When can a partner retire from the firm?
A partner may retire with the consent of all the other partners, in the way an express agreement allows, or, where the partnership is at will, by giving notice in writing to all the other partners. The retirement deed records that exit. It does not, by itself, tell the public.
When is retirement allowed?
Section 32 gives those three routes. A partnership for a fixed term is not a partnership at will, so a bare notice is not enough unless the deed says it is. The other partners can still consent. Retirement does not dissolve the firm where the others continue the business. What the original deed should have settled is on the deed page.
Why is public notice required?
A retiring partner is not automatically free of later debts. Until public notice of the retirement is given, the partner remains liable for acts of the firm done after retirement to any person who dealt with the firm and did not know of the retirement. Public notice under section 72 is a publication in the Official Gazette and in at least one vernacular newspaper circulating in the district of the firm’s principal place of business. If the firm is registered, the notice is also given to the Registrar of Firms.
That registrar is not the Registrar of Companies. Registration of the firm, and what an unregistered firm cannot sue for, is on the unregistered-firm page. For debts that already existed, a retiring partner is discharged as against a third party only by an agreement among the partner, the continuing partners, and that third party.
What does the deed record?
The deed names the retiring partner and the partners who continue, the date, and how the account of capital and profit up to that date will be settled. It can say who may keep using the firm name. A non-compete clause is a contract the partners choose. The Act does not require one, and it does not set a radius or a period.
Stamp on the deed is a state charge. This page does not set the rate, and it does not supply a blank deed. Retirement does not create limited liability. A business that needs that limit is formed as an LLP, which is a different statute and a different filing. How a firm is registered is on the partnership page.
Frequently asked questions
Four questions cover a fixed term, public notice, the Registrar of Companies, and limited liability.
Can a partner retire by notice in a fixed-term firm?
Not by the statute alone. Notice is enough only where the partnership is at will. A fixed term needs the other partners’ consent, or a clause in the deed that allows retirement.
Does the deed replace public notice?
No. The deed binds the partners. People who dealt with the firm, and who are not told, can still treat the retiring partner as a partner until public notice is given.
Is the retirement filed with the Registrar of Companies?
No. A partnership firm is not a company. If the firm is registered, notice goes to the Registrar of Firms of the state, with the Gazette and newspaper notice.
Does retirement limit the partners’ liability?
No. Retirement does not turn the firm into a limited-liability entity. A partner who wants limited liability uses a different form, such as an LLP.
Sources
Retirement is section 32 of the Indian Partnership Act, 1932. Public notice is section 72. Stamp on the deed is a state charge.