Partnership Deed (Pakistan)

A Partnership Deed in Pakistan records the terms of the business relationship between the partners, including capital, management and how the venture may end.

The Partnership Act 1932 sets out the rights and duties of partners in detail. Section 13 lists the mutual rights and duties of partners in the absence of contrary agreement: equal sharing of profits and losses; the right to participate in the management of the firm; no partner entitled to remuneration for acting in the firm's business (unless the partnership deed provides otherwise); indemnity for liabilities incurred in the ordinary conduct of business; and the right to inspect the firm's books at any time. The Partnership Deed may modify any of these default rules by express agreement.

Registration of a partnership firm with the Registrar of Firms of the relevant province (Punjab, Sindh, KPK, or Balochistan) is governed by Sections 58–65 of the Partnership Act 1932. Registration is not compulsory in Pakistan, but an unregistered firm is subject to significant disabilities under Section 69 of the Partnership Act 1932: an unregistered firm cannot sue a third party or a partner in a court of law to enforce a right arising under the Partnership Act 1932 or under the contract of partnership, although it can be sued. Registration of the firm with the Registrar of Firms also establishes the firm's official name and the details of the partners for the purpose of subsequent dealings.

For tax purposes, a partnership firm in Pakistan is treated as an Association of Persons (AOP) under the Income Tax Ordinance 2001 administered by the Federal Board of Revenue (FBR). The firm is required to obtain a National Tax Number (NTN) from FBR, file annual income tax returns, and pay tax on the firm's taxable income. Partners are individually taxed on their share of the firm's income. The Securities and Exchange Commission of Pakistan (SECP) does not regulate partnerships — partnerships are registered with the provincial Registrar of Firms, not with SECP.

The legal framework governing the Partnership Deed (Pakistan) in Pakistan draws on several key statutes and regulatory bodies. Under the Companies Act 2017, the Securities and Exchange Commission of Pakistan (SECP) maintains the register of Pakistani companies. Section 16 of the Companies Act 2017 governs company incorporation. The Contract Act 1872 governs general contractual obligations. The Federal Board of Revenue (FBR) administers corporate tax under the Income Tax Ordinance 2001. The High Courts (Lahore, Sindh, Peshawar, Balochistan, Islamabad) have original and appellate jurisdiction. Parties executing a Partnership Deed (Pakistan) in Pakistan should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Partnership Act 1932 sets the foundational requirements.

A Partnership Deed in Pakistan is required whenever two or more persons decide to carry on a business together with a view to sharing profits and wish to document the terms of their business relationship.

A Partnership Deed is required when forming a business partnership in any commercial sector — trading, manufacturing, professional services, real estate development, or hospitality — to define each partner's capital contribution, profit share, duties, and authority to bind the firm in contracts with third parties.

A Partnership Deed is needed when applying for registration of the firm with the Registrar of Firms under Section 58 of the Partnership Act 1932. The registration application must be accompanied by a statement in the prescribed form signed by all partners, and the Partnership Deed is submitted as the founding document. Registration removes the disabilities imposed by Section 69 of the Partnership Act 1932 on unregistered firms.

A Partnership Deed is required when opening a business bank account at a scheduled bank regulated by the State Bank of Pakistan (SBP) — Habib Bank Limited, United Bank Limited, MCB Bank, Allied Bank, or National Bank of Pakistan. Banks require the Partnership Deed to verify the firm's name, partners' CNIC numbers, and the authority of the signing partner to operate the account.

A Partnership Deed is needed when applying for a National Tax Number (NTN) from the Federal Board of Revenue (FBR) for the partnership firm as an Association of Persons (AOP) under the Income Tax Ordinance 2001, and for registering for sales tax under the Sales Tax Act 1990 where the firm's taxable supplies exceed prescribed thresholds.

A Partnership Deed is required when the firm wishes to enter into significant commercial contracts — with suppliers, clients, government procurement agencies, or financial institutions — as the deed documents which partners have authority to bind the firm and provides the documentary basis for due diligence by the counterparty.

A Partnership Deed is needed when the firm applies for licences, permits, or registrations with provincial authorities such as the Punjab Revenue Authority, Sindh Revenue Board, or the relevant municipal corporation, all of which require proof of the firm's constitution and partners' identities.

A Partnership Deed is needed when one partner wishes to retire, a new partner is to be introduced, or the firm is to be dissolved — clear deed provisions for these events prevent costly civil litigation before District Courts in Lahore, Karachi, Islamabad, or Rawalpindi.

A valid Partnership Deed in Pakistan under the Partnership Act 1932 must contain the following essential elements.

Firm Name and Business: The name of the partnership firm, the nature of the business to be carried on (trading, manufacturing, services, real estate, or other), and the principal place of business (city and full address in Lahore, Karachi, Islamabad, Rawalpindi, or elsewhere in Pakistan). The firm name must not be identical or deceptively similar to that of another registered firm.

Partners' Details: Full legal names, CNIC numbers issued by NADRA, residential addresses, and occupations of each partner. The maximum number of partners is twenty under Section 11 of the Companies Act 2017 — beyond twenty, the business must be incorporated as a company under the Companies Act 2017 and registered with SECP. For corporate partners, the SECP registration number and registered office must be stated.

Capital Contributions: The amount of capital each partner contributes to the firm — in cash (PKR), property, goodwill, or services — and whether interest on capital is payable. Partners who contribute unequal capital typically negotiate different profit-sharing ratios or preferential returns on capital. Additional capital calls require unanimous consent unless the deed provides otherwise.

Profit and Loss Sharing: The ratio in which profits and losses are shared among the partners. Under Section 13(b) of the Partnership Act 1932, profits and losses are shared equally in the absence of an agreement — the Deed must expressly specify the agreed sharing ratio. The annual accounts are typically drawn up at 30 June (end of Pakistan's fiscal year under the Income Tax Ordinance 2001) and the firm's taxable income is reported to FBR as an AOP.

Management and Authority: Which partner(s) are responsible for day-to-day management; which acts require unanimous partner consent (admitting a new partner under Section 31 of the Partnership Act 1932; encumbering firm property; settling claims above a specified threshold); and the authority of individual partners to bind the firm in contracts with third parties under Section 18 (implied authority of a partner).

Partner Remuneration: Whether any partner receives a salary or management fee for services to the firm — this is not a default entitlement under Section 13(a) of the Partnership Act 1932 and must be expressly stipulated. Remuneration paid to a partner reduces the taxable AOP income for FBR purposes.

Banking and Accounts: The name of the SBP-regulated scheduled bank where the firm account is maintained; authorised signatories; whether single or joint signatures are required for withdrawals above specified amounts; and the obligation to maintain proper books of account accessible to all partners under Section 13(f) of the Partnership Act 1932.

Retirement and Admission: Procedure and notice period for a partner's retirement under Section 32 of the Partnership Act 1932; the right of retiring partners to receive their capital and profit share; and the procedure for admitting a new partner by unanimous written agreement under Section 31.

Dissolution and Winding Up: Grounds for dissolution (agreement, expiry of term, completion of venture, death or insolvency of a partner under Section 42 of the Partnership Act 1932, or court order under Section 44); the procedure for realising assets; discharging firm liabilities to creditors; repaying partner capital; and distributing any surplus in the profit-sharing ratio.

Governing Law and Dispute Resolution: Pakistani law; disputes to be referred to arbitration under the Arbitration Act 1940 or before the civil courts in the province where the firm is registered.

Forms-legal.com provides this Partnership Deed (Pakistan) template as a starting point. Parties should stamp the deed with the applicable provincial stamp paper and register the firm with the Registrar of Firms to avoid the Section 69 disabilities.