Minor Partner in Firm Under The Partnership Act

Introduction: Can a Minor Be a Partner in a Firm?

When it comes to Partnership Firm Registration in India, understanding who can legally become a partner is crucial. One common query is whether a minor—a person under the age of 18- can be a partner in a partnership firm.

According to the Indian Contract Act and the Indian Partnership Act,1932, a minor cannot enter into a contract, and since a partnership is based on a contractual relationship, a minor cannot become a full-fledged partner in a firm. However, there are exceptions to this rule that allow a minor to be admitted only to the benefits of the partnership, subject to certain conditions.

• Such a minor has the right to share the property and profits of the firm as may be agreed upon. He may have access to inspect and copy any of the firm's accounts. 
• A minor’s share is liable for the firm's acts, but the minor is not personally liable for any act.
• Such a minor may not sue the partners for an account or payment of his share of the property or profits of the firm, save when severing his connection with the firm. In such a case, the amount of his share shall be determined by a valuation made as far as possible.

Where Such a Person Becomes a Partner

(a) His rights and liabilities as a minor continue up to the date on which he becomes a partner. But he also becomes personally liable to third parties for all the acts of the firm done. He will be liable from the time he was admitted to the benefits of a partnership.

(b) His share in the property and profits of a firm shall be the share to which he was entitled as a minor.

Where Such a Person Elects Not to Become a Partner

(a) His rights and liabilities shall continue to be those of a minor under this section up to the date on which he gives public notice.

(b) His share shall not be liable for any acts of the firm done after the date of the notice.

(c) He shall be entitled to sue the partners for his share of the property and profits under the sub-section.

A minor cannot be bound by a contract because a minor’s contract is void and not merely voidable. Therefore, a minor cannot become a partner in a firm because the partnership is founded on a contract. Though a minor cannot be a partner in a firm, he can nonetheless be admitted to the benefits of the partnership. In other words, he can validly give a share in the partnership profits. When this has been done, and it can be done with the consent of all the partners, then the rights and liabilities of such a partner will be governed as follows-

Rights of a Minor in Partnership

1. A minor partner has a right to his agreed share of the profits and of the firm.
2. He can have access to, inspect and copy the accounts of the firm.
3. He can sue the partners for accounts for payment of his share, but only when serving his connection with the firm and not otherwise.
4. On attaining a majority, he may, within 6 months, select to become a partner or not to become a partner. If he elects to become a partner, then his share is not liable for any acts of the firm after the date of the public notice served to that effect.

Liabilities of a Minor in Partnership

Before Attaining a Majority

• The liability of a minor is confined only to the extent of his share in profits and the property of the firm.
• Minor has no personal liability for the debts of the firm incurred during his minority.
• Minor cannot be declared insolvent, but if the firm is declared insolvent his share in the firm vests in the official receiver/Assignee.

After Attaining a Majority-

Within 6 months of his attaining majority or his obtaining knowledge, he had been admitted to the benefits of a partnership. Whichever date is later, the minor has to decide whether he shall remain a partner or leave the firm.

Where he has elected not to become a partner, he may give public notice that he has elected not to become a partner, and such notice shall determine his position as regards the firm. If he fails to give such notice, he shall become a partner in the firm on the expiry of the said six months.

(a) When he becomes a partner-

If the minor becomes a partner on his own will or by his failure to give the public notice within a specified time, his rights and liabilities are as follows-

1. He becomes personally liable to third parties for all acts of the firm. Since he was admitted to the benefits of the partnership.
2. His share in the property and profits of the firm remains the same, to which he was entitled as a minor.

(b) When he elects not to become a partner

1. His rights and liabilities continue to be those of a minor up to the date of giving public notice
2. His share shall not be liable for any acts of the firm done after the date of the notice.
3. He shall be entitled to sue the partners for his share of the property and profits. Such a minor shall give notice to the registrar that he has or has not become a partner.

Conclusion

While a minor cannot become a partner in a firm, he can be admitted to the benefits of an existing partnership with consent from all partners. It’s essential for entrepreneurs and legal professionals to understand these legal boundaries during Partnership Firm Registration to avoid complications and ensure lawful operations.

By recognizing the rights and liabilities of minors, partnership firms can maintain both transparency and legal validity, safeguarding all parties involved.