LAWS OF MALAYSIA
REPRINT
Act 135
PARTNERSHIP ACT 1961
Incorporating all amendments up to 1 January 2006
PUBLISHED BY
THE COMMISSIONER OF LAW REVISION, MALAYSIA
UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968
IN COLLABORATION WITH
PERCETAKAN NASIONAL MALAYSIA BHD
2006
Laws of Malaysia
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ACT 135
PARTNERSHIP ACT 1961
First enacted
... ... ... ... ... ... 1961 (Sabah Ord. No. 1
of 1961)
Revised
... ... ... ... ... ... ... 1974 (Act 135 w.e.f.
1 July 1974)
PREVIOUS REPRINTS
First Reprint
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1997
Second Reprint
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2000
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LAWS OF MALAYSIA
Act 135
PARTNERSHIP ACT 1961
ARRANGEMENT OF SECTIONS
PART I
PRELIMINARY
Section
1.
Short title
2.
Interpretation
PART II
NATURE OF PARTNERSHIP
3.
Definition of partnership
Certain circumstances not prima facie partnerships
4.
5.
Postponement of rights of person lending or selling in consideration of
share of profits in case of bankruptcy
6.
Meaning of firm and firm name
PART III
RELATIONS OF PARTNERS TO PERSONS DEALING
WITH THEM
7.
Power of partner to bind firm
8.
Partners bound by acts on behalf of firm
9.
Partner using credit of firm for private purposes
10.
Effect of notice that firm will not be bound by acts of partner
11.
Liability of partners
12.
Liability of firm for wrongs
13.
Misapplication of money or property received for or in custody of firm
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ACT 135
Section
14.
Liability for wrongs joint and several
15.
Improper employment of trust property for partnership purposes
16.
Persons liable by "holding out"
17.
Admissions and representations of partner
18.
Notice to acting partner to be notice to firm
19.
Liability of incoming and outgoing partners
20.
Revocation of continuing guarantee by change in firm
PART IV
RELATIONS OF PARTNERS TO ONE ANOTHER
21.
Variation by consent of terms of partnership
22.
Partnership property
23.
Property bought with partnership money
24.
Conversion into personal estate of land held as partnership property
25.
Procedure against partnership property for partner's separate judgment
debt
26.
Rules as to interests and duties of partners, subject to special agreement
27.
Expulsion of partner
28.
Retirement from partnership at will
29.
Where partnership for term is continued over, continuance on old terms
presumed
Duty of partners to render accounts, etc.
30.
31.
Accountability of partners for private profits
32.
Duty of partner not to compete with firm
33.
Rights of assignee of share in partnership
PART V
DISSOLUTION OF PARTNERSHIP AND ITS
CONSEQUENCES
34.
Dissolution by expiration or notice
35.
Dissolution by bankruptcy, death or charge
36.
Dissolution by illegality of partnership
37.
Dissolution by the court
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Section
38.
Rights of persons dealing with firm against apparent members of firm
39.
Right of partner to notify dissolution
40.
Continuing authority of partners for purposes of winding up
41.
Rights of partners as to application of partnership property
42.
Apportionment of premium where partnership prematurely dissolved
43.
Rights where partnership dissolved for fraud or misrepresentation
44.
Rights of outgoing partner in certain cases to share profits made after
dissolution
45.
Retiring or deceased partner's share to be a debt
46.
Rules for distribution of assets on final settlement of accounts
47.
Savings
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ACT 135
Partnership
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LAWS OF MALAYSIA
Act 135
PARTNERSHIP ACT 1961
An Act relating to partnership.
[Sabah--29 April 1961;
Other States--1 July 1974, Act A240]
PART I
PRELIMANARY
Short title
This Act may be cited as the Partnership Act 1961.
1.
Interpretation
In this Act--
2.
"bankruptcy" means--
(a) being the subject of an order of adjudication under the
Bankruptcy Act 1967 [Act 360];
(b) entering into an arrangement to pay creditors less than
the full amount owed; or
(c) dying in insolvent circumstances;
"business" includes every trade, occupation, or profession.
PART II
NATURE OF PARTNERSHIP
Definition of partnership
3. (1) Partnership is the relation which subsists between persons
carrying on business in common with a view of profit.
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ACT 135
(2) The relation between members of any company or association
which is--
(a) registered as a company under the Companies Act 1965
[Act 125] or as a co-operative society under any written
law relating to co-operative societies; or
(b) formed or incorporated by or in pursuance of--
(i) any other law having effect in Malaysia or any
part thereof; or
(ii) any letters patent, Royal Charter or Act of the
Parliament of the United Kingdom,
is not a partnership within the meaning of this Act.
