01 February 2012
Yes a company can become a partner in a firm.
Whether a company can enter into a partnership or not is no longer open to doubt. The Deptt.of Company Affairs has in its Circular No. 1-81 (20-1-81-CL-V), dated 14-9-1981 expressed the following view: "A question has been raised whether an incorporated company can enter into a partnership with some other person or some other company. The matter has been examined by this department in consultation with the Department of Legal Affairs and I am directed to say that prima facie a company entering into a partnership with some other person or some other company would be ultra vires and will be against the principle that a particular company or an incorporated body cannot lawfully employ funds for purposes not authorised by its constitution which would normally be the memorandum and the articles of association. However, a company or an incorporated body, if so authorised by its constitution, can enter into partnership with an individual person or with another company irrespective of nationality and residence. This would, however, require the company to adopt very special articles sincemany of the provisions of the Partnership Act would be difficult to apply to such a partnership. In view of this, while considering applications for registration of firms with bodies corporate as partners under the Indian Partnership Act, 1932, the State Governments should examine the applications before them and find out whether the memorandum andarticles of association of the applicant incorporated companies contain any special articleswhich authorise the incorporated companies to enter into partnerships and the articles alsotake care of the possible anomalies which have been pointed out in the Calcutta High Court's ruling in the case of Ganga Metal Refining Company P. Ltd. v. Income-tax Commissioner West Bengal, (1968) 38 Com Cases 117 : AIR 1967 Cal 429.
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