Rights of Partners in a Business Partnership

Rights of Partners in a Business Partnership

1. Right to Take Part in the Conduct of the Business

Sec. 12(a) stipulates that each partner in a business partnership have the right to take part in the business proceeding. But this right is subject to a contract to the contrary. However, this right may be waived by a partner himself.

2. Right to be Consulted

In case of matters affecting the business, each partner can has the right to be consulted. Further, every partner has the right to express his views in front of other partners also. Sometimes, difference of opinion arises among the partners. If it is over an ordinary matter, the same may be settled by a majority of the partners, whereas if it is over a fundamental matter, it can be settled only with the consent of all the partners.

3. Right to have Access to Books

Every partner in a business partnership can access and inspect any of the books of the firm as per law. It can be exercised either by the partner himself or by his authorized agent. The partners cannot object to inspection of books by the agent of a partner, unless they have a reasonable ground for believing that the trade secrets might be leaked out.

4. Right to Share Profits

Every partner is entitled to have equal share in the profits of the firm. At the same time, the partners are equally liable to all the losses sustained by the firm unless otherwise agreed upon as per the partnership agreement.

5. Right to Interest on Capital

Ordinarily, no interest is payable to the partners. However, if it is allowed by an express or implied agreement or by the custom of trade, a partner can charge interest on capital. In such a case also, interest shall be paid only out of profits.

6. Right to Interest on Advance

A partner who contributes additional advance to the firm apart from the amount of his capital for the purpose of business is entitled to get there on an interest at the rate of 6% per annum. It is payable out of the property of the firm as if it were an expense. Thus it is payable even if there are no profits.

7. Right to be Indemnified

The partner of a firm is entitled be indemnified by the firm in the following circumstances:

  1. Expenses incurred in the ordinary course of business, and
  2. Expenses incurred in an emergency.

8. Right to the Use of the Partnership Property

In the absence of any contract to the contrary, each partner is presumed to have an equal share in the property of the partnership and is entitled to have them held and used only for the purpose of the business. Partners should not use it as their own property.When at any point of time, a partner uses the property of the business firm to his own benefit either directly or indirectly, the profits thus earned are accountable to the firm.

9. Power in an Emergency

As per the Indian Partnership Act, a partner is vested with the powers to initiate action to safeguard the firm from loss.

10. No New Partner to be Introduced

New partners may not be introduced in a partnership without the consent of every individual partners. They have the right to object such admission unless there is an express contract allowing such introduction.

11. No Liability before Joining the Firm

Unless there is a contract to the contrary, new partner will not have any liability for any act of the firm done before he become a partner.

12. Right to Retire

Retirement from a partnership is a partner’s right. Partner can retire from partnership in any of the following modes.

  1. With the consent of all the partners, or
  2. As per the agreement between the partners, or
  3. In case of partnership- at-will, by giving prior notice to the other partners regarding the intention of his retirement.

13. Right not to be Expelled

Every partner has a right not to be expelled from the firm unless there is a clause in the partnership agreement that give power to the majority of the partners to expel him in good faith.

14. Right to Carry on Competing Business

Outgoing partners cannot be restricted as they are not bound by the partnership agreement. They have the right to carry on a business competing with that of the firm. But he should not use the name of the firm or solicit the firm’s customers who were dealing with the firm. However, he may agree with the partners that he will not carry on any competing business.

15. Right to Share Subsequent Profits After Retirement

Where a partner has died or ceased to be a partner, the surviving or continuing partners may carry on the regular business with the firm’s property without any final settlement of accounts between them. In such cases, the outgoing partner or his estate then in the absence of a contract to the contrary is entitled to

  1. such share of the profits as is proportionate to his share in the property of the firm, or
  2. interest at the rate of 6% per annum on the amount of his share in the property of the firm.