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Incoming and Outgoing Partner


Incoming and Outgoing Partner
Incoming and Outgoing Partner

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Incoming Partner


For the admission or introduction of a new person into a firm as its partner, the consent of all the existing partners of the firm is necessary and compulsory.



Thus, where a person is admitted or introduced into an already existing firm as its new partner, with the consent of all the existing partners of the firm, is referred to as an ‘Incoming Partner’. 



Further, as it is most logical and reasonable, such an incoming partner, who has joined the firm as a partner midway, cannot be held liable for any of the acts of the firm pertaining to the period prior to his joining the firm. 



But then, if the incoming partner, on his own, specifically agrees to bear and share even the past liabilities of the firm, he will also be held liable for such liabilities to all the already existing partners of the firm. 



However, any of the third parties, cannot hold him liable for any of the acts of the firm pertaining to the period prior to his joining the firm.



This is so because, there is no privity of contract between the new partner and the creditors of the firm pertaining to the debt or other liabilities incurred by the firm during the period prior to his (incoming partner’s) joining the firm.

 
 

Outgoing Partner (or Retired Partner)


In contrast to the incoming partner, an ‘Outgoing Partner’ (also referred to as a Retired Partner), is that existing partner of the firm who leaves the firm, while the remaining partners of the firm continue to conduct the business.



A partner of a firm may leave or retire from the firm under the following conditions:


(a) With the consent of all the remaining partners of the firm;


(b) In accordance with an express agreement by the partners; and


(c) In the case of a partnership–at-will, by giving written notice to all the remaining partners regarding the intention to retire [Section 32 (1)].



Additionally, public notice must be given regarding the retirement of the particular partner of the firm. This notice can be issued by the retiring partner or any of the remaining partners of the reconstituted firm.



It's important to note that until such public notice about the retirement is given, the retiring partner remains liable to third parties for all the acts conducted by the firm.



Furthermore, the firm undergoes reconstitution upon the retirement of the partner. However, the outgoing partner continues to be liable for the debts or other obligations of the firm pertaining to the period prior to retirement. 



Additionally, the retiring partner remains liable to third parties for all transactions of the firm initiated during the period of partnership, which remain unfinished at the time of retirement.



However, a retiring partner may be discharged from any liabilities to third parties for acts of the firm conducted prior to retirement, provided there is agreement with the third party and the partners of the reconstituted firm.



This agreement may be expressed or implied from the dealings between the firm and the third parties, subsequent to the knowledge of the partner's retirement.



It's important to highlight that while a partner may voluntarily retire, expulsion from the partnership can only occur if such power is conferred through a contract between the partners and exercised in good faith [Section 33].



Moreover, a retiring partner continues to be entitled to receive their share in the firm's profits earned even after retirement until their accounts are finally settled [Section 37].

 
 

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