27 April 2024
As per Section 63 of the Indian Partnership Act, 1932, a notice needs to be sent to the registrar of Firms if there's a change in the "constitution of the firm." My question is:
Do adjustments of terms among existing partners in a registered firm, through a supplementary or amendment deed (including profit-sharing ratio changes), qualify as a "change in constitution" requiring a notice to the Registrar of Firms, considering there's no admission of new partners or retirement of existing ones?
09 July 2024
Yes, adjustments of terms among existing partners in a registered firm, including changes in profit-sharing ratios through a supplementary or amendment deed, generally qualify as a "change in constitution" under Section 63 of the Indian Partnership Act, 1932. Here’s why:
### Understanding "Change in Constitution":
1. **Definition under the Partnership Act:** - The term "change in constitution" broadly refers to any alteration in the essential elements that define the partnership, such as changes in the partnership agreement, rights and duties of partners, or the profit-sharing ratios.
2. **Scope of Change:** - While the Act specifically mentions that a notice to the Registrar is required for changes in the constitution, it typically encompasses alterations that affect the partnership's internal structure, management, or the nature of partnership relations.
3. **Application to Adjustments in Terms:** - Adjustments in profit-sharing ratios or other terms among existing partners alter the fundamental understanding of how profits and losses are distributed within the partnership. Even without the admission or retirement of partners, such changes modify the core elements of the partnership's operations and agreements.
### Notice Requirement:
- **Notification to Registrar:** According to Section 63 of the Partnership Act, any change in the constitution of the firm must be intimated to the Registrar of Firms within a specified period. This is to ensure that the Registrar maintains accurate records of all partnerships operating within their jurisdiction.
### Practical Steps:
- **Supplementary Deed:** When making adjustments to terms among partners, it is common practice to execute a supplementary or amendment deed. This document should explicitly outline the changes made, including revised profit-sharing ratios or any other amended terms.
- **Registrar Notification:** After executing the supplementary deed, partners should ensure that the changes are promptly communicated to the Registrar of Firms. This is typically done by submitting a notice along with the relevant documents, such as the amended partnership deed.
### Conclusion:
In summary, adjustments of terms among existing partners in a registered firm, even without the addition or retirement of partners, generally constitute a "change in constitution" under the Partnership Act. It is advisable to comply with the notice requirement under Section 63 by notifying the Registrar of Firms about such changes to ensure legal compliance and maintain accurate records of the partnership's current status.
10 July 2024
i actually contacted the Registrar of firms, W.B regarding this. according to them internal changes without admission, retirement, or death does not require any formal notice under 63. However if one wants one can send a letter to the registrar with a copy, which shall be signed and returned as a proof of receipt of such letter.
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