I have invested in a school under partnership with two other friend in Assam. I Need to create a partnership deed. Each of us has invested around 1 CR. However, since I cannot purchase land in Assam due to specific documentation requirements for land registration, we have decided that the other two partners will buy the land in their names, and I will invest in the infrastructure.
My concern is that they have the land in their names, which can serve as security for them in case of any future issues or in the event of school discontinuation for any reason. This way, they will at least have an asset (the land) in their names.
Now, my question is: Can we draft a partnership deed as below where the in case case legally in discontinuation of the school,the asset value should be devided among three:
Clauses:
1. School Asset including Land:
The school asset, including the land on which the School is situated, cannot be sold or otherwise disposed of while the School is in operation.
2. In Case of Discontinuation of School:
In the event of the discontinuation of the School, the partners unanimously agree to the following provisions:
2.1. Division of Assets: All school property, including the land plots numbered 215 and 260, registered in the names of Partner 1 and Partner 2, respectively, shall be equitably divided among all three partners, Partner 1, Partner 2, and Partner 3. The equal distribution is based on the fact that all three partners have made equal investments. Partner 1 and Partner 2 have invested in the land, and Partner 3 has invested in the building construction and other infrastructure.
2.2. Option for Cash Settlement: In the event that any one of the partners wishes to receive a monetary settlement instead of a share of the property, such a request shall be considered. However, a consensus among all three partners must be reached for this to occur. If an unanimous decision to convert the property into cash is made, the property shall be sold, and the amount shall be divided equally among all three partners.
2.3. No Objection Certificate (NOC): Before any action can be taken with respect to the School property including land, a No Objection Certificate (NOC) must be obtained from all three partners. Without an NOC from each partner, no sale or transfer of the School property and land can proceed.
3. Update of Agreement with Plot Numbers:
The Partners acknowledge that additional lands may be purchased in the future to further the objectives of the School. In such cases, this Agreement shall be updated to include the plot numbers and details of the newly acquired lands. Any such update shall be carried out in mutual agreement among all the Partners.
Please suggest if this is possible. Also, let me know if any other robust clauses need to be updated.
The concern is that the school will continue to operate for many years to come, and, in any future scenario, my legal heirs should not suffer.
Thanks.
Asked 1 year ago in Business Law
Thank you for the quick response.
As I understand it, a well-crafted partnership agreement, with all clauses agreed upon by all partners, plays a crucial role in this scenario, serving as a legally binding document to address any adverse situation in future.
To clarify my understanding further, I understood that when property is contributed as capital to the partnership firm, it becomes the property of the partnership. However, it remains crucial to have a meticulously drafted partnership agreement that explicitly outlines how property contributions are managed, even when the land is registered in the name of an individual partner.
So, does this imply that it is permissible for the land to be registered in the name of one partner, while the partnership deed designates this as a capital contribution to the partnership entity (in our case, the school)?
The intent is for this partnership deed to function as a legal document, affirming that the property belongs to the firm, and in the event of the school's dissolution, the assets or asset value will be equitably distributed among all partners.
I'm raising this question because, as previously mentioned, I am unable to register the land in my name due to the specific local document requirements in Assam. In Assam, only residents of the state are eligible to purchase land. Nevertheless, given that our investments are equal, with mine even exceeding the others, in any adverse future circumstances, the property's value should be divided equally among all three partners.
If my understandings are correct, then can you also help me draft a partnership deed with all other clauses as well?
Asked 1 year ago
Land has already been purchased in the names of two partners.
Can we purchase the land in the name of the partnership? I think it has to be in someone's name right?
Or do you mean that we should include a clause in the partnership agreement stating, 'partner has purchased the said land and used it as their share of investment as capital for the partnership,' is sufficient?
Asked 1 year ago
Thank you for the reply.
I understand that non-tribals cannot acquire land from the tribal belt.
However, I am now little confuse. isn't this a special situation?
Since the two partners do not have the cash to invest in the business, they are using the land as their share of investment in the firm (school), while I have invested in cash for the construction of the school building.
In summary, each of us has invested around 1 CR. The land owned by the other two partners constitutes their portion of the 1 CR investment.
So, legally, shouldn't all three partners have an equal share in the assets value in the event of the dissolution of the firm (school)?
I understand that the land cannot be shared with me, but shouldn't I be entitled to the value of the share of the land in terms of cash? Can't we create an agreement that includes these clauses?
If this is not possible, do you have any alternative solutions to propose?
@Ajay, may I ask for your perspective on this as well?
Asked 1 year ago
