Question

What are rules applicable in absence of partnership deed?

Hint:

A partnership deed is essential to clearly outline the terms of the partnership. Without it, legal provisions will apply, which may not always suit the partners’ intentions.

Answer 1

Step 1: General Rule.
In the absence of a partnership deed, the partnership is governed by the provisions of the Indian Partnership Act, 1932 (or applicable jurisdiction’s law). The following general rules apply:
Step 2: Rules in Absence of Partnership Deed.
1. Profit and Loss Sharing: In the absence of an agreement, partners will share profits and losses equally.
2. Interest on Capital: No interest is allowed on capital in the absence of an agreement.
3. Interest on Drawings: No interest is charged on drawings unless the partners agree otherwise.
4. Salaries to Partners: No salary is paid to partners unless stated otherwise in the deed.
5. Admission of New Partner: A new partner can be admitted only with the consent of all existing partners.
Step 3: Conclusion.
In the absence of a partnership deed, the rules prescribed by law will be applicable. These rules are generally meant to ensure fairness and proper management of the partnership.