Partnership can only arise as a result of an agreement or agreement between the partners, express or implied, between the partners. In Bangladesh, partnership firms are formed under the provisions of the Partnership Act 1932. A partnership is a type of business structure where two or more partners start an entity to do business. There must always be two or more partners for a partnership to exist. A non-profit organization is not a partnership under Bangladesh law.

Definition of partnership

Partnership is defined in the Partnership Act, 1932 as a relationship between persons who have agreed to bear all the profits of a business or act for all.

Partnership is “an association of two or more persons to carry on business as co-owners for profit. The relationship existing between persons carrying on business in common for the purpose of profit.”

Partnership is a form of business organization formed by a voluntary agreement of minimum two and maximum 20 persons (maximum 10 in case of banking business) to generate and share profits among themselves.


1. Voluntary Contract – There must be an agreement between two or more persons

2. Division of profits of the company. – The contract must share the profits of a company

3. Mutual representation – The business must be conducted on behalf of all or one of them.

Partnerships and certain similar entities

·    Partnerships and co-ownership

·   Partnerships and a club

·   Partnership and a company

Class of partners

Regarding customs and customs in our region, partners can be classified as follows:

An active partner is one who participates in the business of the firm. A partner who joins the company by agreement but is not involved in the management of the company is called a nominal partner. However, your responsibilities are the same as active partners. A subpartner is an acquirer of a portion of a partner’s interest in a company. He owns 25% of a company.

Rights and Obligations of Partners

An agreement between the partners creates the partnership; They share mutual rights and obligations. Therefore, in the interests of a company, consent of all partners is required. However, such agreements are governed by the Partnership Act 1932 Under general liability, the partners are bound to carry on the business of the company for maximum mutual benefit They should be faithful to each other and keep each partner or his legal representatives fully informed on all matters relating to the firm (Section 9). In this category, the relationship is considered to be one based on “utmost good faith”, even though the partners do not trust each other. In some cases, the relationship between the partners has a fiduciary nature. In short, each partner is bound to compensate the company for any loss suffered by him as a result of his fraud in the conduct of the company’s business (Section 10).

There are certain rules between the partners while conducting the management

I. It is the right vested in each partner to participate in the management of the partnership business.

II. Every partner has the right to inspect and copy the business books of the company

III. No change can be made as a company without the consent of all the partners.

IV. Each partner must carefully manage the business of the company (Section 13).

Shareholders can divide the management activities among themselves as they wish. There may be a partner who is not involved in that part of the contract. The partnership agreement may stipulate that while acting as a partner he shall not carry on any business other than the business of the firm and such agreement shall not be voidable by reason of restraint of trade [Section 11(2)]. It is a personal right of the partner to participate in business activities, which cannot be exercised by the assignee during the existence of the company.

Minor’s partnership in business affairs

A partnership can only be created by an agreement under the Act 1932. However, a minor can share the profits of the business with the consent of all the partners, but he cannot be a partner. Meanwhile, a minor can share the property and profits of the company, which is governed by an agreement between the partners. However, the minor has the right to inspect the accounts of the law firm even if he is not a partner within the meaning of Section 10 Paragraph 1 of the German Civil Code (BGB). 30(1) and (2).

If a minor participates in the company’s facilities, he may not be personally liable, but his business during the company’s operations is liable. He cannot sue for an account of his partners, a share of payment in his property or the profits of the company, but he can only do so if he satisfies his connection with the company in terms of section 30, (3) and (4). . The law requires that she publicly declare her desire to have a partner within six months of reaching adulthood. If he fails to give notice, the partner becomes a partner after six months as per section 30 paragraph 5. Once he attains majority and becomes a partner, his liabilities are the same as those of other partners

Spouse’s Retirement

o A partner may withdraw from the with the consent of all the partners or,

o  As part of an agreement between partners.

o By written notice to all partners. (§ 32).

o A departing partner must publicly announce his departure.

Exclusion of partner is possible. This power is contained in the deed and was exercised in good faith. In legal terms, the exclusion of a partner is equivalent to the departure of a partner.

If a partner becomes insolvent, he ceases to be a partner from the date of that decision, irrespective of whether the firm is dissolved or not. If it is provided for in the deed, the bankruptcy of a partner shall not cause the dissolution of the partnership.

Death of a results in dissolution of the company. Consent of other partners is required for continuation of the company even after the death of the partner.

Procedure for dissolution and liability for steps taken after dissolution

The dissolution of a partnership in a firm may be effected by the consent of the entire partner as per agreement between the parties. A fixed resolution can be done automatically-

a) All the shareholders or all but one are insolvent or

b) An event has occurred whereby the company carries out an unlawful business activity.

There are also situations where one partner is insane and the insanity must be permanent in nature. After the dissolution of a company, a person carrying on business with its partners is entitled to presume that they continue as representatives of each other until notice of dissolution is given. However, to release a partner from liability to a third party for any act committed by either of them after dissolution. Partners must publicly announce the dissolution so customers know they are no longer working with the old firm.

Company registration

Ø The Partnership Act 1932 lays down the procedure for registration of a firm, but registration is not mandatory. Failure to register will not constitute a agreement or transaction between the parties or third parties. In case of an unregistered partnership, one partner cannot sue the other under the Act. Similarly, a company cannot sue third parties to enforce contractual rights. Hence it is advisable to register the under the Act. Registration of such a company is optional. However, once a partnership firm is registered, it can enjoy certain legal rights and reliefs.

Registration Formalities-

A declaration of prescribed documents contains the name of the company, type of business, capital and assets of the company, capital of individual partners, term of partnership, provisions for deduction of salaries and profits. Rates of interest on partners’ capital, advances and withdrawals, rights and obligations of individual partners, provisions for accounting and auditing, distribution of profits and losses, power to admit and exclude partners, termination of contract by bankruptcy, death, etc., goodwill in property after sale or death and Share valuation and an arbitration clause.

Ø Prescribed Fees.

Ø During registration – at any time, but before filing any suit.

Rights of partners

Financial rights

o Partners share profits equally, unless they agree otherwise.

o Partners share losses according to their share of profits unless they agree otherwise.

o  Any loss sharing agreement between the partners is binding only on them and not on outsiders.

o Partners are not entitled to payment in excess of their share of profits unless they otherwise agree – interest on capital, interest on advances.

o  All partnership property belongs to the partnership as a whole and not to the individual partners.

o Application for ownership

o Right to compensation

o Right to profit sharing after retirement

Right of transfer of interest

§ A partner cannot sell his share without the consent of the other partners; It can only transfer the right to receive profits and losses.

§ A new partner can be admitted to the partnership only with the unanimous consent of the other partners.

Obligations of partners

  • Righteousness, faithfulness
  • Pay compensation
  • be diligent
  • No compensation
  • Equalization of losses
  • Duty of care – partners liable for: gross negligence, careless conduct, willful misconduct or breach of law.
  • Partners are not liable for simple negligence.
  • Fiduciary Duty Partners have a fiduciary duty to their partnership.
  • Acts that may breach this fiduciary duty include:
  • In competition with partnerships
  • Taking a business opportunity away from partnership
  • Using partnership property for personal gain, secret gain
  • Conflict of interest
  • Unlimited liability
  • Diploma

Partnership business plays a dominant role in the business sector of Bangladesh. The Partnership Act, 1932 lays down the procedure for registration of a partnership firm, but registration is not mandatory. Failure to register will not constitute a partnership agreement or transaction between the parties or third parties. In case of an unregistered partnership, one partner cannot sue the other under the Partnership Act. Similarly, a company cannot sue third parties to enforce contractual rights. Hence it is advisable to register the partnership under the Act.

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