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Module 4

A partnership can be dissolved in several ways: 1) By agreement between the partners. 2) Compulsorily if all partners become insolvent or the business becomes illegal. 3) Upon certain contingencies like the expiration of a fixed term, completion of a venture, death of a partner, or insolvency of a partner. 4) By notice from one partner seeking dissolution. 5) By court order if grounds exist like insanity of a partner, misconduct, or inability to carry on business except at a loss.

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54 views2 pages

Module 4

A partnership can be dissolved in several ways: 1) By agreement between the partners. 2) Compulsorily if all partners become insolvent or the business becomes illegal. 3) Upon certain contingencies like the expiration of a fixed term, completion of a venture, death of a partner, or insolvency of a partner. 4) By notice from one partner seeking dissolution. 5) By court order if grounds exist like insanity of a partner, misconduct, or inability to carry on business except at a loss.

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MAYNARD CALVIN S.

MAGSINO

BA2DA

Module 4

1.
Liquidation of a Partnership
Dissolution of Partnership As stated earlier dissolution of partnership changes the existing
relationship between partners but the firm may continue its business as before.

Dissolution of a Firm
Dissolution of a partnership firm may take place without the intervention of court or by the order
of a court, in any of the ways specified later in this section. It may be noted that dissolution of the
firm necessarily brings in dissolution of the partnership. However, dissolution of partnership would
not necessarily involve dissolution of firms.

2.

1. Dissolution by Agreement: A firm is dissolved :


(a) with the consent of all the partners or
(b) in accordance with a contract between the partners.
2. Compulsory Dissolution: A firm is dissolved compulsorily in the following cases:
(a) when all the partners or all but one partner, become insolvent, rendering them incompetent
to sign a contract;
(b) when the business of the firm becomes illegal; or
(c) when some event has taken place which makes it unlawful for the partners to carry on the
business of the firm in partnership.
3. On the happening of certain contingencies: Subject to contract between the partners, a firm is
dissolved :
(a) if constituted for a fixed term, by the expiry of that term;
(b) if constituted to carry out one or more ventures, by the completion thereof;
(c) by the death of a partner;
(d) by the adjudication of a partner as an insolvent.
4. Dissolution by Notice: In case of partnership at will, the firm may be dissolved if any one of the
partners gives a notice in writing to the other partners, signifying his intention of seeking
dissolution of the firm.
5. Dissolution by Court: At the suit of a partner, the court may order a partnership firm to be
dissolved on any of the following grounds:
(a) when a partner becomes insane;
(b) when a partner becomes permanently incapable of performing his duties as a partner;
(c) when a partner is guilty of misconduct which is likely to adversely affect the business of the
firm;
(d) when a partner persistently commits breach of partnership agreement;
(e) when a partner has transferred the whole of his interest in the firm to a third party;
(f) when the business of the firm cannot be carried on except at a loss; or
(g) when, on any ground, the court regards dissolution to be just and equitable.

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