• Repayment of Capital Investment after Resignation of Partnership

Respected Sir/Madam,

1. I have entered into a partnership on 18th February 2016 as per the Partnership Act, 1932.

2. Total number of Partners : 3 Nos.

3. First Partner : 55% (Managing Partner) , Second Partner (Me) : 35% (Sleeping Partner), Third Partner : 10% (Sleeping Partner).

4. Business is under loss and the performance is not upto expectation even after repeated reviews.

4. Henceforth, I have given my Resignation of Partnership on 13th January 2017 through email to the Managing Partner.

5. Question : How much of my Capital Investment 35% is entitled to be repaid from the Managing Partner?

Kindly advise on how to proceed further.
Asked 7 years ago in Business Law

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4 Answers

1) if the business is running at loss you have to bear the proportionate loss incurred by firm

2) you would not be entitled to refund of full amount invested by you

3) insist that accounts of firm be audited

Ajay Sethi
Advocate, Mumbai
95197 Answers
7607 Consultations

5.0 on 5.0

is there a clause in your partnership agreement regarding valuation to be done by a person or firm designated by the parties. Should the parties fail to agree on a specific person or firm, then each partner will submit the name of a person or firm and these persons or firms shall agree on a third person or firm. If two of the three persons or firms designate a valuation within 10 percent of the other, then the average of these two valuations shall be accepted by the parties. If there is no such percentage available, then the average of the three valuations shall prevail as the value of the business at that time.

2) based on valuation done on resignation you should receive proportionate share of your investments

3) payment should be done within reasonable period

Ajay Sethi
Advocate, Mumbai
95197 Answers
7607 Consultations

5.0 on 5.0

Question : How much of my Capital Investment 35% is entitled to be repaid from the Managing Partner?

The partnership agreement about profit and loss sharing has to be seen.

if a firm is not having any written agreement or a partnership deed or if partnership deed is there but it is silent on certain issues the following provisions of the Indian Partnership Act 1932 will be applicable.

1. Profit sharing Ratio : Profits and losses would be shared equally among partners.

2. Interest on capital : No interest on capital would be allowed to partners. If tehre is an agreement to allow interest on capital it is to be allowed only in case of profits.

3. Interest on drawings: No interest on drawings would be charged from partners.

4. Salary: No salary or commission is to be allowed to partners.

5. Interest on Loan : If a partner has provided any Loan to the firm, he would be paid Interest at the rate 6% p.a. This interest on loan is a charge against profits i.e. it is to be allowed even if there are losses to the firm.

T Kalaiselvan
Advocate, Vellore
85398 Answers
2235 Consultations

5.0 on 5.0

1. If I'm bearing the loss of the firm from start date till resignation date after audited accounts the remaining capital investment will be repaid?

In any legal partnership firm, there is what partnership deed with the conditions agreed between the parties involved, so as to terminate partnership, one might first consider the terms of the agreement stated on the deed, then secondly, if the terms stated come to an end like :the end of a deed, you can move out easily after the procedures are complete. But if it is the opposite, that is :without the settlement as per conditions of the partnership deed, then you need some business administrative accords in order to either withdraw your shares or your partnership conditions, in case there are procedures stated by the law of the land, then those laws should be followed.

2. Is there any time duration in which the Managing Partner should repay?

You may issue a demand notice with time specification for payment of dues to you, failure to comply with the demand made, you may initiate legal proceedings as per the provisions of law.

T Kalaiselvan
Advocate, Vellore
85398 Answers
2235 Consultations

5.0 on 5.0

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