Business Laws and Ethics · Indian Partnership Act, 1932

Admission, Retirement and Expulsion of Partners under the Partnership Act

Updated 10 October 2026 · Fact-checked

A new partner is admitted only with the consent of all existing partners, unless the contract says otherwise. A partner leaves by retirement, expulsion, insolvency or death. An outgoing partner stays liable to third parties for the firm's acts until public notice is given, so always check whether notice was given and how.

Understand Admission, Retirement and Expulsion of Partners

A firm's make-up can change. A new partner can come in, and an old partner can go out by retirement, expulsion, insolvency or death. Each change affects who is liable to outsiders and what the outgoing person can claim. Exam questions test these two points again and again.

Admission. Unless the partnership contract says otherwise, a new person becomes a partner only with the consent of all the existing partners. A minor cannot be a partner but may be admitted to the benefits of partnership with the consent of all partners (Section 30). The minor's share is liable for the firm's acts, but the minor is not personally liable. Within six months of attaining majority, or of learning of the admission (whichever is later), the minor may give public notice electing to become or not to become a partner. If the minor gives no notice, the minor becomes a partner when the six months expire.

Retirement. Under Section 32(1) a partner may retire in three ways: with the consent of all the other partners, in accordance with an express agreement among the partners, or, where the partnership is at will, by giving written notice to all the other partners. Retirement does not end liability for the past. A retiring partner can be freed from liability for earlier acts only by an agreement with the third party and the partners of the reconstituted firm. That agreement may be implied from a course of dealing after the third party knew of the retirement.

Liability after leaving. Under Section 32(3), the retired partner and the partners remain liable to third parties for acts that would have been acts of the firm, until public notice is given. There is one exception. A retired partner is not liable to a third party who dealt with the firm without knowing that he was a partner. Notice may be given by the retired partner or by any partner of the reconstituted firm. Section 72 lays down how: for a registered firm, by notice to the Registrar under Section 63 and by publication in the Official Gazette and in at least one vernacular newspaper in the district of the firm's place or principal place of business. In any other case, by publication in the Gazette and the newspaper only.

Expulsion, insolvency, death. The provisions supplied for this page do not set out these rules, so the points below are general rules outside the supplied text. Learn them from your study material and check the exact wording there. A partner can be expelled only if the power is given by the contract and it is exercised in good faith, that is, for the benefit of the firm. An expelled partner is then in the position of an outgoing partner. A partner who is adjudicated insolvent ceases to be a partner. Death of a partner dissolves the firm unless the contract provides otherwise. Where the firm is not dissolved by death, the deceased partner's estate is not liable for any act of the firm done after his death (Section 35). Section 45 deals with acts done after the firm is dissolved. Its proviso says the estate of a partner who dies or is adjudicated insolvent is not liable under that section for acts done after the date he ceases to be a partner.

Rights of an outgoing partner. He may carry on a competing business and advertise it. Subject to contract, he may not use the firm name, represent himself as carrying on the firm's business, or solicit the firm's earlier customers (Section 36(1)). Partners may agree that he will not carry on a similar business within a specified period or within specified local limits. Such an agreement is valid if the restrictions are reasonable (Section 36(2)). If the continuing partners carry on the business with the firm's property without final settlement of accounts, Section 37 applies (see the formulas below).

