Deed of Retirement from Partnership

What is a Deed of Retirement from Partnership?

A Deed of Retirement from a Partnership is an Agreement entered into between the Retiring Partner (the partner leaving the partnership) and the Continuing Partners (the Partners who will continue in the partnership).

This Deed can be used for any type of Partnership Firm. Generally, the retirement of the Partner will not close down the Partnership (except if there are only two partners) and the Partnership continues to exist with new terms. The Deed of Retirement from a Partnership addresses the distribution of properties or valuables, liabilities, and responsibilities among the remaining partners.

What is the difference between a Deed of Retirement from Partnership and a Deed of Dissolution of Partnership Firm?

The Deed of Dissolution of a Partnership Firm is used when the Partnership dissolves or closes down all business activities and the books are closed permanently. It focuses on winding up the business, distribution of assets and settling the liabilities of the partnership.

But, in the case of the Deed of Retirement from the Partnership, if there exists more than one Partner in the Partnership, the remaining Partners continue to do the business with updated terms and conditions.

Is it mandatory to have a Deed of Retirement from Partnership?

No, it is not mandatory. However, having a written Deed of Retirement from a Partnership helps prevent misunderstanding and disputes in future.

What are the prerequisites of a Deed of Retirement from a Partnership?

Before entering into a Deed of Retirement from Partnership, the following things need to be checked:

• Need to check the contents of the existing partnership agreement to verify the procedures when a partner retires.
• Ensure all partners agree to the terms of retirement.
• Need to evaluate or calculate the retiring partner's share or liability to close their accounts.

Who can enter into a Deed of Retirement from Partnership?

The original partners who are part of the existing partnership agreement or their authorized representative can enter into this Deed of Retirement from Partnership. The authorization can be provided through a general power of attorney or by passing a board resolution.

What can be the duration of a Deed of Retirement from Partnership?

The duration typically covers the period from the signing of the deed until the retirement process is fully completed and all conditions are fulfilled.

What has to be done once a Deed of Retirement from Partnership is ready?

To be a valid contract, both the Retiring Partner and Continuing Partners must duly sign this agreement on an appropriate stamp paper as defined under the rules and regulations of the states where the agreement is entered into.

The retiring partner will not be relieved from the liabilities of the firm unless a public notice informing about the retirement has been duly published in a regional language newspaper. Such publications shall be where the principal place of business of the partnership is located. Such notice shall also be published in the official gazette.

If the partnership is registered, a notice must be sent to the concerned Registrar of Firms where the partnership was registered.

Which documents should be attached to a Deed of Retirement from Partnership?

The following documents can be attached to a Deed of Retirement from Partnership:

• Original partnership agreement.
• Valuation report of the partnership.
• Valuation of retiring partner's shares in the partnership.
• Relevant financial documents including balance sheet and profit and loss accounts of partnership.

What must a Deed of Retirement from Partnership contain?

The Deed of Retirement from the Partnership must include the following clauses:

• Partnership details: The legal name, address and other details of the partnership.
• Purpose of the partnership: A brief description of the business that the partnership was engaged in.
• Partners information: The legal names and addresses of both the Retiring Partner and Continuing Partners.
• Final settlement amount: The final settlement amount to be paid by either Party to the other Party on the closing of accounts.
• Liability declaration: The retiring Partner shall not be liable for the acts and commissions of the Firm from the date of retirement.
• Restrictions: The general and specific restrictions on the Retiring Partner in relation to the Firm.
• Public Notice: The details of the party who will publish a public notice in a reasonable time after execution of this Agreement.

Which laws are applicable to a Deed of Retirement from Partnership?

The Indian Partnership Act, 1932, defines the rules related to the Partnership and retirement of Partners. The rules under the Indian Contract Act, 1872 may also be applicable.

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