Partnership (Amend) Bill: every partnership must maintain proper books of accounts: SECP

The proposed Partnership (Amendment) Bill, 2016 would make it mandatory for every partnership to maintain proper books of accounts on the pattern of companies. A comparative-table of the existing provisions of Partnership (Amendment) Act, 1932 and proposed provisions along with rationale compiled by the Securities and Exchange Commission of Pakistan (SECP) revealed that it would be extended to the Islamabad Capital Territory.
Like companies every partnership should also maintain proper books of accounts which give an insight on their working. Also, it will help in inspection and investigation by the commission, the SECP proposed. The proposed law has also revised penalty regime for partnership with power of investigation and inspection by the Commission. Sources said that the "partnership" is 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.
(1) Under proposed section 12A (Books of accounts and other record), the firm shall prepare and maintain at its registered office books of accounts and other relevant books and papers and record for every calendar year which gives a true and fair picture of the state of affairs of the firm: provided that in case of death of a partner, the accounts of the partnership shall be consolidated and will be shared with all the partners and legal heirs or their representatives of the deceased partner.
(2) Books of accounts shall be open for inspection by the partners or their legal heirs at its registered office during business hours or as may be prescribed by the Commission.
(3) The partners of the firm shall authenticate the record, whether audited or not and it shall be admissible as evidence in case any dispute as to the accounts arises, it added. The function is already being provided by the Commission with respect to companies and the same facility will also be available in case of partnerships, the SECP said.
Under the proposed section (12B Inspection of Record), (1) the partnership deed and such other ancillary record of every firm shall be open for inspection which is maintained with the Commission or by any officer authorised by it in this behalf for reasons to be recorded in writing.
(2) It shall be the duty of every partner or other employee of the firm to produce to the person making inspection under sub-section (1) all such books and record of the firm in his custody or under his control and to furnish him with any such statement, information or explanation relating to the affairs of the firm, as may be required.
(3) If default is made in complying with the provisions of this section, the firm, its partners and every person, who is in default shall be liable to a fine, which may extend up to twenty thousand rupees, it added. Moreover, the section 69 has been proposed to be amended which provides an exception to the general rule in case a partnership is not registered, the matter cannot be proceeded in courts by the legal heirs of the deceased partner but this proviso empowers them to pursue the case in courts.
According to the proposed section 69A (Penalty for contravention of Sections 60, 61, 62 or 63): if any statement, intimation or notice under sections 60, 61, 62 or 63 in respect of any registered firm is not sent or given to the registrar within the period specified in that section, the registrar may, after giving notice to the partners of the firm and after giving them a reasonable opportunity of being heard, refuse to make the suitable amendments in the records relating to the firm, until the partners of the firm pay such penalty, not exceeding one thousand rupees per day, as the registrar may determine in respect of the period between the date of expiry of the period specified in sections 60, 61, 62 or as the case may be, 63 and the date of making the amendments in the entries relating to the firm.
The said provision adds a check and empowers the registrar to impose penalty on those whoever disobeys the directions of prescribed time proposed in Sections 60, 61, 62 and 63, the SECP said.
The proposed law has also provided for the mechanism for the imposition of penalty, the SECP added. The proposed section (70C Penalty adjudication of offence and appeal) reads as: (1) any person who contravenes the provision of this act or rules or regulations made thereunder shall be guilty of an offence and shall be liable to penalty to be imposed by the registrar such sum which may extend to one hundred thousand rupees.
(2) The amount of penalty imposed under sub-section (1) shall be payable to the Commission and may be recovered as provided under section 42B of the Securities and Exchange Commission of Pakistan Act, 1997. (3) Any person aggrieved by an order passed by the Commission or officer authorised in this behalf may prefer an appeal under sub-section (4) of section 58 court of sessions, it added.
Background of the issue revealed that Senator Muhammad Azam Khan Swati introduced a Private Member's Bill in the Senate on September 26, 2016 titled "The Partnership (Amendment) Bill, 2016." The Bill aims to amend the Partnership Act, 1932 in its application to Islamabad Capital Territory. The Senate Standing Committee held three meetings to go ahead with legislative process of the Bill.
In order to consider and deliberate on the Bill moved by Senator Muhammad Azam Khan Swati, Ministry of Interior, Chief Commissioner Islamabad Capital Territory and Securities and Exchange Commission of Pakistan (SECP) have been consulted. The views/comments received from Ministry of Interior / Chief Commissioner ICT and SECP are as under: Ministry of Interior/ICT: The insertion of proposed Section 70(A) for filing of complaint against a firm or its partner in the Court of Civil Jurisdiction of District where main office of the firm is situated, would create ambiguity and legal/operational complications. The error/ambiguity is required to be removed.
SECP: The SECP has reviewed various partnership laws in international jurisdiction ie India, UK, Malaysia and Singapore and prepared a comprehensive comparative matrix to equip this outdated law with the modern innovations. The following amendments have been proposed in the Partnership Act, 1932 in addition to the three amendments proposed by the Senator:
Territorial limits confined to the extent of Islamabad; inclusion of the rights of legal heirs; registrar of firms will now operate under SECP; penalties revised; books of accounts to be maintained; power of investigation and inspection with the Commission; alternate dispute resolution; introduction of transmission through electronic mode; power to make rules and power to make regulations, the SECP proposed.