Key rules to remember

Admission of a partner: New partner = consent of all existing partners (unless contract says otherwise); Without this consent no one becomes a partner. A minor can only be admitted to the benefits of partnership (Section 30).
Ways to retire (Section 32(1)): Consent of all other partners OR express agreement OR written notice (partnership at will); Written notice to all other partners works only where the partnership is at will.
Liability after retirement (Section 32(3)): Liable to third parties until public notice is given; Exception: no liability to a third party who dealt with the firm without knowing he was a partner.
Public notice (Section 72): Registered firm: notice to Registrar (Section 63) + Official Gazette + vernacular newspaper. Other cases: Gazette + newspaper; The newspaper must be a vernacular one circulating in the district of the firm's place or principal place of business. Notice may be given by the retired partner or any partner of the reconstituted firm (Section 32(4)).
Outgoing partner's claim (Section 37): Share of profits attributable to use of his share of property OR interest at 6% p.a. on his share, at his option; Applies where continuing partners use the firm's property with no final settlement of accounts and no contract to the contrary. If a contractual option to purchase is duly exercised, he has no further claim.
Minor's election (Section 30(5)): Notice within 6 months of majority or of knowledge, whichever is later; no notice = becomes a partner; On becoming a partner he is personally liable for all acts of the firm since admission to the benefits.
Continuing guarantee (Section 38): Revoked as to future transactions from the date of any change in the firm's constitution; Holds in the absence of agreement to the contrary.
Estate of a deceased partner (Section 35): No liability for firm's acts after death where the contract keeps the firm alive; Section 35 covers a firm that is not dissolved by death. Section 45 is about acts done after dissolution: its proviso says the estate of a partner who dies or is adjudicated insolvent is not liable under that section for acts done after he ceases to be a partner.

How to solve Admission, Retirement and Expulsion of Partners questions

Most questions give a change in the firm and ask who is liable or what a person can claim. Work through it in this order.

1Identify the type of change: admission, retirement, expulsion, insolvency or death.
2Note the dates: when the change happened, when the act or transaction took place, and when any notice was given.
3Check the contract. Most rules apply only in the absence of a contract to the contrary.
4For liability, decide whether the act was before or after the change, and whether public notice was given.
5If notice is in question, check whether the firm is registered. Then test the mode of notice against Section 72.
6Check whether the third party knew the person was a partner. This decides the Section 32(3) exception.
7For money claims, apply Section 37 (interest at 6% or profit share) or the continuing guarantee rule in Section 38.
8Write the conclusion in one line, naming the section.

Quickest way: Date-and-notice check

When to use it: Use for any liability question about a retired, expelled, deceased or insolvent partner.

Draw a line with three marks: change date, act date, notice date.
If the act is before the change, the partner stays liable for acts done while he was a partner (Section 25). A retiring partner can be discharged only by an agreement with the third party (Section 32(2)).
If the act is after the change and notice was given, the partner is not liable.
If the act is after the change and no proper notice was given, the partner is liable, unless the third party did not know he was a partner.
For a deceased partner, the estate is not liable for acts after death where the firm continues under the contract (Section 35). For acts after dissolution, the Section 45 proviso protects the estate of a partner who dies or is adjudicated insolvent from acts done after he ceases to be a partner.

Common mistakes in Admission, Retirement and Expulsion of Partners

Saying a retired partner is free of all liability once he retires.
Students link retirement with a clean exit.
Fix: Remember Section 32(3): he stays liable to third parties until public notice. Past debts also remain unless the third party agrees to discharge him.
Treating any announcement as public notice.
Students forget that the Act prescribes the mode.
Fix: For a registered firm, give notice to the Registrar and publish in the Official Gazette and a vernacular newspaper. A private letter to customers is not public notice.
Holding the estate of a deceased partner liable for later acts because no notice was given.
Students apply the retirement rule to every case.
Fix: Where the contract keeps the firm alive after his death, Section 35 says the estate is not liable for acts done after death. After dissolution, the Section 45 proviso protects the estate of a partner who dies or is adjudicated insolvent from acts done after he ceases to be a partner. The Section 32(3) notice rule is for retired partners.
Giving the outgoing partner both interest and profit share under Section 37.
Students read 'or' as 'and'.
Fix: He chooses one: profit attributable to his share of the property, or 6% p.a. interest on that share.
Saying a minor becomes a partner automatically on admission.
Students mix up admission to benefits with partnership.
Fix: A minor is only admitted to the benefits. He becomes a partner only by electing to or by giving no notice within six months of majority or of knowledge, whichever is later.
Forgetting the continuing guarantee ends on a change in the firm.
Students think a guarantee runs until the debt is paid.
Fix: Under Section 38, a guarantee given to or about a firm is revoked for future transactions from the date of any change in the firm's constitution, unless agreed otherwise.

