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Private Limited Company and Partnership in Bangladesh
In Bangladesh, there is a distinction between a private limited company and a partnership.
A company is a basically fictitious person with its own legal entity. It bears a common seal and is in perpetuity. Partnership, on the other hand, is the relationship between individuals known as partners, and the partnership’s business is carried on under the name of the firm.
The following are the main distinctions between a company and a partnership:
In terms of definition, a company can be defined as a group of people who come together for a common purpose and are registered under company law. However, a partnership is a relationship formed by individuals who have agreed to split the profits of a business carried on by all or any of them acting for all.
(in) Legal entity:
A company is a separate legal entity from the members who own shares in it.
A firm is not a distinct entity; it is comprised of its partners.
According to the Partnership Act, partners in a firm are individuals who act together in accordance with their agreement.
(in) Liability:
A shareholder’s liability is limited to the nominal value of the shares held by him.
A partner’s liability extends to the entirety of his property.
Every partner in a firm is jointly and severally liable for all of the firm’s debts.
(iv) Share transfer:
Except for private companies, public company shares are freely transferable.
However, a partner cannot substitute another partner for himself unless agreed upon with his co-partners. ™ NO TEE Ca (v) Indefinite succession; 0 use on at a gai
A legally existing company continues to exist even if a member dies or retires.
In the absence of a contract, however, the death or retirement of a partner dissolves the partnership.
(vi) Shareholder Contract:
A company’s shareholder can enter into a contract with the company. However, a partner cannot enter into a contract with his firm.
(vi) Number of members:
The number of members in private companies ranges from two to fifty. In the case of a public limited company, the minimum number of members is seven, with no maximum.
The maximum number of members in a partnership engaged in banking business is ten, and in other cases it is twenty.
(vili) Property of the institution:
in the case of a company, all properties are solely owned by the company. During its lifetime, no member can claim any part of it.
In the case of a partnership, however, the properties belong to the individual partners who make up the firm. [Re: George Newman and Co.] 136 (ix) Power to bind: A shareholder has no power to bind the company or other shareholders, except as permitted by the articles.
In the case of a partnership, however, a partner can bind the other partners for any act performed by any of them during the course of business.
(x) Accounts and audits:
A company must maintain proper accounting records and have its annual accounts audited.
In contrast, there is no statutory requirement for partnership to do so.
(xi) Modification of fundamental documents:
The Articles of Association (A0A) and Memorandum of Association bind the company (MA). According to the law, the power to change these documents is limited. However, in the case of a partnership firm, the basic document, the agreement, may be subject to change at the request of the partners.
(xii) Registration:
Because a company is a legal entity, it must be registered.
However, in the case of a partnership, registration is not required.
(xili) Statutory obligation:
The Companies Act strictly governs a company. A company must perform a number of statutory duties, such as holding statutory meetings, maintaining books of accounts, distributing profits, and so on. A partnership, on the other hand, has no such statutory obligations.
Under normal circumstances, a partnership registration can be completed within one/two days.
Step 1- Choosing the Partnership Name.
The partners are free to choose any name as they desire for their partnership firm subject to the following rules:-
- The names must not be too identical or similar to the name of another existing firm doing similar business so as to lead to confusion. The reason for this rule being that the reputation or goodwill of a firm may be injured, if a new firm could adopt an allied name.
- The name must not contain certain words expressing or implying the sanction, approval or patronage of Govt.
Once you select a name, you should apply for name clearance using the website of RJSC.
STEP 2 – PREPARE A PARTNERSHIP DEED
You should draft a partnership agreement. A partnership agreement typically includes the following clauses:
Name and address of the firm, as well as the names of all partners;
The nature of the business to be conducted;
Date of business establishment; Duration of partnership (whether fixed or indefinite);
Each partner contributes capital;
Profit sharing percentage among partners;
Rules to be followed in the event of a partner’s retirement, death, or admission; and
The above are the bare minimums that must be included in all partnership agreements. Any additional clauses may also be mentioned by the partners.
The Partnership Deed should be on stamp paper and signed by all partners in accordance with the Stamp Act. The document should then be notarized.
STEP 3- REGISTER PARTNERSHIP DEED WITH RJSC
The partnership agreement and filled out RJSC should receive Form I. These documents will be reviewed by RJSC officials. When the officials are satisfied with the points stated in the partnership deed, he shall record the statement in the Register of Firms and issue a Certificate of Registration.
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