We’ve already discussed the basics of partnership. Now, we shall discuss the topic Position of a Minor in Partnership. Before we do that we have to understand some basic definitions:
Table of Contents
Who is a minor?
The Indian Majority Act, 1875 specifies the age of majority in India i.e 18 years. Even a person short of a day from being 18 years qualifies as a minor. In other words, the statute says that any individual, domiciled in India, who has not attained the age of 18 years is a minor.
In India, a minor cannot be a partner in the partnership firm. Section 30 of The Indian Partnership Act, 1932 contains provisions in this regard.
A minor’s contract is void and not merely voidable. Therefore, a minor cannot be a partner in a firm because the partnership is founded on the basis of a contract.
Though a minor cannot be a partner in a firm, he can nonetheless be admitted to benefits of partnership under section 30 of the said Act.
In other words, he can validly be given a share in the partnership profits. The rights and liabilities of such a minor is governed under section 30 of the Indian Partnership Act, 1932.
A person who is a minor according to the law to which he is subject may not be a partner in a firm, but, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership.
Section 30(1) in The Indian Partnership Act, 1932.
Rights of a minor in partnership
- A Minor partner has the right to his agreed share of the profits of the firm.
- He can have access to inspect and copy the accounts of the firm
- He can sue the partners for accounts or for payment of his share but only when severing his connection with the firm, and not otherwise.
- On attaining majority he may within 6 months elect to become a partner or not to become a partner if he elects to become a partner then he is entitled to the share to which he was previously entitled as a minor. If he chooses not to be admitted as a partner then he shall not be liable for any acts of the firm after the date of a public notice served to that effect.
Liablities of a minor in partnership
Before attaining majority:
- The liability of the minor is confined only to the extent of his share the profits and property of the firm
- Minor has no personal liability for the debts of the firm incurred during his minority.
- Minor cannot be declared insolvent, but if the firm is declared insolvent the share of him in the firm vests with the Official Receiver or Assignee
After attaining majority:
A minor partner in partnership within 6 months of attaining majority or on him obtaining knowledge that he had been admitted to the benefits of the partnership whichever date is later, the minor partner has to decide if he wants to stay as a partner or leave the firm where he has elected not to become a partner and such notice shall determine his position as regards to the firm.
If he fails to give such a notice he shall become a partner of the firm on the expiry of the said six months.
When he becomes a partner
If the minor becomes a partner by his own will or by his failure to give public notice within the specified time his rights and liabilities as given in Section 30(7 ) are as follows:
a. He becomes personally liable to third parties for all actions of the firm done since he was admitted to the benefits of the partnership.
b. His share in the property and the profits of the firm remains the same to which he was entitled as a minor
When he elects not to become a partner:
a. His rights and liabilities continue to be those of a minor to the date of giving public notice.
b. He shall not be liable for any acts of the firm done after the date of the public notice.
c. He shall be entitled to sue the partners for property or profits. It may be noted that such a minor shall give notice to the registrar that he has or has not become a partner.
Read the whole provision related to this topic:
30. Minors admitted to the benefits of partnership.—
(1) A person who is a minor according to the law to which he is subject may not be a partner in a firm, but, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership.
(2) Such minor has a right to such share of the property and of the profits of the firm as may be agreed upon, and he may have access to and inspect and copy any of the accounts of the firm.
(3) Such minor’s share is liable for the acts of the firm, but the minor is not personally liable for any such act.
(4) Such minor may not sue the partners for an account or payment of his share of the property or profits of the firm, save when severing his connection with the firm, and in such case the amount of his share shall be determined by a valuation made as far as possible in accordance with the rules contained in section 48: Provided that all the partners acting together or any partner entitled to dissolve the firm upon notice to other partners may elect in such suit to dissolve the firm, and thereupon the court shall proceed with the suit as one for dissolution and for settling accounts between the partners, and the amount of the share of the minor shall be determined along with the shares of the partners.
(5) At any time within six months of his attaining majority, or of his obtaining knowledge that he had been admitted to the benefits of partnership, whichever date is later, such person may give public notice that he has elected to become or that he has elected not to become a partner in the firm, and such notice shall determine his position as regards the firm: Provided that, if he fails to give such notice, he shall become a partner in the firm on the expiry of the said six months.
(6) Where any person has been admitted as a minor to the benefits of partnership in a firm, the burden of proving the fact that such person had no knowledge of such admission until a particular date after the expiry of six months of his attaining majority shall lie on the persons asserting that fact.
(7) where such person becomes a partner,—
(a) his rights and liabilities as a minor continue up to the date on which he becomes a partner, but he also becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership, and
(b) his share in the property and profits of the firm shall be the share to which he was entitled as a minor.
(8) Where such person elects not to become a partner,—
(a) his rights and liabilities shall continue to be those of a minor under this section up to the date on which he gives public notice,
(b) his share shall not be liable for any acts of the firm done after the date of the notice, and
(c) he shall be entitled to sue the partners for his share of the property and profits in accordance with sub-section (4).
(9) Nothing in sub-section (7) and (8) shall affect the provisions of section 28.
Section 30 in The Indian Partnership Act, 1932
FAQ relating to position of a minor in partnership firm in India.
A minor partner has the right to profits just like any other partner. He can inspect the books of accounts, sue for payments if he wants to severe his connection with the firm and on attaining majority he can elect to become a partner or severe his connection from the firm.
A minor can elect to become a partner in the partnership firm once he has attained the age of majority.
A minor is only admitted as a nominee who is entitled to the benefits of the partnership firm. He is not an actual partner and therefore not liable for any acts of the firm. In other words, a minor’s share is liable for the acts of the firm but the minor cannot be personally held liable.
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