Is registration of a partnership firm mandatory? What are the consequences of non-registration?
Registration of a partnership¬†firm is not mandatory under law.¬†The Partnership Act,1932 provides that if the partners so desire may register the firm with the Registrar of Firms of the state in which the firm’s main office is situated. A partnership firm may be registered at the time of formation or at any time thereafter.¬†
In order to get a partnership firm registered, an application in a prescribed form must be filled with the Registrar of Firms. The application should contain the following information:¬†
1. The name of the firm¬†
2. The principal place of business of the firm
3. Names of other places where the firm’s business is carried on.
4. Names in full and permanent addresses of the partners.¬†
5. The date on which each partner joined the firm
6.¬† Duration of partnership, if any.¬†
The application should be signed and verified by each partner, then it is to be submitted to the Registrar of Firms¬†of the area in which the main office of the firm’s business is situated or proposed to be situated.¬† The registration fee is also deposited along with the application. After the submission of the application, the registrar will examine the application. If he is satisfied that everything is in order and all the legal formalities have been observed, he will make an entry in the register of firms. He will also issue a certificate of registration. Any change in the information submitted at the time of registration should be communicated to the Registrar.¬†
The consequences of a partnership firm which is not registered are as follows:¬†
1. It cannot enforce its claims against the third party in a court of law.
2. It cannot file a legal suit against any of its partners
3. Partners of an unregistered firm cannot file any suit to enforce a right against the firm.
4. A partner of an unregistered firm cannot file suit against other partners.
5. It cannot claim adjustment for any sum exceeding Rs. 100. Suppose an unregistered firm owes Rs. 1200 to X and X owes Rs.1000 to the firm. The firm cannot enforce an adjustment of Rs.1000 in a court of law.
¬†¬†¬†¬†Non- registration of a firm, however, does not affect the following rights:¬†
1. The right of a partner to sue for the dissolution of the firm or for the accounts of a dissolved firm or to enforce any right or power to realize the property of a dissolved firm.
2. The power of an official assignee or receiver to realize the property of an insolvent partner.
3. The rights of the firm, or its partners, having no place of business in India.
4. Any suit or set off in which the claim does not exceed rupees hundred.
5. The right of a third party to sue the unregistered firm or its partners.
6. The right to sue a third party for infringement of a patent right.
The Indian Partnership Act,1932 has effectively ensured the registration of a partnership firm without making it compulsory.