• Zero liability partner

Dear sir
My brother and my friend have partnered to run an Overseas Manpower Company as partnership firm. My brother being a graduate was offered the partnership because only a graduate could obtain Overseas Manpower Licence and my friend is not a graduate. My brother is 5% shareholder and my friend who is the authorised person/signatory for all financial activities is 95% shareholder. 
Can my brother amend the partnership deed in such a manner that it makes him non-liable in case of any financial irregularity or loss caused by the other partner.
P.S. this is NOT a Limited Liability Partnership company.
Asked 8 months ago in Business Law

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17 Answers

A sleeping partner is one who contributes capital. A sleeping partner is a partner who 'sleeps', that is, he does not take active part in the management of the business. Such a partner only contributes to the share capital of the firm, is bound by the activities of other partners, and shares the profits and losses of the business.

Make him a sleeping partner.

Rahul Mishra
Advocate, Lucknow
12251 Answers
29 Consultations

5.0 on 5.0

Partnership deed can provide that partner of a firm will only share the profits of the firm and won’t be liable for any losses of the firm.

Moreover, if a partner who is in “partner in profits only” deals with any of the third parties or outsiders then he will be liable for the acts of profit only and not any of the liability. 

Ajay Sethi
Advocate, Mumbai
82096 Answers
5157 Consultations

5.0 on 5.0

Yes that can be decide through partnership deed. But in case lincese authority initiated any legls action than it will be againt your brother only because he has obtain the license.

In partnership deed, clause of limited liability of your brother can be include.

Yogendra Singh Rajawat
Advocate, Jaipur
21439 Answers
31 Consultations

4.4 on 5.0

Yes, your brother can make amendment in the shareholder agreement and make new agreement accordingly.

Ganesh Kadam
Advocate, Pune
12005 Answers
128 Consultations

4.9 on 5.0

In unlimited partnership, every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.

You can be held personally responsible for another partner's negligence or carelessness

Legally speaking, a partnership is an association of two or more persons, known as general partners, who act as co-owners of a business and operate it for profit.

While you are not legally required to have a written partnership agreement, an oral agreement may suffice, it is still good business to put everything (the details of ownership, including the partners’ rights and responsibilities and their share of profits) down on paper to avoid potential misunderstandings and disagreements.

According to the Partnership Act of 1932, the partners are free to determine the mutual rights and duties by contract.

Unlike a general partner, who is personally responsible for all debts and obligations of the partnership, a limited partner can lose only the amount of capital he has invested in the business.

On the down side, he has relatively little power within the partnership because he is not allowed to be actively involved in the management of the business; he is merely a financial contributor.

Nevertheless, he has the right to be informed of all business matters relating to the company and to share in its profits.

Before entering into a partnership, weigh all the pros and cons.



T Kalaiselvan
Advocate, Vellore
72170 Answers
1078 Consultations

5.0 on 5.0

The parent is liable for every act of the firm or the other partner if the same is done in regular discharge  of business of the firm.

Therefore your brother can not have such escape route even if his friend signs such agreement.

Only if your brother is not involved in any activities of the firm and if the same is explicitly mentioned in the firm as his true role of name lending only then he can escape the liability.

Therefore ask his friend to make such necessary amendments. 


Devajyoti Barman
Advocate, Kolkata
22341 Answers
343 Consultations

5.0 on 5.0

If it's not a limited liability partnership he may legally get entangled in the liability factor from legal way. Still he can try to reduce gis liability in pushing the same towards the other partner if possible

Prashant Nayak
Advocate, Mumbai
23361 Answers
49 Consultations

4.4 on 5.0

Dear Sir/Madam,

You are suggested that the said partnership deed can be amended so as to bring the total liabilities on the authorised signatory only.  

Ganesh Singh
Advocate, New Delhi
6616 Answers
14 Consultations

4.5 on 5.0

Partner in profit only: The partner who agrees to share the profit but does not suffer losses. He is not liable for any liabilities in case of dealing with the third party. 

Mohammed Mujeeb
Advocate, Hyderabad
19002 Answers
18 Consultations

4.5 on 5.0

Hii greetings of the day.

I guess and understand the deed must be signed .... But if it's not active, I sujjest  consult a lawyer and make a required changes and be clear on the job profile , responsibility duties and liabilities and asset and loss . If he is not ready to make changes, better to make an another agreement with MOU with clear understanding and points.. and if still your friend does not agree, I suggest quit the business it's more risky than any profit in future with 5 percent in partnership with loss  and taking such high risk ,.better than this is working will be work as an employee on salary baisi. 

With regard .

All the best.

Rita Rajput
Advocate, Thane
181 Answers
2 Consultations

Not rated

That cannot be done because the brother has partnered for the purpose of procuring the license 

He is not a sleeping or non executive partner

His liability in case of any irregularities is limited only to his 5% share 

Your brother also has a profit share of 5%


Yusuf Rampurawala
Advocate, Mumbai
6157 Answers
50 Consultations

5.0 on 5.0

1. YES .... Partnership Deed maybe amended and duly registered to have a specific clause to limited liability to Brother in case of any default ot whatsoever nature (Legal /Financial /Claims /Disputes /Liabilities /whatever ....)

2. ALSO Brother should take an separate Indemnity Bond from other partner to indemnify him against all Legal Claims /Disputes /Losses etc....

Hemant Agarwal
Advocate, Mumbai
5546 Answers
25 Consultations

5.0 on 5.0

No such agreement can be made if it is a partnership firm. It needed to be limited liability company 

Rahul Jatain
Advocate, Rohtak
5365 Answers
4 Consultations

4.8 on 5.0

Dear sir,

Yes, your brother can amend the partnership deed to be a dormant partner and a partner in profits only. Also as your brother to get issued a public notice to this effect in order to be on a safer side.  

Best wishes.

Agam Sharma
Advocate, New Delhi
617 Answers
5 Consultations

5.0 on 5.0

Your brother can execute an amended agreement with his partner where agreement can make him a profit sharing partner with zero liability.

Mohit Kapoor
Advocate, Rohtak
10689 Answers
7 Consultations

5.0 on 5.0

Option No.1:

Your brother can take  an Indemnity bond from his friend, stating that, he shall indemnify your brother if any financial irregularity / loss is caused by him.


Option No.2:

He needs to have nominal share if not 5% reduce it substantially.  The Liability Clause in the Partnership Agreement need to be captured the clear details of sharing the liability in case of any financial irregularity / loss is caused by your brother's friend (other partner) / business losses which arise.   



S Srinivasa Prasad
Advocate, Hyderabad
2868 Answers
9 Consultations

5.0 on 5.0

- As per law, all Partners of a Partnership firm are jointly liable on all firm contracts.

- Further, all partners are jointly and severally liable for all torts committed by one of the partners or by a firm.

- Hence, your brother should amend/modify the partnership deed with the new clause of responsibility/liability in case of financial irregularity or loss caused by the other partner

- .Further , both should execute an Supplementary agreement to the Partnership Deed after mentioning the new clause .

Mohammed Shahzad
Advocate, Delhi
6719 Answers
71 Consultations

5.0 on 5.0

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