A ‘partnership’ is defined as an association of two or more persons engaged in a business for sharing profit and loss in proportion to to their initial paid-up capital. Partners are legally liable for all assests acquired in the name of the business (un less otherwise stated in the partnership agreement).
Incase one of the partner(s) doesnot outlive the buisness, other partners cannot exercise their right over the share of the deceased partner when it comes to commercial property that is in the name of the frim or used by the partners exclusively for the business.
The share deceased partner (in any commercial property) can be distributed in three ways:
1. When a partnership deed (agreement) exists: Once a partnership has been established , each partner nominates a successor authorised to exercise control over the deceased person’s share. The share of the business is automatically transferred to the designated successor according to the terms and conditions of the partnership agreement.
* If the deed allows the right to purchase the share of the deceased partner, the surviving partner/s can buy the share from the successor. However, the decision to sell or retain control over thy share lies entirely with the successor.
2. When no partnership deeds exists: The shares of deceased partner and transferredin accordance with the provision of The Partnership Act, 1932. The Act stipulates that after the death kf a partner, proprietary control over his/her share is entirely at the discretion of his/her legal representatives of heirs.
3. According to Shariah (Islamic Law): A partnership is called ‘Musharakah’, while each partner is called a ‘Shirakh’. In case of death of a partner, his share is automatically inherited by his/her legal heirs(as per Sharaih).
The legal heirs may choose to retain control over the share, sell it to the other partner/s or to an independent third party.
By Sadia Tariq. The writer is a lawyer