Nature of Partnership

When two or more persons join hands to set up a business and share its profits and losses it is
called Partnership. Partnership as the ‘relation between persons who have agreed to share the
profits of a business carried on by all or any of them acting for all’.
Partners are the persons who have entered into partnership individually with one another.
Partners collectively are called ‘firm’. The essential features of the partnership are as follows.
 Two or More Persons:
There should be at least two persons coming together to form the partnership for a common goal.
In other words, the minimum number of partners in a partnership firm can be two.
 Agreement:
The partnership is an agreement between two or more persons who decided to do business and
share its profits and losses. To have a legal relationship between the partners, the partnership
agreement becomes the basis. The agreement can be in written form or oral form. An oral
agreement is equally valid. But preferably the partners should have a written agreement, in order
to avoid disputes in future.
 Sharing of Profit:

The agreement between partners must be to share profits and losses of a business. Sharing of
profits and losses is important. The partnership is not for the purpose of some charitable activity.

Liability of Partnership
Each partner is liable jointly with all the other partners. And also, when is a partner, severally
liable to the third party for all the acts done by the firm. Liability of the partner is not limited.
This implies that for paying off the firm’s debts, his private assets can also be used.
Step by Step Process for Company Registration / Formation /
Incorporation in Pakistan
Following steps involve in Company Registration in Pakistan when formed through online mode.

Step 1: Search Company Name Availability:

(for Company Registration in Pakistan)

Search the availability of name of the proposed company for Company Registration in Pakistan.
If same name or any identical name already taken, then try other options for new company name.
Company Name Search is free and attract no fees.

Step 2: Getting the Company Name Reserved:

(for Company Registration in Pakistan)
If the proposed name of the company is available, then the second step is to apply for company
name reservation. For name reservation, go to SECP website create the user login and start the
name reservation process. Follow the steps as directed.
The first step in company Registration in Pakistan is to make an application to the registrar of
companies for the availability of name. The application can be made both online and in offline
mode and normally takes a period of one to two days before confirmation of the name applied
for new company registration in Pakistan. Before making an application to the Securities and
Exchange Commission of Pakistan for company registration please do not forget to do Company
Name Search on the Securities and Exchange Commission of Pakistan website. Once the name is
confirmed you can proceed with the process of company registration in Pakistan.
Fee. Deposit applicable fee in selected MCB or UBL bank.

Step 3: Obtaining Digital Signature of Directors:

(for Company Registration in Pakistan)
 You already have one login/user ID which will be used for one Director of the proposed
Company. For remaining directors create secondary user ids through login into existing user
ID in SECP eservices for all directors.
 Digital signatures are mandatory for submitting case through e services (online). For digital
signature of directors, obtain the form and get it signed by each director (One form for one
director). SBC will fill in the rest of NIFT Form and submit the same at NIFT counter at
CRO-SECP along with following documents;
Attested copies of CNIC of all Directors
Attested copies of Availability of Name Letter issued by SECP.
 NIFT will deliver digital signatures details through email. Download the signature at the
same day while following the instructions given in that email. If have problem in
downloading call at NIFT Help Line.

NIFT Fees. Normal: Rs. 1,500 Per Director, Fast Track (Same Day), Rs. 1,800 Per Director

Step 4: Applying for online Company Incorporation

(for Company Registration in Pakistan)
i). Before starting process of online filling of application for incorporation, prepare a folder with
Company Name and prepare following documents and also convert them into PDF documents;
Memorandum of Association
Article of Association
Please note that there is no need to create Form 1, Form 21 and Form 29 manually, as eservices
system will automatically generate these forms when you fills in eservices main form
Availability of Name letter issued by SECP
CNIC copies of all Directors
Memorandum of Association
Memorandum of Association is the basic document where all the objectives of the company
registration are stated e.g. the basic objective of company registration is to engage in the business
of general order supplier or trading company or any other business. All the business the company
is planning to undertake must be stated in the memorandum in order to get the process of
company registration in Pakistan to complete.
Articles of Association
Articles of Association is the basic document where all the rules of the company to operate are
stated e.g. How directors are going to operate, when how General Meetings of the company
undergoing the process of company registration in Pakistan is to be conducted etc.
Form 1 (Form One):
Form 1 for company registration is the basically a declaration of one of the directors of the
company about to be registered. Form 1 can be downloaded from Securities and Exchange
Commission of Pakistan website. This is another compulsory component of company registration
process in Pakistan.
Form 21:
Form 21 is the form whereby the address of company undergoing the process of company
registration in Pakistan is notified to the registrar.
Form 29:
Form 29 contains information about the particulars of the directors of the company that is
undergoing the process of company registration in Pakistan.

Step 4 (ii). Completing Online Incorporation Process:

(for Company Registration in Pakistan)
 Login at SECP, click on company incorporation
 Fill the form and provide the given information
 Attach the MOA, AOA, CNICs of directors, Company Name Reservation (All in PDF)
 Then click on bank challan and save
 Click on start process, sign the documents and then submit to SECP (remember to install
Java)
 Click on submitted process, click on bank challan, print and pay at MCB Bank
 Then follow up with CRO-SECP

Types of Partners

A partnership is when two or more people work together and share the profits from the business
or profession. However, one must not always assume that all partners participate in the work or
profits or even liabilities of the firm equally. In fact, there are various types of partners based on
the extent of their liability, or their participation in the firm – like an active partner or dormant
partner etc.

1] Active Partner/Managing Partner

An active partner is also known as Ostensible Partner. As the name suggests he takes active
participation in the firm and the running of the business. He carries on the daily business on
behalf of all the partners. This means he acts as an agent of all the other partners on a day to day
basis and with regards to all ordinary business of the firm.

Hence when an active partner wishes to retire from the firm, he must give a public notice about
the same. This will absolve him of the acts done by other partners after his retirement. Unless he
gives a public notice, he will be liable for all acts even after his retirement.

2] Dormant/Sleeping Partner
This is a partner that does not participate in the daily functioning of the partnership firm, i.e. he
does not take an active part in the daily activities of the firm. He is however bound by the action
of all the other partners.
He will continue to share the profits and losses of the firm and even bring in his share of capital
like any other partner. If such a dormant partner retires, he need not give a public notice of the
same.

3] Nominal Partner
This is a partner that does not have any real or significant interest in the partnership. So, in
essence, he is only lending his name to the partnership. He will not make any capital
contributions to the firm, and so he will not have a share in the profits either. But the nominal
partner will be liable to outsiders and third parties for acts done by any other partners.

4] Partner by Estoppel
If a person holds out to another that he is a partner of the firm, either by his words, actions or
conduct then such a partner cannot deny that he is not a partner. This basically means that even
though such a person is not a partner he has represented himself as such, and so he becomes
partner by estoppel or partner by holding out.

5] Partner in Profits Only

This partner will only share the profits of the firm, he will not be liable for any liabilities. Even
when dealing with third parties he will be liable for all acts of profit only; he will share none of
the liabilities.

6] Minor Partner
A minor cannot be a partner of a firm according to the Contract Act. However, a partner can be
admitted to the benefits of a partnership if all partner gives their consent for the same. He will
share profits of the firm but his liability for the losses will be limited to his share in the firm.

Such a minor partner on attaining majority (becoming 18 years of age) has six months to decide
if he wishes to become a partner of the firm. He must then declare his decision via a public
notice. So, whether he continues as a partner or decides to retire, in both cases he will have to
issue a public notice.