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Kandarp Vanita
| Updated: 09 Mar, 2021 | Category: Partnership Firm

Procedure & Reasons for Change in Partnership Deed

Change in Partnership Deed

Partnership is regarded as the most popular method which the business owners and the entrepreneurs opt to start with their business in any country. Before starting any business as partners in a partnership firm, they have to start their business with a written document which is known as Partnership Deed. In simple words, partnership deed is a reasonable and plain document which shall mention the regulations and frameworks to abide by while running and managing businesses as partners. Partnership deed is an agreement done between the partners of a firm that contains all the conditions and requisite terms of partnership amongst the partners. The partnership deed serves the purpose for the effortless and successful administration of a partnership firm. Therefore, any change in partnership deed has to be procedure and provision bound.

Provision for Change in Partnership Deed

Partnership deed is a document that contains various policies governing the partners and requires clear understanding of such policies by all the partners. It provides with various terms which are essential to determine before starting up the business such as about profit & loss sharing, salary of the partners, procedure of changes in the partnership deed, capital interest, admitting new partner, etc. with the purpose to bring clarity to the partners.

The provision of Section 63 of the Indian Partnership Act, deals with Change in the constitution of the firm and its dissolution which says that any change in the constitution of the firm shall be notified to the Registrar with specifying the date thereof. Thus, change of partnership deed shall be notified to the Registrar.

Procedure of Change in the Partnership Deed

Under the Indian Partnership Act, 1932[1] the following forms as given below is accepted for various amendment in original Form-A and Form-C.

S. No. Form no. Purpose
1 Form no. II For change in business principle place & name change in the firm.
2 Form no.III For any change which is other than business principle place.
3 Form no. IV For name change of the partners & their permanent address.
4 Form no. V For change in the constitution of forms & retirement and addition of the partners.
5 Form no. VI For firm’s dissolution  
6 Form no. VII When the minor partner attains the majority age

Step 1:-Take the mutual consent of partners.

Step 2:-To draft a new Partnership Deed according to the changes in the constitution of the Firm

Step 3:-Fill the Form in Capital Letters in given above Form No.

Step 4:-The Challan Fees payment with the respective Bank.

Step 5:-Submission of the application with the respective Registrar of Firms along with few Documents which are given below:- Old Partnership Deed xerox copy which was drafted during the time of Constitution of Firm with the attestation of the Notary where the Registered Office of the Firm is located.

  • New Partnership Deed xerox copy which is drafted during the required changes in the Constitution of Firm and duly attested by the Notary where the Registered Office of the Firm is located.
  • All partners ID Proofs together with the ID proof of the new admitted partners attested duly.
  • Passport size photos of each and every partner with the new admitted partners, if any.
  • Copy of Challan Receipt deposited in the Bank.
  • If place of business has been changed then ownership proof of the new place of business.
  • The Xerox copy of both the Certificate A and certificate C which was issued at time of constitution of the Firm, duly attested.

After submission of the application to the Registrar he will look after the application and when the Registrar is satisfied with the compliance of the application and that it is completing all the requirements and the partners have properly complied all the provisions of the Partnership Act, the Registrar shall record it in the statement in Register of Firms and give a Certificate A and Certificate D asserting the Changes in the Partnership Firm. Thus, this procedure shall amount to change in partnership deed and shall govern all the partners.

Read our article:Partnership Firm Registration: Definition, Regulations, and Registration Procedure

What are the Possible Reasons to make Change in Partnership Deed?

There are various Possible Reasons to make Change in Partnership Deed, which are as follows:-

Possible Reasons to make Change in Partnership Deed

Due to Change in Business Activities

This may contain any addition, modification, amendment or deletion of the business activities that has been carried on by the partnership firm. Change in business activities shall require the change in partnership deed.

Change in Name or Place of Business

The partners can together with the consent of all the partners mutually decide to change or modify the name of partnership firm and also the place of business as and when required.

With these changes it will also be necessary to change the partnership deed and the PAN card and other documents shall be registered in name of the firm.

Change of Capital Contribution

Capital is the sole purpose of doing a business and is the backbone of the business. Any change in the capital of the firm shall require the amends and change in the partnership deed.

Change in Management Structure

The managementof the firm to handle the firm and the persons responsible for certain work or particular department is generally fixed. So, any change in it shall require the change in partnership deed.

Change in Terms or Conditions

The terms and conditions are the basic essentials which describe the firm so any change in the terms of the partnership or related to any part of the deed is included here.

Such changes shall require the change in the partnership deed. It can also include a change in the like manner as given below:-

  • Addition of new Partner,
  • Appointment of  new Partner,
  • Expulsion of  a Partner,
  • Retirement of any Partner, and
  • Resignation of any Partner.

Change in Profit or Loss Sharing Ratio

Profit and loss sharing ratio is the main concern of the partners and it totally depends on their mutual consent. They can change the profit and loss ratio according to the situation of the firm and so it can be processed by change in partnership deed.

Modification of Rights and Responsibilities

Any modification or alteration in the change of the rights and responsibilities of the partner shall invite the change in partnership deed.

Change of Duration of Partnership

When the duration of the partnership is specifically decided since the incorporation of the partnership firm then any change in the duration must be mutually decided and the same shall bring the change the partnership deed.

Conclusion

A Partnership Deed is the backbone of the Partnership firm.  The partnership deed acts as the constitution of the partnership firm. So, the partnership deed can be modified and altered according to the requirements of the business and with the willingness and consent of all the partners.

Thus, it is important that any change in the firm is reflected accordingly as a change in partnership deed as the firm gets its identity through the partnership deed.

Read our article:Description on Registration of Partnership Firm in India

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Kandarp Vanita

Kandarp Vanita has done masters in Corporate and Commercial Law from WB National University of Juridical Sciences. She has 3 yrs of experience in drafting legal documents & dissertations. Being a curious reader, she is also passionately into providing legal backups and comprehensive understandings in every aspect of Law to the firms.

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