Partnership Deed – Business Studies

    1. Meaning of Partnership Deed

    Mutual understanding and trust among all the partners is necessary for dynamic and successful running of a partnership firm conducted by two or more persons. In conducting such a firm, the papers should first enter into a deed of agreement clearly determining the capital they are to invest; conduct and management of the firm, distribution of profit and loss, rights, duties, and liability. Such a document signed by the performers is called Parlnership Deed.

    “Partnership Deed is a document containing all the matters according to which mutual rights, duties, and liabilities of the partners in the conduct and management of the affairs of the firm are determined.”

    Partners may enter into mutual agreement in written or oral form. Such agreement can be either in oral or written form in America, Britain and India, but the laws of the countries like France and Italy demand such agreement in written form. In Nepal, according to the Partnership Act,2020, such agreement is not compulsory to be in written form. However, such agreement is necessary to be in written form because it may be very helpful to the partners in the future. If any conflict, misunderstanding etc. Takes place among between the partners, such written deed can play a very important role in solving the problems among them. It is often found that in the beginning, the partners become very intimate, trust one another, show hearty relations etc. Among them, but later on there begins misunderstanding, conflict, contradiction and: Quarrel about even insignificant issues. In such a situation the problems among them can be solved through the deed of agreement as it contains all the terms and conditions of the partnership. That is why, after having signed the partnership deed by all the partners and stuck a necessary stamp it should be submitted to the concerned government office along with the registration form. Such deed gets legal recognition.

    2 Features of Partnership Deed

    Features of partnership deed are as follows:

    a. Unanimity: Partnership Deed is drafted in the  unanimity of the partners. At the end it contains the signatures of all the partners.

    b. Objective:  The objective of the deed is to avoid/get rid of all the partnership related future problems like misunderstanding, wrangle etc. Such deed among partners can help them solve the problems.

    c. Fixation of rights, duties and liabilities:  Rights, duties and liabilities of the partners are fixed by the deed.

    d. Detailed agreement:  Name of the partnership firm, structure, size, its capital, the ratio of profit and loss, etc. Are mentioned in the deed.

    3. Contents of Partnership Deed

    Deed of partnership is the fundamental rules of partnership business. This is also called ‘Articles of Partnership’.Burt it is not like a charter of a company. Partnership deed may be short or long. But, while preparing it, all the.Contents should be made clear keeping in view of every possible problems that may arise in the future. Deed of partnership has not any specific model or format. Every partnership firm may draft it according to its own will and necessity. Generally, the main contents to be included in the deed are as follows:

    1.  Name of the partnership firm
    2. Duration of the firm
    3. Objectives of the firm

    4. Specification of the nature and type of the business firm

    5. Name and address of the partners

    6. Types of partnership

    7. Name of the representative partner to work on behalf of fellow partners

    8. Capital to be invested and method of investing partners’ capital

    9. The rate of interest to be given to the partners for their loan capital

    10. Limit of amount to be drawn by partners from their capital, the rate of interest and other conditions

    1 1. Methods of sharing loss and profit among the partners and its ratio

    12. Remuneration and commission to be given to partners

    13. Division of work, duties and responsibilities of the partners in conducting the firm

    14. Rights of the partners

    1 5. Subjects and acts that are restricted to the partners concerning the firm

    16. Name of the authorized partner to sign bank cheque and other documents of the firm on behalf of the firm

    17. Arrangement of transaction record, account keeping and auditing

    18. Principles and methods to be applied in case of death, retirement and insolvency of any partner and admission of new partner

    19. Method of evaluation of good will of the firm and its distribution

    20. Provision and process for recovering indemnity from a partner in the event of any loss knowingly caused by partner and description whether to expel such partner or not

    21. Provision of arbitration for resolving any dispute and misunderstanding among the partners in case so happened

    22. Provision of dissolution of the partnership firm and procedure of settlement of accounts

    23. Restrictions and other terms and conditions related to the  long lasting existence and nature of the firm etc.

    The very things can be included in the deed of a partnership firm. Partners should take decision through discussions what to include in the deed. They may include different terms and conditions according to their necessity, nature, types of partnership, the number of partners etc. The main things that the entire partnership firm must include for convenient study are as follows:

    1. Name and address of the firm and its partners

    2. Nature and duration of business firm

    3. Capital contribution

    4. Distribution of profit

    5. Drawing and remuneration of partners

    6. Management rights

    7. Books of accounts of the firm and banking accounts

    8. Provision for arbitration

    9. Provision in case of death, insolvency and retirement of partner and dissolution of the firm

    If anything deemed necessary to include in the deed of a partnership firm, to repeal or amend, it can be done having discussion and consensus among the partners. According to Section 10 of the Nepal Partnership Act, 2020, if any, change is needed in the description of partnership deed, an application should be submitted to the concerned department. The intended change can be made only by getting it approved from by  the department.




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