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Know about Partnership deed and change
Partnership Deed may be a fundamental document for the firm because it governs the firm’s operations and activities. The partners must abide by the clauses of partnership deed during its existence and must not act beyond the scope drawn. Hence, to increase or restrict the scope of activities or operations, partners may change the partnership agreement.
The changes in the Partnership deed are made by the execution of a supplementary deed which is an addendum to the first partnership deed. Payment of appropriate stamp tax may be a must for said deed. The registration of the supplementary deed would be compulsory if the firm is already registered with the Registrar of Firm.
Reasons for change in Partnership Deed
- Change of Partners and rights and responsibilities: It is the foremost common reason for modification indeed. Any existing partner could also be unable to continue or new partners could also be required to be added with the expansion of the business. altogether these cases of appointment, addition, removal, resignation or death of a partner, supplementary partnership deed for a change of partners is executed.
- Change commercial activity or name: As said, the firm cannot act beyond the scope drawn by the agreement. Thus, if required to undertake new commercial activity, the partners must amend the business clause of the partnership deed enumerating the new activities. Also, the modification may happen to limit the scope of activities by removing discontinued activities.
- Change capital and share ratio: Where capital is that the need for business, the return is need for partners. The capital is often increased to expand business or other requirements. The change in capital mostly comes with a change in share or ownership ratio, too. Both would require the change in the partnership deed. The change in the capital also demands payment of additional stamp tax to the Government.
- Change other clauses: Name of partnership or change in situ of business, the addition of branch office, etc. are often made effective through executing the supplementary deed. Other clauses cover change in terms & conditions of appointment, resignation and see period, the facility of operations, jurisdiction of partnership, the way of dissolution and duration of the partnership, etc.