Siva (Consultant) 01 May 2009

Managing Partner Vs Partner - Roles & Responsibilties

Hi ~

Please let me know the Roles and Responsibilites of a Managing Partner and the other Partners of a partnership firm, in more specific terms (i.e) Managing Partner role - Vs - Parterns role.

Thanks, Siva

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3 Replies

A V Vishal (Advocate) 01 May 2009

Dear Shiva:

The Partnershipship has not defined the term Managing partner or Dormant partners. However, the terms have to be understood in wider sense. Therefore a managing partner is one who participates actively in the day to day working of the partnership firm. All others who are not actively engaged in conducting business can be dormant partners.

The act has specified the duties, rights, responsibilities of each partner which is reproduced for your information:

GENERAL DUTIES OF PARTNERS

Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner or his legal representative.

Duty to indemnify for loss caused by fraud

Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.

DETERMINATION OF RIGHTS AND DUTIES OF PARTNERS BY

CONTRACT BETWEEN THE PARTNERS

(1) Subject to the provisions of this Act, the mutual rights, and duties of the partners of a firm may be determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing.

Such contract may be varied by consent of all the partners, and such consent may be expressed or may be implied by a course of dealing.

THE CONDUCT OF THE BUSINESS

Subject to contract between the partners,-

(a) every partner has a right to take part in the conduct of the business;

(b) every partner is bound to attend diligently to his duties in the conduct of the business;

(c) any difference arising as to ordinary matters connected with the business may be decided by a majority of the partners, and every partner shall have the right to express his opinion, before the matter is decided, but no change may be made in the nature of the business without the consent of all the partners; and

(d) every partner has a right to have access to and to inspect and copy any of the books of the firm.

MUTUAL RIGHTS AND LIABILITIES

Subject to contract between the partners,-

(a) a partner is not entitled to receive remuneration for taking part in the conduct of the business;

(b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm;

(c) where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out of profits;

(d) a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six per cent per annum;

(e) the firm shall indemnify a partner in respect of payments made and liabilities incurred by him-

(i) in the ordinary and proper conduct of the business, and

(ii) in doing such act, in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances; and

(f) a partner shall indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the business of the firm.

Please note this is not the complete list, the duties, rights and responsibilities vary based on the situation.