Small business partnerships have many advantages as they allow the business owners to pool complementary skill sets and share start-up costs and risks with one another. Unfortunately, many of the advantages of partnerships can also be disadvantages, and statistics show that up to 70% of business partnerships ultimately fail. Partnerships are breeding grounds for conflict because everyone is a chief, or thinks they are. That’s just one of the reasons many partnerships end up failing. A Partnership Agreement is a contract between two or more individuals who would like to manage and operate a business together in order to make a profit.
The partners are required to modify/rewrite the partnership agreement to avoid partnership disputes over the business. The changes are made with an agreement called the Supplementary Agreement to the original partnership deed.
Each step to make amendments in partnership deed are explained below:
Step 1: Mutual consent of the partners
The first step in making a modification is to discuss the proposed changes and its implications to seek the consent of the partners. Without the consent of the partners, the changes are not possible in the partnership deed. Before contacting the counsel or the preparing the deed for change, the partners should first look after whether the other partners are ready for the changes.
Step 2: Preparation of the Supplementary Deed
Based on the requirement for change, the partners need to either prepare the supplementary deed or hire a professional who can assist in the matter. The professional will help you to draft the deed keeping in mind other related provision and consequences. As the draft agreement is prepared and partners’ consent is received after the review, one can proceed for execution of the agreement.
Step 3: Execution of Supplementary Partnership Deed
The execution of the deed will involve a number of formalities to be completed by the partners.
- Requirement of Stamp Duty
The deed may be executed for change in capital or otherwise. When it includes the change in capital of the firm, the stamp duty payable for execution of deed will be calculated based on the additional capital or the change. The rates for the attracted duty are prescribed by the concerned State Stamp Act. If there is no change in capital, the deed is executed by payment of Rs 100 as Stamp Duty.
- Signature & Notary
The partners of the firm are required to put their signature at the respective place provided in the supplementary deed. Further, it also requires putting their initials on the rest of the pages. Further, the deed is required to be attested by at least two witnesses. The witnesses to the agreement can be any person other than the parties to the agreement. The signed deed will then be required to be notarized by the competent person.
Step 4: Filing with RoF
Where the partnership firm is already registered with the Registrar of Firm (RoF) of the concerned state, the partners must file the supplementary deed along the applicable form with the RoF. The process of application with RoF will change from State to State and so here are general pointers. A complete application of modification is filed in the prescribed form to the RoF. Along with the application, copies of the following documents are required to be provided.
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