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CA Manish Kumar Gupta
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  1. CA Vishnu Ram Enlightened

    Mandatory Conditions for a Partnership Firm in India A Partnership Firm in India is governed by the Indian Partnership Act, 1932. While registration is not mandatory, certain legal and operational conditions must be met for a valid partnership. 1. Minimum Two Partners (Section 4) A partnership mustRead more

    Mandatory Conditions for a Partnership Firm in India

    A Partnership Firm in India is governed by the Indian Partnership Act, 1932. While registration is not mandatory, certain legal and operational conditions must be met for a valid partnership.

    1. Minimum Two Partners (Section 4)

    • A partnership must have at least two persons to form a firm.
    • The maximum number of partners is:
      • 50 (as per Companies Act, 2013).
      • No limit for professional firms (e.g., chartered accountants, lawyers).

    2. Valid Partnership Agreement (Partnership Deed)

    • A written or oral agreement between partners is necessary.
    • A written Partnership Deed is recommended for clarity and legal proof.
    • Essential contents of a Partnership Deed:
      • Name of the firm and partners
      • Capital contribution
      • Profit-sharing ratio
      • Rights and duties of partners
      • Dispute resolution mechanism

    3. Profit Motive

    • The partnership must be formed for lawful business with the intent to earn profit.
    • Non-profit organizations cannot be partnerships.

    4. Shared Responsibility & Liability (Section 25)

    • Partners have unlimited liability, meaning personal assets can be used to pay business debts.
    • Each partner is jointly and severally liable for the firm’s liabilities.

    5. Mutual Agency (Section 18 & 19)

    • Each partner can act as an agent of the firm and bind other partners.
    • Any act done by a partner in the ordinary course of business is binding on the firm.

    6. Registration (Optional but Recommended) – Section 58

    • While registration of a partnership firm is not mandatory, an unregistered firm:
      ❌ Cannot file legal suits against third parties
      ❌ Cannot claim set-off in court
    • Registration requires filing with the Registrar of Firms in the respective state.

    7. PAN & Bank Account

    • A partnership firm must obtain a PAN (Permanent Account Number) from the Income Tax Department.
    • A separate bank account in the firm’s name is required for transactions.

    8. Taxation & Compliance

    • A partnership firm must file Income Tax Returns (ITR-5) annually.
    • GST registration is required if turnover exceeds ₹40 lakh (₹20 lakh for services).
    • TAN (Tax Deduction & Collection Account Number) is needed if TDS is applicable.

    Final Answer

    For a valid Partnership Firm in India, these conditions must be met:
    ✅ Minimum two partners
    ✅ Partnership Deed defining terms
    ✅ Profit-sharing agreement
    ✅ Unlimited liability & mutual agency
    ✅ Optional but recommended registration
    ✅ Compliance with tax laws (PAN, ITR, GST, TAN, etc.)

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Ramesh Sharma
Enlightened
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  1. CA Vishnu Ram Enlightened

    Hi, Please refer to section 149(1) of the Company Act,2013, according to which: A One Person Company needs to have a Board of Directors consisting of individuals as directors and shall have a minimum of one director. It can have directors up to a maximum of 15 which can also be increased by passingRead more

    Hi,

    Please refer to section 149(1) of the Company Act,2013, according to which:

    A One Person Company needs to have a Board of Directors consisting of individuals as directors and shall have a minimum of one director. It can have directors up to a
    maximum of 15 which can also be increased by passing a special resolution as in case of any other company.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Hi, Section 135 of Companies Act is applicable to every company  which is having : • net worth of Rs 500 crore or more; or • turnover of Rs 1000 crore or more; or • a net profit of Rs 5 crore or more during any of the three preceding financial years. The word used here is ’every company’, However, iRead more

    Hi,

    Section 135 of Companies Act is applicable to every company  which is having :
    • net worth of Rs 500 crore or more; or
    • turnover of Rs 1000 crore or more; or
    • a net profit of Rs 5 crore or more
    during any of the three preceding financial years.

    The word used here is ’every company’, However, in terms of rule 6(2) of companies (Incorporation) Rules, 2014, an OPC loses its status if paid-up capital exceeds Rs. 50 lakhs or average annual turnover is more than 2 crores in three immediate preceding consecutive years.

    In view of this, it is quite clear that an OPC would not meet the criteria specified in section 135 as detailed above.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Please refer the rule 3 of the Companies (Incorporation) Rules, 2014, which provides that only a natural person who is an Indian citizen and resident in India is eligible to incorporate OPC. Therefore, the question of any “body corporate” or other organizations can not constitute a One person companRead more

    Please refer the rule 3 of the Companies (Incorporation) Rules, 2014, which provides that only a natural person who is an Indian citizen and resident in
    India is eligible to incorporate OPC. Therefore, the question of
    any “body corporate” or other organizations can not constitute a One person company. Naturally, they are not a natural person.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Following are the differences between advances and loans. A Loan is a financial assistance given with an absolute promise to repay, whereas an advance is given against the supply of goods and services. Generally, Loan carries a rate of Interest against the financial assistance whereas an Advance doeRead more

    Following are the differences between advances and loans.

    A Loan is a financial assistance given with an absolute promise to repay, whereas an advance is given against the supply of goods and services.

