by the firm shall be got audited every year by qualified auditors.

18. FINANCIAL YEAR:

The financial year of the firm shall be from ……….. . .. . .. of each year

ending with . . . .. .. . . .   of succeeding year.

19.  No partner will be entitled to retire from the firm without giving atleast one month notice in advance, to the other and without obtaining prior permission from the Bank or financial institution with whom the firm will have transactions.

20.  No. partner will be entitled to transfer, assign or charge his/her interest or share in the firm to a third party without prior consent of the other partner and also without prior permission of the Bank.

21.  Since second and third parties herein have retired from the firm w.e.f. today, have drawn up the accounts till date and that the retiring partners have no dispute or claim either against the firm or the continuing partners.

22.  No partner shall engage himself/herself in any activity or business which is similar identical with the business and activity of the firm either directly or indirectly to affect the interests of the firm adversely.

23.  The firm shall sue and be sued in the name of the firm only and managing partner shall represent the firm in such matters before the courts of law by signing such papers as may be required to be signed and verified for being presented in the courts, arbitrators or such other authority.

24.  The properties acquired and transactions carried on by the firm shall be in the name of the firm and all assets, liabilities goodwill etc., that have been acquired as on date will continue to be the assets of the firm.

25.  The partners shall sincerely do their respective jobs which is necessary in the best interest of the firm so as to run the same smoothly and profitably to the best advantage of all the partners. If any partner were to deliberately cause loss to the firm or is acting prejudicial to the interest of the firm such a partner shall make good the same to the other partner and such partner shall be removed from the partnership.

26.  In respect of all the matters for which there is no specific clause provided herein, the parties herein, will be governed by provisions of the Indian partnership Act 1932 and any amendments thereto from time to time.

IN WITHNES WHEREOF THE PARTIES HERETO HAVE SER THEIR RESPECTIVE HANDS TO THIS PARTNERSHIP DEED ON THE DATE AND PLACE MENTIONED HEREINABOVE IN PRESENCE OF THE FOLLOWING WITHNESSES:

WITNESSES:

1.                                                                                                                     PARTNERS:

2.

Law of Dissolution of firm in India

39. Dissolution of a firm- The dissolution of partnership between all the partners of a firm is called the “dissolution of the firm”.

40. Dissolution by Agreement- A firm may be dissolved with the consent of all the partners or in accordance with a contract between the parties.

41. Compulsory dissolution- A firm is dissolved-

(a) by the adjudication of all the partners or of all the partners but one as insolvent, or

(b) by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership;

Provided that, where more than one separate adventure or undertaking is carried on by the firm, the illegality of one or more shall not of itself cause the dissolution of the firm in respect of its lawful adventures and undertakings.

42. Dissolution on the happening of certain contingencies- Subject to contract between the partners a firm is dissolved-

(a) if constituted for a fixed term, by the expiry of that term;

(b) if constituted to carry out one or more adventures or undertakings, by the completion thereof.

(c) by the death of a partner; and

(d) by the adjudication of a partner as an insolvent.

43. Dissolution by notice of partnership at will- (1) Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

(2) The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of communication of the notice.

44. Dissolution by the Court- At the suit of a partner, the Court may dissolve a firm on any of the following grounds, namely:-

(a) that a partner has become of unsound mind, in which case the suit may be brought as well by the next friend of the partner who has become of unsound mind as by any other partner;

(b) that a partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner;

(c) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business, regard being had to the nature of the business.

(d) That a partner, other than the partner suing, willfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct of its business, or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;

(e) That a partner, other than the partner suing, has in any way transferred the whole of his interest in the firm to a third party, or has allowed his share to be charged under the provisions of Rule 49 of Order XXI of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908); or has allowed it to be sold in the recovery of arrears of land revenue or of any dues recoverable as arrears of land revenue due by the partner.

(f) That the business of the firm cannot be carried on save at a loss; or

(g) On any other ground which renders it just and equitable that the firm should be dissolved.

45. Liability for acts of partner done after dissolution- (1) Notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution, until public notice is given of the dissolution;

Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of a partner who not having been known to the person dealing with the firm to be a partner, retires form the firm, is not liable under this section for acts done after the date on which he ceases to be a partner.

(2) Notices under sub-section (1) may be given by any partner.

After dissolution of partnership, no partner, no partner is privy to other. Suit by one will not operate as resjudicata on the other.

