A partnership in Bangladesh arises when two or more persons agree to share the profits of a business carried on by all of them, or by any of them acting for all. Registration is not what creates the partnership, but an unregistered firm and its partners face serious restrictions when attempting to enforce contractual rights in court.
Governing law
The principal legislation is the Partnership Act, 1932. Section 4 defines partnership, partners, a firm, and the firm name. The definition makes mutual agency central to partnership: the business must be carried on by all partners or by one or more partners acting for all. Sharing profit alone does not conclusively establish a partnership. Section 6 requires the real relationship between the parties to be examined from all relevant facts.
Section 5 provides that partnership does not arise merely from status, such as membership of a family. Section 7 defines a “partnership at will” as one where the agreement contains no provision concerning duration or determination.
The principal provisions governing partners’ rights and duties are sections 9 to 17. Sections 18 to 27 govern the authority of partners and their liability to outsiders. Registration is addressed in sections 58 to 69. Dissolution and the winding up of partnership affairs are governed principally by sections 39 to 55.
The Companies Act, 1994 also limits the size of an unincorporated business association. Section 4 generally prohibits an association or partnership formed for profit from having more than ten members for banking business or more than twenty members for another business unless it is registered as a company or formed under another applicable law.
How a partnership is formed
A partnership is formed by agreement, not by registration alone. The agreement may theoretically be oral, written, or inferred from conduct, although operating without a carefully drafted partnership deed creates substantial evidential and commercial risk.
Three elements are particularly important. There must be an agreement between the parties, an intention to share the profits of a business, and mutual agency. Mutual agency means that each partner may act as an agent of the firm and of the other partners in the ordinary course of partnership business.
For example, three people may jointly finance a restaurant and divide its profits. If each is authorised to order supplies, engage employees, receive payments, or otherwise bind the business, their relationship is likely to have the characteristics of partnership. By contrast, a lender receiving a percentage of revenue as interest or repayment does not necessarily become a partner merely because payment is linked to profit.
A written deed should identify the partners, capital contributions, profit and loss ratios, business purpose, management authority, bank-signing arrangements, decision-making rules, drawings, accounting duties, admission and retirement of partners, dispute resolution, death or incapacity provisions, and dissolution procedure.
Registration of the firm
Section 58 permits the partners to apply to the Registrar of Firms by submitting a prescribed statement containing the firm name, principal place of business, other places of business, the date each partner joined, the partners’ full names and permanent addresses, and the intended duration of the firm. The statement must be signed and verified by all partners or their specially authorised agents.
The Registrar of Joint Stock Companies and Firms, commonly known as RJSC, states that partnership registration requires the prescribed Form I together with the partnership deed and applicable filing documents. Unlike a company, a partnership does not ordinarily require prior name clearance through the RJSC name-clearance process. The live RJSC requirements and fees should be rechecked when filing because administrative forms and charges may change.
Registration does not convert the firm into a company or a separate body corporate. The firm name is the collective business name of the partners.
Legal duties among partners
Section 9 requires partners to carry on the business for the greatest common advantage, to be just and faithful to one another, and to provide true accounts and full information concerning matters affecting the firm.
Section 10 requires a partner to indemnify the firm for loss caused by that partner’s fraud. Sections 12 and 13 establish default rules concerning participation in business, access to books, decision-making, remuneration, profit and loss sharing, interest, and indemnification. The partnership deed may modify many default rights, but it cannot lawfully authorise fraud or conduct prohibited by law.
Under section 16, a partner must account to the firm for personal profit obtained from a transaction of the firm, use of firm property, use of the business connection, or use of the firm name. A partner who secretly diverts a customer, commission, opportunity, or rebate belonging to the partnership may therefore be required to restore the benefit.
Authority and liability of partners
Section 18 provides that a partner is an agent of the firm for the purposes of the business. Under section 19, a partner’s act done in the usual way of business generally binds the firm, subject to the partnership agreement and the third party’s knowledge of any restriction.
Section 25 makes every partner jointly and severally liable for acts of the firm done while that person was a partner. A creditor may therefore pursue one or more partners personally for the full enforceable debt, leaving the partners to settle contribution among themselves.
Sections 26 and 27 can also make the firm liable for a partner’s wrongful act or misapplication of money received within the scope of apparent authority. A partner should not assume that limited participation in management protects personal assets from partnership liabilities.
