Partnership

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manojagatheeswari (Querist)
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11 January 2010 While drafting Partnership Deed whether we should specify the fixed capital amount in the Capital Clause?
Under which section it is compulsory?

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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11 January 2010 If you wants to make capital fixed then it is compullsory. otherwise not.

manojagatheeswari

manojagatheeswari (Querist)
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11 January 2010 Thank you sir.

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manojagatheeswari

manojagatheeswari (Querist)
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11 January 2010 Which section of the Partnership act makes it compulsory?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 August 2024 In drafting a Partnership Deed, it is generally a good practice to specify the fixed capital amount in the Capital Clause. This clause outlines the initial capital contributions of each partner and sets the groundwork for how future changes in capital will be handled.

### Key Points About Specifying Fixed Capital:

1. **Clarity and Agreement**: Specifying the fixed capital amount helps in maintaining clarity among the partners regarding their financial contributions and equity in the partnership. It ensures that all partners are on the same page regarding their investment and share in the business.

2. **Operational Basis**: It establishes the financial basis for the partnership and helps in determining the distribution of profits and losses, as well as other financial arrangements.

### Legal Requirement in India:

In India, under the **Partnership Act, 1932**, there is no specific section that mandates the specification of fixed capital in the Partnership Deed. However, Section 13 of the Act does discuss the **Partnership Deed** and the agreement between partners, which can include capital contributions.

### Recommended Practice:

- **Section 13 of the Partnership Act**: This section outlines that the partnership deed should cover terms and conditions agreed upon by the partners, which includes the capital contribution.

- **General Recommendation**: While not legally compulsory, specifying the fixed capital amount in the Partnership Deed is advisable for the sake of clarity and legal enforceability. It helps in defining each partner’s stake and financial obligations clearly.

In summary, while it may not be strictly required by law, specifying the fixed capital amount in the Capital Clause of the Partnership Deed is a good practice to avoid future disputes and ensure a clear understanding among partners.