PARTNERSHIP

Whether incorporated companies can enter into partnership with some other person/company

A question has been raised whether an incorporated company can enter into a partnership with some other person or some other company. The matter has been examined by this Department in consultation with the Department of Legal Affairs. The view of the Department is that prima facie a company entering into a partnership with some other person or some other company would be ultra vires and will be against the principle that a particular company or an incorporated body cannot lawfully employ funds for purposes not authorised by its constitution which would normally be the memorandum and the articles of association. However, a company or an incorporated body, if so authorised by its constitution, can enter into partnership with an individual person or with another company irrespective of nationality and residence. This would, however, require the company to adopt very special articles since many of the provisions of the Partnership Act would be difficult to apply to such a partnership. In view of this , while considering applications for registration of firms with bodies corporate as partners under the Indian Partnership Act, 1932, the State Government should examine the applications before them and find out whether the memorandum and articles of association of the applicant incorporated companies contain any special articles which authorise the incorporated companies to enter into partnerships and the articles also take care of the possible anomalies which have been pointed out in the Calcutta High Court's ruling in the case of Ganga Metal Refining Co. v. CIT AIR 1967 Cal. 429.

* CIRKCULAR NO.1/81[20/1/8-CL-V], DATED 14.9.1981.