The limit of number of partners for forming partnership firm was not levied by the Partnership Act. Instead it was earlier levied by Companies Act, 1956. At present the Companies Act, 2013 is in effect and the limit of partners is also changed.
What is aim?
As far as the aim for the limit is to prevent mischief and malpractice undertaken by the large organisations because of flexibility granted by unregistered entities such as Partnership Firms. Therefore, the Law puts ceiling limit on the number of persons constituting an association or partnership.
What is the provision?
Section: Section 464 of Companies Act, 2013
The Government has power to decide the maximum number of person allowed to form business for gain under this section. The provision further restricts that the maximum number to be notified must not exceed 100.
The provision does not apply to: HUF; or partnership formed by professionals (CA/CS/CMA)
The association or partnership violating the provision is terms as illegal association and is punishable with fine which may extend to 1 Lakh rupees and shall also be personally liable for all liabilities incurred in such business.
What is the limit as present?
Rule: Rule 10 of the Companies (Miscellaneous) Rules, 2014
Under this rule, the limit of number of persons is 50. If the number of Partners exceeds the limit prescribed i.e. 50, it is considered as illegal association, which the law does not recognize.