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Andy and Anita are partners in the firm without a partnership deed with a capital of $5,00,000 and $3,00,000 respectively. Andy wants to share the profits in the ratio of capitals. Discuss the legality of this feature.​

1 Answer

2 votes
In the absence of a partnership deed, the provisions of the Indian Partnership Act, 1932, would apply. As per Section 13 of the Act, the partners are entitled to share the profits equally, unless there is an agreement to the contrary.

In this case, Andy wants to share the profits in the ratio of capitals, which is contrary to the default provision of the Act. However, this can be legally done if Anita agrees to it. Since there is no partnership deed, there is no explicit agreement to share the profits equally. Therefore, Anita can agree to Andy's proposal and the profits can be shared in the ratio of capitals.

It is important to note that in the absence of a partnership deed, the partners are jointly and severally liable for the debts of the firm. Therefore, it is advisable to have a written partnership deed that clearly outlines the rights, duties, and obligations of the partners.
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User CraigTeegarden
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