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Please answer this.

M.Sriram Shenoy (CA Final) (814 Points)

25 January 2008

Can a Company be a partner in a partnership firm? If so, how can the creditors of the firm proceed against the company for the recovery of their dues in case of dissolution of the firm, as a company has limited liability and a firm has unlimited liability.Also, what will be the impact on the company's own creditors and shareholders?

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3 Replies

$wap$ (Assistant Auditor) (189 Points)
Replied 05 February 2008

yes a company can become a partner in a firm.. the company's liability towards the creditors of the firm will be unlimited, as per provisions of partnership act. however, its liabilty towards its own creditors will be limited as per companies act.

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M.Sriram Shenoy (CA Final) (814 Points)
Replied 06 February 2008

Thank You swapnil ji. But can you tell, from what source will a company payoff the debts of the firm? Can it pay out of its capital and is that legally allowed?

$wap$ (Assistant Auditor) (189 Points)
Replied 08 February 2008

the company cannot pay off the debts of the firm out of its own capital... the debts will have to be paid from the capital that has been introduced in to the partnership firm by the company along with the other partners.