The Meaning and Definition of Partnership Deed?
The formation of partnership requires an understanding among the partners in the form of an agreement because partnership arises not from status but from contract. The partnership agreement may be oral or in writing. In France and Italy, the law makes partnership agreement in written form. The document in which all the important terms and conditions regarding the partnership business are written is called partnership deed.
A partnership deed is written agreement which contains terms and conditions as to the relationship of the partners among each other. There is no prescribed Performa for partnership deed but it must be stamped and signed by all the partners. Partnership deed is drawn to avoid misunderstanding and undesirable litigation. Where it is decided to have a partnership deed in written form, it should be stamped according to the provisions of Stamp Act, 1899. It is not regarded as a public document like memorandum of association and articles of association. It is otherwise known as agreement, deed or articles of partnership.
A properly drafted partnership deed contains the following points:
- The name of the firm and the names of the partners.
- The place where the head office is situated and the business is carried on.
- Nature and kinds of business operation.
- The amount of capital contribution by the partners.
- The commencement and the duration of partnership.
- the proportion in which the profits are to be shared.
- The provisions for interest on capital, if any.
- Nature of loans and advances and the provisions for interest on loan.
- The amount of withdrawal to be made by the partners to any partner for this special service to the firm.
- Provisions for maintenance of books of accounts and the procedure of audit of accounts.
- The name of the partners for signing cheques and other important documents.
- Procedure for valuation of goodwill at the time of admission and retirement.
- Arbitration clause for settlement of disputes among the partners.
- Procedure for dissolution of partnership and partnership firm.
- Provisions for determining the amount of capital payable to the retiring partner or to the heir of a deceased partner.
- The method of revaluation of assets and liabilities.
- The procedure of settlement in case of dissolution of partnership.