Introduction of a partner
Introduction of a Partner in a Partnership Firm
Meaning
The introduction of a new partner means adding a new person to an existing partnership firm with the consent of all the existing partners. The new partner then becomes a party to the partnership agreement and shares in the profits, losses, rights, and liabilities of the firm.
Legal Position
The Indian Partnership Act, 1932, does not expressly define or provide detailed provisions on the introduction of a new partner.
However, introduction of a new partner essentially results in a reconstitution of the firm, because the identity of the firm changes with the admission of a new member.
This is typically governed by the terms of the partnership deed or by mutual consent of all partners.
Key Features
Consent of All Partners is Necessary
A new partner can be introduced only with the consent of all the existing partners.
If the partnership is at will or by contract, the procedure set in the partnership agreement must be followed.
Reconstitution of the Firm
The introduction of a new partner changes the constitution of the firm.
The new partner shares profits and losses in an agreed ratio.
Old partnership dissolves and a new partnership is formed.
New Partnership Agreement
Usually, a new partnership deed or an addendum to the existing deed is executed.
It should specify the rights, duties, capital contribution, profit-sharing ratio, and liabilities of the new partner.
Liability of New Partner
The new partner is liable for all debts and obligations of the firm only from the date of admission.
They are not personally liable for the firm’s debts incurred before their admission, unless otherwise agreed.
Effect of Introduction of New Partner
The old firm is dissolved and a new firm is constituted.
The new partner acquires rights to participate in business and share profits.
Previous debts and liabilities remain binding on the old partners; the new partner may be liable for future debts only.
The firm's name, goodwill, and other assets become common property of the new firm.
Process of Introduction
| Step | Explanation |
|---|---|
| Consent | Obtain consent of all existing partners. |
| Agreement | Execute a fresh partnership deed or amendment. |
| Capital Contribution | New partner brings agreed capital contribution. |
| Profit Sharing | Decide profit-sharing ratio. |
| Registration (if applicable) | Update firm’s registration if registered under state laws. |
Case Laws
🧑⚖️ Gokal Chand v. N.C. Srivastava, AIR 1956 All 101
Held that introduction of a new partner without consent of all existing partners is invalid.
🧑⚖️ Arun Kumar Singh v. Union of India, (1989) 4 SCC 719
Emphasized that the rights and liabilities of a new partner start only from the date of admission.
🧑⚖️ T. Sarkar & Co. v. Udayanarayan, AIR 1947 Cal 241
New partner is not liable for debts incurred before his admission, unless there is a contract to the contrary.
Summary
| Aspect | Explanation |
|---|---|
| Who can be introduced? | Any person with consent of all partners |
| Effect on firm | Old firm dissolved; new firm created |
| Liability of new partner | From date of admission only |
| Documentation | New partnership deed or amendment |
| Consent needed | Mandatory from all partners |
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