Worked examples

Example 1

Ravi, Sunil and Meena run a registered firm in Pune. Meena retires on 1 April. No public notice is given. On 1 June, Gupta Traders, a supplier who had always known Meena as a partner, supplies goods on credit to the firm for ₹80,000. The firm fails to pay. Is Meena liable?

Show the solution

The change is Meena's retirement on 1 April. The act is a credit purchase on 1 June, after the retirement.
No public notice has been given. Under Section 32(3), despite her retirement, Meena and the continuing partners remain liable as partners to third parties for any act that would have been an act of the firm if done before the retirement, until public notice is given. A credit purchase for the firm's business is such an act.
The exception applies only to a third party who dealt with the firm without knowing she was a partner. Gupta Traders knew Meena was a partner, so the exception does not help her.
Because she remains liable as a partner, Section 25 applies. Every partner is liable jointly with all the other partners and also severally for the firm's acts.

Answer: Meena is liable to Gupta Traders for ₹80,000 under Section 32(3), jointly with the other partners and also severally (Section 25), until public notice is given. For the registered firm, notice goes to the Registrar under Section 63 and is published in the Official Gazette and a vernacular newspaper (Section 72).

Example 2

Arun retires from a firm on 1 January. His share in the firm's property is ₹5,00,000. The continuing partners keep using the firm's property without settling his accounts. There is no contract on this. After nine months Arun claims a sum from them. If he chooses interest, how much can he claim?

Show the solution

Section 37 applies because the continuing partners carry on the business with the firm's property, with no final settlement and no contrary contract.
Arun may choose a share of profits attributable to the use of his share of property, or interest at 6% per annum on his share.
He chooses interest. Annual interest = ₹5,00,000 × 6 ÷ 100 = ₹30,000.
For nine months: ₹30,000 × 9 ÷ 12 = ₹22,500.

Answer: Arun can claim ₹22,500 as interest for nine months. He could instead have claimed the profit attributable to his share of the property, but not both.

Exam tips

Read the dates in the question first. Most answers turn on whether the act came before or after the change and before or after notice.
In liability questions, name the section: Section 32(3) for retired partners, Section 25 for joint and several liability, Section 45 for dissolution, Section 35 for estates.
Learn the Section 72 mode of notice for registered and other firms. Many MCQs test this difference.
For expulsion, write the general rule: the power must be given by the contract and exercised in good faith, for the benefit of the firm. Check the exact wording and section number in your study material.
In MCQs, watch for words such as 'at will', 'registered' and 'without knowing he was a partner'. They change the answer.

Practice questions from Indian Partnership Act, 1932

Admission, Retirement and Expulsion of Partners in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Admission, Retirement and Expulsion of Partners: frequently asked questions

Is a retired partner liable for the firm's acts after retirement?

Yes, until public notice of retirement is given. Under Section 32(3) he remains liable to third parties for acts that would have been the firm's acts before retirement. He is not liable to a third party who dealt with the firm without knowing he was a partner.

How is public notice of retirement given?

For a registered firm, give notice to the Registrar under Section 63. Also publish it in the Official Gazette and in at least one vernacular newspaper in the district where the firm has its place or principal place of business. For an unregistered firm, publication in the Gazette and the newspaper is enough. The retired partner or any partner of the reconstituted firm may give it.

What can an outgoing partner claim under Section 37?

If the continuing partners use the firm's property with no final settlement of accounts and no contrary contract, he can choose either the profit attributable to his share of the property or 6% per annum interest on that share. If a contractual option to purchase his interest is duly exercised, he has no further claim.

Can a partner be expelled?

This is a general rule outside the provisions supplied for this page, so check the wording in your study material. A partner can be expelled only if the contract gives that power and it is used in good faith, for the benefit of the firm. An expelled partner is treated as an outgoing partner, and the rules on notice and liability apply.

What happens to a continuing guarantee when a partner leaves?

Under Section 38, a continuing guarantee given to a firm, or to a third party about the firm's transactions, is revoked for future transactions from the date of any change in the firm's constitution. This is so unless the parties agreed otherwise.