1. Meaning of Reconstitution

• Reconstitution refers to a change in the structure of the partnership firm
  
• It does not dissolve the firm but alters the relationship among partners
  
• The firm continues with a new agreement or modified terms
  
• Business operations remain unaffected during reconstitution
  
• Only the internal composition or arrangement is revised
  

2. Common Reasons for Reconstitution

• Admission of a new partner into the firm
  
• Retirement or voluntary exit of an existing partner
  
• Death or insolvency of a partner in the firm
  
• Change in profit-sharing ratio or capital contribution
  
• Any change in the terms recorded in the partnership deed
  

3. Legal Process for Reconstitution

• A new or supplementary partnership deed must be prepared
  
• Consent of all existing partners is required for changes
  
• The revised deed should clearly mention new terms and changes
  
• If the firm is registered, the Registrar of Firms must be informed
  
• All official records and agreements should reflect the updates
  

4. Effects of Reconstitution

• The firm continues as a going concern under the same name
  
• Rights and liabilities may change depending on the new terms
  
• Assets and liabilities remain with the firm unless decided otherwise
  
• The status of the firm’s contracts and clients remains unchanged
  
• Continuity of business avoids operational disruption
  

5. Documentation and Compliance

• Update the partnership deed with all agreed modifications
  
• Inform banks, clients, vendors, and statutory authorities
  
• Maintain updated capital, profit-sharing, and partner records
  
• Issue public notice if there is a significant change
  

Ensure compliance with applicable state rules and procedures