Partnership
Supriyo Samaddar
(Querist) 25 February 2010
This query is : Resolved
Can a private limited company become a partner in a partnership firm with three persons who are also the directors of the same company.
A V Vishal
(Expert) 25 February 2010
Whether a company can enter into a partnership or not is no longer open to doubt. The Deptt. of Company Affairs has in its Circular No. 1-81 (20-1-81-CL-V), dated 14-9-1981 expressed the following view: "A question has been raised whether an incorporated company can enter into a partnership with some other person or some other company. The matter has been examined by this department in consultation with the Department of Legal Affairs and I am directed to say that prima facie a company entering into a partnership with some other person or some other company would be ultra vires and will be against the principle that a particular company or an incorporated body cannot lawfully employ funds for purposes not authorised by its constitution which would normally be the memorandum and the articles of association. However, a company or an incorporated body, if so authorised by its constitution, can enter into partnership with an individual person or with another company irrespective of nationality and residence. This would, however, require the company to adopt very special articles since many of the provisions of the Partnership Act would be difficult to apply to such a partnership. In view of this, while considering applications for registration of firms with bodies corporate as partners under the Indian Partnership Act, 1932, the State Governments should examine the applications before them and find out whether the memorandum and articles of association of the applicant incorporated companies contain any special articles which authorise the incorporated companies to enter into partnerships and the articles also take care of the possible anomalies which have been pointed out in the Calcutta High Court's ruling in the case of Ganga Metal Refining Company P. Ltd. v. Income-tax Commissioner West Bengal, (1968) 38 Com Cases 117 : AIR 1967 Cal 429."
Raj Kumar Makkad
(Expert) 25 February 2010
Yes. It can become very well. This matter has been discussed in this forum various times.
Sanjeev Panda
(Expert) 26 February 2010
I agree with Mr. A V Vishal
Kumar Thadhani
(Expert) 26 February 2010
Yes private limited company can become a partner in partnership provided articles of the private limited company do not restrict todo so otherwise it will ultra-vires.