46. Rights of partners to have business wound up after dissolution- On the dissolution of a firm every partner or his representative is entitled, as against all the other partners of their representatives, to have the property of the firm, applied in payment of the debts and liabilities of the firm and to have the surplus distributed among the partners or their representatives according to their rights.

47. Continuing authority of partners for purposes of winding up- After the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners, continue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the firm and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise:

Provided that the firm is in no case bound by the acts of a partner who has been adjudicated insolvent; but this proviso does not affect the liability of any person who has after the adjudication represented himself or knowingly permitted himself to be represented as a partner of the insolvent.

48. Mode of settlement of accounts between partners- In settling the accounts of a firm after dissolution, the following rules shall, subject to agreement by the partners, be observed:-

(a) Losses, including deficiencies of capital, shall be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportions in which they were entitled to share profits;

(b) The assets of the firm, including any sums contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order:-

(i) in paying the debts of the firm to third parties;

(ii) in paying to each partner rateably what is due to him from the firm for advances as distinguished from capital.

(iii) in paying to each partner rateably what is due to him on account of capital; and

(iv) the residue, if any, shall be divided among the partners in the proportion in which they were entitled to share profits.

49. Payment of firm debts and of separate debts- Where there are joint debts due from the firm, and also separate debts due from any partner, the property of the firm shall be applied in the first instance in payment of the debts of the firm, and, if there is any surplus, then the share of each partner shall be applied in payment of his separate debts or paid to him. The separate property of any partner shall be applied first in the payment of his separate debts, and the surplus (if any) in the payment of the debts of the firm.

50. Personal profits earned after dissolution- Subject to contract between the partners, the provisions of clause (a) of section 16 shall apply to transactions by any surviving partner or by the representatives of a deceased partner, undertaken after the firm is dissolved on account of the death of a partner and before its affairs have been completely wound up:

Provided that where any partner or his representative has bought the goodwill of the firm, nothing in this section shall affect his right to use the firm name.

51. Return of premium on premature dissolution- Where a partner has paid a premium on entering into partnership for a fixed term and the firm is dissolved before the expiration of that term otherwise than by the death of a partner, he shall be entitled to repayment of the premium or of such part thereof as may be reasonable, regard being had to the terms upon which he became a partner and to the length of time during which he was a partner, unless-

(a) the dissolution is mainly due to his own misconduct, or

(b) the dissolution is in pursuance of an agreement containing no provision for the return of the premium or any part of it.

52. Rights where partnership contract is rescinded for fraud or misrepresentation- Where a contract creating partnership is rescinded on the ground of the fraud or misrepresentation of any of the parties thereto, the party entitled to rescind is, without prejudice to any other right, entitled-

(a) to a lien on, or a right of retention of, the surplus or the assets of the firm remaining after the debts of the firm have been paid, for any sum paid by him for the purchase of a share in the firm and for any capital contributed by him;

(b) to rank as a creditor of the firm in respect of any payment made by him towards the debts of the firm; and

(c) to be indemnified by the partner or partners guilty of the fraud or misrepresentation against all the debts of the firm.

53. Right to restraint from use of firm name or firm property- After a firm is dissolved, every partner or his representative may, in the absence of a contract between the partners to the contrary, restrain any other partner or his representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been completely wound up:

Provided that where any partner or his representative has bought the goodwill of the firm, nothing in this section shall affect his right to use the firm name.

54. Agreements in restraint of trade- Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within a specified period or within specified local limits; and notwithstanding anything contained in Section 27 of the Indian Contract Act, 1872 (9 of 1872), such agreement shall be valid if the restrictions imposed are reasonable.

55. Sale of goodwill after dissolution- (1) in settling the accounts of a firm after dissolution, the goodwill shall, subject to contract between the partners, be included in the assets, and it may be sold either separately or along with other property of the firm.

(2) Rights of buyer and seller of goodwill- Where the goodwill of a firm is sold after dissolution, a partner may carry on a business competing with that of the buyer and he may advertise such business, but, subject to agreement between him and the buyer, he may not-

(a) use the firm name,

(b) represent himself as carrying on the business of the firm, or

(c) solicit the custom of persons who were dealing with the firm before its dissolution.

(3) Agreement in restraint of trade- Any partner may, upon the sale of the goodwill of a firm, make an agreement with the buyer that such partner will not carry on any business similar to that of the firm within a specified period of within specified local limits, and notwithstanding anything contained in Section 27 of the Indian Contract Act, 1872, (9 of 1872), such agreement shall be valid if the restrictions imposed are reasonable.