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Admission of a partner

A firm has a right to admit a new partner at any time during its life time. A newly admitted partner is known as an ‘incoming partner’. The consent of all the partners has to be obtained at the time of admission of a new partner because the mutual relation of partners is of trust and confidence, and only such persons can be admitted into an existing firm in whom all the partners have full confidence.

Case where consent of all the partners is not required

  • When the minor already admitted to the benefit of the firm elects to become the partner on attaining majority
  • In accordance with the contract already entered into between the existing partners
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Liability of an incoming partner

  • Incoming partner is not liable for the past debts of the firm done before his admission in the firm. This is because the old partners were not agents of the new partner when they acted
  • Liability of an incoming partner starts from the date of his admission into the firm. Thus, he is liable for all the acts done by the firm after his admission
  • However, by an agreement with the old partners, an incoming partner may also agree to be liable to the past debts of the firm. But it does not give the right to the creditors of the firm to sue the new partner for the recovery of their debts
An incoming partner can be held liable to the creditors for the past debts, if the following two conditions are satisfied:
  • The reconstituted firm (new firm) has assumed the liability for the past debts of the old firm
  • The creditors have been informed of this new arrangement, and they have accepted the new firm as their debtor and discharge the old firm of its liability

Note: A minor, who elects to become a partner of the firm on attaining the age of majority, will be liable to all the acts of the firm since he was admitted to the benefits of the firm, while an incoming partner is not liable for the past acts of the firm unless agreed upon.

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