Effect of non-registration
Section 69 creates important litigation disabilities. Subject to statutory exceptions, a partner of an unregistered firm cannot sue the firm or another partner to enforce a right arising from a contract or conferred by the Partnership Act. An unregistered firm also cannot ordinarily sue a third party to enforce a contractual right.
Section 69 does not declare every transaction of an unregistered firm void. It restricts specified suits. The section also preserves certain proceedings, including claims connected with dissolution, accounts of a dissolved firm, and realisation of the property of a dissolved firm.
Registration should therefore be completed before a dispute develops. Attempting to register only after litigation becomes necessary may not cure every procedural or limitation problem.
Admission, retirement and expulsion
A new partner cannot ordinarily be introduced without the consent of all existing partners, subject to the partnership agreement. An incoming partner is not automatically liable for acts of the firm committed before admission.
A partner may retire by consent, in accordance with an express agreement, or, in a partnership at will, by written notice to the other partners. Expulsion is valid only when exercised in good faith under an express contractual power.
Retirement does not automatically end liability to third parties who continue dealing with the firm without notice. Proper public notice and notification to banks, suppliers, customers, regulators, tax authorities, and RJSC should be completed.
Dissolution of the firm
Section 39 distinguishes dissolution of the firm from a change in the relationship among partners. A firm may be dissolved by agreement under section 40, compulsorily under section 41, upon specified contingencies under section 42, by notice in a partnership at will under section 43, or by a court under section 44.
Under section 43, a partner may dissolve a partnership at will by giving written notice to all other partners of the intention to dissolve. The firm is dissolved from the date stated in the notice or, if no date is stated, from the date the notice is communicated.
A court may order dissolution on statutory grounds including incapacity, misconduct, persistent breach, transfer of the whole interest, continuing loss, or circumstances making dissolution just and equitable.
Dissolution must be followed by winding up. Section 46 gives every partner a right to have firm property applied toward debts and liabilities and to receive the surplus according to the partners’ rights. Section 48 establishes the general order for settling accounts, including losses, third-party debts, partner advances, capital, and distribution of the residue.
Notice of dissolution may be filed with RJSC under section 63 using the prescribed Form VI. Public notice is also important because section 45 may continue partners’ liability to outsiders for acts that would have bound the firm before dissolution until appropriate notice is given.
Practical documents
Formation records should include the partnership deed, partners’ identification documents, photographs where required, proof of business address, Form I, registration certificate, bank mandate, trade licence, tax registration, VAT registration where applicable, and sector-specific approvals.
Dissolution records should include the dissolution agreement or notice, final accounts, asset and liability schedule, creditor settlement records, employee settlement records, tax documents, bank closure instructions, public notice, and the RJSC filing.
For related guidance, see Ain.bd topics Legal Differences between a Company, Partnership and Sole Proprietorship and Breach of Contract: Available Remedies and Compensation.
Relevant courts and authorities
RJSC administers partnership registration and records changes or dissolution. Contractual and accounting disputes between partners generally fall within the jurisdiction of the competent civil court. Arbitration may apply where the partnership deed contains a valid arbitration agreement.
Tax, VAT, labour, environmental, municipal, import, export, or professional licensing matters remain subject to the relevant authorities and special laws.
Common mistakes
Common mistakes include conducting business without a written deed, assuming registration creates limited liability, allowing one partner unrestricted bank authority, failing to record capital contributions, treating profit sharing as the only test of partnership, ignoring section 69, and failing to give public notice after retirement or dissolution.
Partners also frequently distribute assets before paying creditors, neglect tax and employee liabilities, or assume that an informal withdrawal from management ends personal liability.
Law updated as of 13 July 2026.
Primary-source references
The Partnership Act, 1932, sections 4 to 7, 9 to 19, 25 to 27, 30 to 33, 39 to 48, 55, 58, 59, 63 and 69; the Companies Act, 1994, section 4; and the official partnership forms and filing instructions issued by the Registrar of Joint Stock Companies and Firms.
Disclaimer
This article provides general legal information and is not legal advice. Partnership liability and dissolution consequences depend on the deed, conduct of the partners, transactions with outsiders, evidence, and applicable regulatory laws. Consult a licensed advocate in Bangladesh for a particular partnership or dispute.