JAIIB LRAB Unit 50 - Relations of Partners to One Another

The partners should not make secret profits. They have to be just and faithful to each other.

They must render true accounts of the business and full information of all things affecting the firm to all the partners or their legal representatives.

Every partner is bound to indemnify the firm for any loss caused to the partnership firm by his fraud, in the conduct of the business of the firm.

The partners of a firm can decide their mutual rights and duties and change them from time to time with the consent of all the partners. This may be implied (i.e. understood by the dealings between them/ with outsiders) or may be expressed (i.e. specifically discussed and made clear).

THE CONDUCT OF THE BUSINESS

Subject to a contract between the partners (i.e. the agreement and understanding arrived between themselves)

(a) every partner has a right to take part in the conduct of the business;

(b) every partner is bound to attend diligently to his duties in the conduct of the business;

(c) any difference arising as to ordinary matters connected with the business can be

decided by a majority of the partners and every partner has a right to express his opinion before the matter is decided. However, no change can be made in the nature of the business without the consent of all the partners.

(d) every partner has a right to have access to and to inspect and copy any of the books of the firm.

MUTUAL RIGHTS AND LIABILITIES

Subject to a contract between the partners (i.e., the agreement and understanding arrived between themselves),

(a) a partner is not entitled to receive remuneration for taking part in the conduct of the business;

(b) the partners are entitled to share equally in the profits earned and liable to contribute equally to the losses made by the firm;

(c) where a partner is entitled to interest on the capital subscribed by him such interest is to be paid only out of profits of the firm;

(d) Interest at 6 per cent on extra amount paid by the partner;

(e) the firm has to indemnify a partner in respect of payments made and liabilities incurred by him:

(i) in the ordinary and proper conduct of the business, and

(ii) in doing such act in an emergency, for the purpose of protecting the firm from loss;

(f) similarly, a partner has to indemnify the firm for any loss caused to it by his

wilful neglect in the conduct of the business of the firm.