Partnership Law in Pakistan – Legal Structure & Regulations
https://lex.com.pk/corporate-law/partnership-law-in-pakistan/
Partnerships are one of the most common forms of business associations in Pakistan. Governed primarily by the Partnership Act, 1932, this form of business involves two or more individuals (or legal persons) agreeing to carry on a business jointly with the intention of sharing profits and losses.
🤝 What Is a Partnership?
A partnership is a contractual relationship formed when two or more persons agree to combine their resources, labor, and skills to run a business. In Pakistan, partnerships are not separate legal entities, unlike companies, and the partners are personally liable for business obligations.
📜 Types of Partnerships
Under Pakistani law, there are generally two categories of partnerships:
General Partnership – All partners share equal rights and liabilities.
Limited Partnership (less common and regulated under special laws) – Some partners have limited liability depending on their role in management.
Most businesses operate under general partnerships, which are relatively simple to form and dissolve.
📝 Partnership Agreement
While not mandatory, a written partnership deed is strongly recommended. This agreement defines the terms and conditions such as:
Profit/loss sharing ratio
Roles and responsibilities
Capital contributions
Dispute resolution mechanisms
Admission or retirement of partners
In the absence of a written agreement, the Partnership Act, 1932 governs all matters by default, which may not reflect the specific needs of the business.
🏢 Registration of Partnership
Although registration with the Registrar of Firms is not compulsory, an unregistered partnership faces several limitations, such as:
Inability to sue third parties or other partners
Limited legal recognition in banking and tender processes
Registration benefits include enhanced legal credibility, enforceability of agreements, and easier access to loans and business licenses.
⚖️ Rights and Duties of Partners
Each partner has the following basic rights and duties:
Right to participate in business decisions
Duty to act in good faith
Equal right to profits (unless otherwise agreed)
Joint liability for debts and obligations
Responsibility for losses
Any breach of fiduciary duty or dishonesty may lead to legal consequences under civil or criminal law.