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Describe partnership
Outline separate legal entity of a company
Assessment;
Test 1
INTRODUCTION
Three types of business entities;
Sole proprietorship (also known as Sole Trader)
Partnership business entity
Limited Company (Sdn. Bhd. / Sendirian Berhad / Berhad)
Other types;
Foreign companies
Limited Liability Partnership
INTRODUCTION
Laws that govern business organization;
Sole proprietorships
Partnerships
Companies
SOLE PROPRIETORSHIP
Owned by 1
person and
must be
Malaysian
citizen
Requires
small amount
of capital to
established
Small and
family based
business
Characteristics
Name of the
owner can
be used as
business
names
No separate
legal
existence
Unlimited
liability
PARTNERSHIP
Partnership is governed by;
Partnership Act 1961 (Revised 1974)
Business Registration Act 1956 (Amendment 1978)
Definition of Partnership;
Section 3(1) of the Partnership Act defines;
ELEMENTS OF PARTNERSHIP
Relation
*partnership agreement
is a contract
A Business
Between person
*Section 2 including
every trade, occupation
of profession
Carried on in common
*there must be 1 person
or more carry on the
business for himself and
on behalf of the others
TYPES OF PARTNER
General
Active
Sleeping
Quasi-Partner
All partners are entitled to share equally in the capital and profits of the business
and must contribute equally to losses whether of capital or otherwise
Sec 26 (b)
The firm must indemnify every partner in respect of payments made and personal
liabilities incurred by him
Sec 26 (c)
A partner is entitled to interest at the rate of 8% per annum from the date of the
payment of the advance.
Sec 26 (d)
Sec 26 (e)
Sec 26 (f)
Sec 26 (g)
Sec 26 (h)
Sec 26 (i)
All partners have access to and inspect the partnership books. A partner may
employ an accountant to examine the books
FORMATION OF PARTNERSHIP
Form
Numbers of
partners
FORMATION OF PARTNERSHIP
Anyone who is legal capacity is capable of entering into a
partnership agreement
Majority Act 1971 18 years old is stated as the age of a major
Capacity
LIABILITIES OF PARTNERSHIP
Ordinary Tort
Misapplication
Misappropriation
Contractual
Liability
Sec 11 PA 1961 all partners in a firm are jointly liable for all contractual
and other debts and liabilities, including tax and judgement debts
which are incurred while each is a partner
LIABILITIES OF PARTNERSHIP
Liability of Retired
Partners
After retirement, a partner is still liable to person who deal with the firm
after a charge in its constitution, unless he has given notice to such
person that he is no longer a partner under Sec 38 (1).
Re Siew Inn Steamship Co [1934] MLJ 180
Criminal Liability
Although partner are jointly liable in civil cases, they are not jointly liable
in criminal cases.
Chung Shin Kian & Anor v PP. [1980] 2 MLJ 246
Duration of Liability
Sec 19 (1) PA 1961 - New partner who has just been admitted into a firm
is not liable for debts incurred prior to his admission
Subramaniam Chettiar v Kader Mastan & Co [1934] MLJ 74
Liability of Persons
for Holding Out
DISSOLUTION OF PARTNERSHIP
Partnership
may be
dissolved by:
Without court
order
With court
order
DISSOLUTION OF PARTNERSHIP
(without court order)
Dissolution
by
agreement
Dissolution
by operation
law
Sec 34 (1) (b) if the partnership was entered into for a single
adventure or undertaking, and that adventure or undertaking
terminates
Sec 34 (1) (c) if the partnership was entered into for an
undefined time, by any partner giving notice to the other partner
of his intention to terminate the partnership
DISSOLUTION OF PARTNERSHIP
(without court order)
By death,
bankruptcy
or charge
By illegality
of
partnership
DISSOLUTION OF PARTNERSHIP
Sec 37 (a) - Insanity of a partner
Sec 37 (b) Permanent incapacity of any partner to
perform his duties
With court
order
COMPANY
Companies Act 1965 regulate companies in Malaysia
Companies Regulations 1966 form the core in the regulation of a
companies
The act is modeled on the English Companies Act 1948 and the
Australian Uniform Companies Act 1961
COMPANY
Definition:
Sec 4 (1) CA 1965
defines Company as a
company incorporated
pursuant to the
Companies Act
It does not die but continues to exist until its name is struck off by
the registrar of company.
Case: RE NOEL TEDMAN HOLDINGS PTY LTD
In this case, both the shareholders and directors were died in a traffic
accident, but however, the company still existed
Membership
Characteristics
Liabilities
Life Span
A company has a specific right and responsibility. It can acquire assets under its own name.
A company can also take legal action and face legal action under its own name.
Life Span
The life span of a company is not dependent upon the death or resignation of its members.
A company can be dissolved when its members are no longer interested in continuing the
business.
Liabilities
The liabilities of the members in a company are limited to the total shares contributed to the
companys capital. Personal assets are not affected regardless of what happens to the
company.
Membership
A company must have at least two members who are of Malaysian nationality. These two
members can act as a director and founder of the company.
The members of the company will appoint the Board of Directors who will manage and run
the business operation subject to the Companies Act 1965