Certain circumstances not prima facie partnerships
4.  In determining whether a partnership does or does not exist,
regard shall be had to the following rules:
(a) joint tenancy, tenancy in common, joint property, common
property, or part ownership does not of itself create a
partnership as to anything so held or owned, whether the
tenants or owners do or do not share any profits made
by the use thereof;
(b) the sharing of gross returns does not of itself create a
partnership, whether the persons sharing such returns
have or have not a joint or common right or interest in
any property from which or from the use of which the
returns are derived;
(c) the receipt by a person of a share of the profits of business
is prima facie evidence that he is a partner in the business,
but the receipt of such a share, or of a payment contingent
on or varying with the profits of a business, does not of
itself make him a partner in the business; and in particular--
(i) the receipt by a person of a debt or other liquidated
amount, by instalments or otherwise, out of the
accruing profits of a business does not of itself
make him a partner in the business or liable as
such;
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(ii) a contract for the remuneration of a servant or
agent of a person engaged in a business by a share
of the profits of the business does not of itself
make the servant or agent a partner in the business
or liable as such;
(iii) a person being the widow or child of a deceased
partner, and receiving by way of annuity a portion
of the profits made in the business in which the
deceased person was a partner, is not, by reason
only of such receipt, a partner in the business or
liable as such;
(iv) the advance of money by way of loan to a person
engaged or about to engage in any business on a
contract with that person that the lender shall receive
a rate of interest varying with the profits, or shall
receive a share of the profits, arising from carrying
on the business, does not of itself make the lender
a partner with the person or persons carrying on
the business or liable as such:
Provided that the contract is in writing and signed
by or on behalf of all the parties thereto; and
(v) a person receiving, by way of annuity or otherwise,
a portion of the profits of a business in consideration
of the sale by him of the goodwill of the business
is not, by reason only of such receipt, a partner
in the business or liable as such.
Postponement of rights of person lending or selling in
consideration of share of profits in case of bankruptcy
5. In the event of the bankruptcy of any person to whom money
has been advanced by way of loan upon such a contract as is
mentioned in subparagraph 4(c)(iv), or of any buyer of a goodwill
in consideration of a share of the profits of the business, the lender
of the loan shall not be entitled to recover anything in respect of
his loan, and the seller of the goodwill shall not be entitled to
recover anything in respect of the share of profits contracted for,
until the claims of other creditors of the borrower or buyer for
valuable consideration in money or money's worth have been
satisfied.
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ACT 135
Meaning of firm and firm name
6.  Persons who have entered into partnership with one another
are, for the purposes of this Act, called collectively a firm, and
the name under which their business is carried on is called the
firm name.
PART III
RELATIONS OF PARTNERS TO PERSONS DEALING
WITH THEM
Power of partner to bind firm
7.  Every partner is an agent of the firm and his other partners
for the purpose of the business of the partnership; and the acts of
every partner who does any act for carrying on in the usual way
business of the kind carried on by the firm of which he is a member
bind the firm and his partners, unless the partner so acting has in
fact no authority to act for the firm in the particular matter, and
the person with whom he is dealing either knows that he has no
authority or does not know or believe him to be a partner.
Partners bound by acts on behalf of firm
8.  An act or instrument relating to the business of the firm and
done or executed in the firm-name, or in any other manner showing
an intention to bind the firm, by any person thereto authorized,
whether a partner or not, is binding on the firm and all the partners:
Provided that this section shall not affect any general rule of law
relating to the execution of deeds or negotiable instruments.
Partner using credit of firm for private purposes
9.  Where one partner pledges the credit of the firm for a purpose
apparently not connected with the firm's ordinary course of business,
the firm is not bound, unless he is in fact specially authorized by
the other partners; but this section does not affect any personal
liability incurred by an individual partner.
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Effect of notice that firm will not be bound by acts of partner
10.  If it has been agreed between the partners that any restriction
shall be placed on the power of any one or more of them to bind
the firm, no act done in contravention of the agreement is binding
on the firm with respect to persons having notice of the agreement.
Liability of partners
11.  Every partner in a firm is liable jointly with the other partners
for all debts and obligations of the firm incurred while he is a
partner; and after his death his estate is also severally liable in a
due course of administration for such debts and obligations, so far
as they remain unsatisfied but subject to the prior payment of his
separate debts.
Liability of firm for wrongs
12.  Where, by any wrongful act or omission of any partner acting
in the ordinary course of the business of the firm or with the
authority of his co-partners, loss or injury is caused to any person
not being a partner in the firm, or any penalty is incurred, the firm
is liable therefor to the same extent as the partner so acting or
omitting to act.
Misapplication of money or property received for or in custody
of firm
In the following cases, namely:
13.
(a) where one partner, acting within the scope of his apparent
authority, receives the money or property of a third person
and misapplies it; and
(b) where a firm in the course of its business receives the
money or property of a third person, and the money or
property so received is misapplied by one or more of the
partners while it is in the custody of the firm,
the firm is liable to make good the loss.
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ACT 135
Liability for wrongs joint and several
14.  Every partner is liable jointly with his co-partners and also
severally for everything for which the firm while he is a partner
therein becomes liable under section 12 or 13.
Improper employment of trust property for partnership purposes
15.  If a partner, being a trustee, improperly employs trust property
in the business or on the account of the partnership, no other
partner is liable for the trust property to the persons beneficially
interested therein:
Provided as follows:
(a) this section shall not affect any liability incurred by any
partner by reason of his having notice of a breach of
trust; and
(b) nothing in this section shall prevent trust money from
being followed and recovered