Question

What is the maximum number of partners in Banking business

• A. Eight
• B. Ten
• C. Twelve
• D. Sixteen

Hint:

Remember the old rule that was tested for decades: Maximum partners for a normal partnership = 20; for a banking partnership = 10. Be aware that the new Companies Act, 2013 has changed this to a general limit (currently 50) without a special rule for banking.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
The question asks for the maximum number of partners allowed in a partnership firm engaged in the banking business. This question is based on the law as it stood for many years under the Companies Act, 1956, and the Banking Regulation Act, 1949.

Step 2: Detailed Explanation:
The rules regarding the maximum number of partners in a firm were historically governed by the Companies Act.
- Section 11 of the Companies Act, 1956, prohibited associations or partnerships consisting of more than a certain number of persons for the purpose of carrying on any business that has for its object the acquisition of gain, unless it is registered as a company.
- The section itself specified a limit of 20 persons for ordinary businesses.
- However, for a partnership carrying on banking business, the limit was specified as ten persons. This was a specific rule for the banking sector.
Important Note: The Companies Act, 2013, has changed this landscape. Section 464 of the 2013 Act now prescribes a maximum limit of 100 partners (which the Central Government has currently set at 50 via rules) for any business, and it does not make a separate distinction for banking business. However, a question from a 2017 exam paper would still be testing the older, well-established rule. Based on the law prevalent for decades, the answer is 10.

Step 3: Final Answer:
Under the long-standing provisions of company law applicable before the full implementation of the 2013 Act, the maximum number of partners in a firm carrying on banking business was ten.