Ans.
RECONSTITUTION OF A FIRM
Incoming and outgoing Partners: The constitution of a
firm may be changed by the introduction of a new partner; death, retirement,
insolvency and expulsion of a partner; or by the transfer of a partner's share
to an outsider. All these are included within the term reconstitution of a
firm. Upon reconstitution, the rights and liabilities of the incoming and
outgoing partners have to be determined.
PUBLIC NOTICE (SEC. 72)
The Partnership Act requires that a public notice must
be given in each of the following cases:
(a) On minor attaining
majority
A minor partner on becoming a major must give public
notice of his intention to remain or not to remain a partner. [Sec. 30(5)]
(b) Retirement of a
partner
When a partner retires from the firm, he must give public
notice to terminate further liability. [Sec. 32(3)]
(c) Expulsion of a
partner
When a partner is expelled from the partnership business
he must give public notice to terminate further liability. [Sec. 33]
(d) Dissolution of the
firm
When a partnership firm is dissolved, the partners of the
dissolved firm must give public notice to terminate further liability [Section
45(1)]
Consequences of not
giving public notice
(a) On minor attaining
majority
If a minor is admitted to the benefits of partnership
under Section 30 he has to give public notice within 6 months of his attaining
majority or of his obtaining knowledge that he has been admitted to the
benefits of partnership, whichever date is later. If he fails to give notice,
that he has elected to become or not to become a partner in the firm, he shall
become a partner in the firm on the expiry of the said 6 months and is liable
as a partner of the firm.
(b) Retirement of a
partner
If a retiring partner does not give a public notice of
the retirement from the firm under section 32, he and the other partners shall
continue to be liable as partners to third parties for any act done by any of
them which would have been an act of the firm if done before the retirement.
(c) Expulsion of a
partner
If in case of expulsion of a partner from the firm a
public notice is not given, the expelled partner and the other partners shall
continue to be liable to third parties dealing with the firm as in the case of
a retired partner. [Section 33],
(d) Dissolution of the
firm
If a public notice is not given on dissolution of a
registered firm, the partners shall be liable to third persons of any act done
by any of them which would have been an act of the firm if done before the
dissolution (section 45). When public notice is given of the dissolution of a
firm, no partner shall have authority to bind the firm except for certain
specific purposes as given in Section 47. According to this section, after the
dissolution of a firm, the authority of each partner to bind the firm and their
mutual rights and obligations of the partners shall continue:
(i) so far as may be necessary wind up the affairs of the
firm; and
(ii) to complete transactions begun but unfinished at the
time of the dissolution.