Gurdeep Singh 03 March 2016

Loans raised in a partnership

I am a fresh chartered accountant having 4 years experience. As is the practice a CA firm needs at least 7 CA's (partners) to apply for big govt audits of banks, insurance, psu etc. So i joined a firm as a partner about a year back.

The partnership firm has different offices in different cities and a clause has been entered in the partnership deed that any office is free to raise loans but it will only be the liablity of that office and other partners cannot be held liable.

Now one of the senior partner has been raising loans in the firm and using it for personal investments/use not sure.

I want to know in case the partner dies or is unable to pay the loans - can the other partners be held responsible by the bank in presence of this clause in the partnership deed.

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2 Replies

G.L.N. Prasad (Retired employee.) 04 March 2016

It clearly depends on the powers vested with Individual partners, and their rights specified in the deed. If the deed specifies that only individual partners are liable for debts made by them on behalf of the firm at their offices/places it may not bind other partners.

But general principle in partnership as you are aware is joint and several. Contact an advocate, and conert the same to limited company, making borrowing powers, authorised to execute documents, company seal etc.,When a violation or deviation is noticed, it should be specifically objected and knowing and not taking any action amountst to estoppel and makes all partners liable, unnecessarily giving scope for litigation.