Incoming and Outgoing Partners under Indian Partnership Act
Incoming and Outgoing Partners under Indian Partnership Act, 1932
1. Incoming Partner
An Incoming Partner is a person who joins an existing partnership firm as a partner after the firm has already been formed.
Key Points:
Must be consented to by all existing partners (either expressly or impliedly).
Becomes liable for all acts of the firm done after their admission.
Is not liable for any acts done before they joined (Section 31 of the Indian Partnership Act).
Has rights and duties similar to other partners from the date of admission.
Effect on Firm:
The incoming partner shares in the profits and losses.
Has a right to participate in management.
The partnership deed or terms agreed on admission govern their rights and liabilities.
2. Outgoing Partner
An Outgoing Partner is a person who ceases to be a partner due to retirement, expulsion, or death.
Key Points:
The outgoing partner is not liable for any acts of the firm done after their retirement or expulsion (Section 32).
However, they remain liable for acts done before retirement or expulsion unless the creditors agree to discharge them.
The partner who retires or is expelled must give public notice to limit liability to third parties.
Effect on Firm:
The outgoing partner loses rights to share profits.
Their share in the partnership is settled according to the partnership agreement or law.
3. Liability and Notice
Both incoming and outgoing partners’ liabilities depend on notice to third parties.
To avoid liability for past or future debts, outgoing partners should give public notice of retirement/expulsion.
Incoming partners should ensure their admission is properly notified to avoid disputes.
4. Summary Table
| Aspect | Incoming Partner | Outgoing Partner |
|---|---|---|
| Becomes partner | Joins existing firm | Ceases to be partner (retirement, expulsion) |
| Liability | Liable for acts after joining | Not liable for acts after leaving; liable for prior acts |
| Consent needed | Yes, from all existing partners | Not applicable |
| Right to profits | From date of admission | Ends on retirement/expulsion |
| Notice to public | Recommended to inform third parties | Must give public notice to limit liability |
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