Partnership Act, 1932

The Partnership Act, 1932 is the foundational law governing business partnerships in Pakistan -- how they are formed, how partners deal with each other and with outsiders, and how they end. Section 4 defines a "partnership" as the relation between people who agree to share the profits of a business carried on by all or any of them acting for all; the people are "partners," collectively a "firm," and the business name is the "firm name." Section 5 clarifies that partnership arises only from contract, not from status (for example, family members running a joint business are not automatically partners), and Section 6 says courts look at the real relationship between the parties, not just labels, when deciding if a partnership exists.

Chapter III (Sections 9-17) sets out partners' duties to each other: to act for the greatest common advantage, be honest and faithful, and render true accounts (Section 9), plus rules on firm property, profit-sharing, and indemnifying the firm for losses caused by a partner's fraud (Section 10).

Chapter IV (Sections 18-30) governs relations with third parties. Section 18 makes each partner an agent of the firm for its business, and Section 19 gives partners implied authority to bind the firm in the ordinary course of business. Section 25 makes each partner liable for the firm's acts, and Section 28 covers "holding out" -- where someone who represents themselves (or allows themselves to be represented) as a partner can be held liable to third parties who relied on that representation, even if they are not actually a partner.

Chapters V and VI deal with partners joining or leaving a firm (introduction, retirement, expulsion, insolvency, and a deceased partner's estate -- Sections 31-38) and dissolution of the firm (Sections 39-55), including dissolution by agreement, compulsory dissolution, dissolution by court order, and how debts and remaining assets are settled once a firm winds up.

Chapter VII (Sections 56-71) covers registration of firms with a Registrar of Firms, including how to register, record changes, and correct the register. Section 69 is a significant practical provision: it restricts an unregistered firm's ability to sue to enforce a contract, meaning failure to register a partnership firm can seriously limit its legal remedies -- current fee schedules for registration are set out in Schedule I of the Act.

This is a long-standing 1932 law with several amendment footnotes (including provisions inserted by later banking-sector ordinances), so anyone relying on specific procedural details, especially registration fees or the treatment of banking-related profit-sharing arrangements under Section 6A, should confirm against the current official text.