    Generally, Loan carries a rate of Interest against the financial assistance whereas an Advance does not carry such a rate of interest.

    A loan can be for a long-term period whereas an advance is given for a short-term period and against work or project.

    A loan is always repaid, whereas an advance is adjusted with the outstanding bill amount.

    Example-Advance given to employees against the current month’s salary. A loan is given to employee for buying a Car.

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Ramesh Sharma
Enlightened
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  1. CA Manish Kumar Gupta Enlightened

    Hi, It's a very interesting question and  I was waiting for it. Lots of companies are appointing a CFO cum Company secretary to save costs. Following provision will help to understand the context of the question: As per section 203, prescribed class of companies shall have the following whole-time kRead more

    Hi,

    It’s a very interesting question and  I was waiting for it. Lots of companies are appointing a CFO cum Company secretary to save costs. Following provision will help to understand the context of the question:

    As per section 203, prescribed class of companies shall have the following whole-time key managerial personnel
    (i) managing director, or Chief Executive Officer or manager and in their absence, a whole-time director;
    (ii) company secretary; and
    (iii) Chief Financial Officer
    Here, the term used is ‘whole-time’ and therefore, three different individuals are required to hold these three key positions.
    Further, as per Regulation 78 of Table F,

    ‘a provision of the Act or these regulations requiring or authorizing a thing to be done by or to a director and chief executive officer, manager, company secretary or chief financial officer shall not be satisfied by its being done by or to the same person acting both as director and as, or in place of, chief executive officer, manager, company secretary or chief financial officer’.

    Hence, with the above provision of the act, it is crystal clear that a CFO can not be appointed as company secretary of the company.

     

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Ramesh Sharma
Enlightened
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  1. CA Manish Kumar Gupta Enlightened

    Hi, As per Section 2(76) read with Rule 3 of the Companies (Specification of definitions, details) Rules, 2014 of the Act, Related party with reference to a company means: 1. A director or key managerial personnel or relative thereof; 2. A firm, in which a director, manager, or his relative is a parRead more

    Hi,

    As per Section 2(76) read with Rule 3 of the Companies (Specification of definitions, details) Rules, 2014 of the Act, Related party with reference to a company means:

    1. A director or key managerial personnel or relative thereof;

    2. A firm, in which a director, manager, or his relative is a partner;

    3. A private company in which a director or manager or his relative is a member or director;

    4. A public company in which a director or manager is a director AND holds along with his relatives, more than two percent of its paid-up share capital;

    5. Any Body Corporate whose Board of Directors, managing director, or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager.

    (b) Any person on whose advice, directions, or instructions a director or manager is accustomed to act.
    Note: nothing contained in clauses (a) and (b)  shall apply to the advice, directions or instructions given in a professional capacity.

    6. Holding, subsidiary, or an associate company of such a company.

    7. Subsidiary of a holding company to which it is also a subsidiary.

    8. Investing company or the venturer of the company.

    Explanation—” investing company or the venturer of a company” means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate

    Note: Term relative in relation to a person means and includes Father, Mother, Son, Son’s wife, Daughter, Daughter’s husband, Brother, Sister, members of a HUF, Husband and wife

    Thanks

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Ramesh Sharma
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Section 197 of the companies Act prescribes certain limits and compliance on the remunerations of directors, including the Managing Director, Whole Time Director, and manager. Schedule V provides conditions with regard to appointment and remuneration of Managing director, whole-time Director and manRead more

    Section 197 of the companies Act prescribes certain limits and compliance on the remunerations of directors, including the Managing Director, Whole Time Director, and manager. Schedule V provides conditions with regard to
    appointment and remuneration of Managing director, whole-time
    Director and manager.

    In view of the above, the provisions related to the managerial remuneration are not applicable to all KMPs but they are applicable only to such managerial personnel as mentioned in Section 197 and  Schedule V to the Companies Act, 2013. Therefore, CS and CFO not being managerial personnel as mentioned in Section
    197, hence, the provisions of Section 197 will not apply on them.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Yes, a person can be a Managing Director in two companies. As per the third proviso to section 203(3) of the Companies Act, 2013, a company may appoint or employ a person as its MD, if he is the MD or Manager of one and not more than one other company with the consent of all directors present at theRead more

    Yes, a person can be a Managing Director in two companies.

    As per the third proviso to section 203(3) of the Companies Act, 2013, a company may appoint or employ a person as its MD, if he is the MD or Manager of one and not more than one other company with the consent of all directors present at the meeting.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    In my view, he can be appointed only in one subsidiary company although It's not clear anywhere in the act, but if we see the provision of section 203 (3) of the Companies Act, 2013, which says that a Wholetime KMP of a company shall not hold office in more than one company except in its subsidiaryRead more

    In my view, he can be appointed only in one subsidiary company although It’s not clear anywhere in the act, but if we see the provision of section 203 (3) of the Companies Act, 2013, which says that a Wholetime KMP of a company shall not hold office in more than one company except in its subsidiary company.

    This section strictly restricts a person from holding office in more than one company, while at the same time enables a person to hold office in its subsidiary company, and ideally, he may be appointed in only one subsidiary.

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