Ways of Dissolution of Partnership Firm.There are several ways to dissolve a partnership firm, which arePartnership firm may be dissolved with the consent of all partners, it is called dissolution by agreement.
Ways of Dissolution of Partnership Firm.
Dissolution by Notice (Sec 43)
When a partnership is at will. The partnership firm may be dissolved by any partner giving the notice in writing to all the other partners of his intention to dissolve the firm. The firm is dissolved from the date written
in the notice. If no date is written, it would be dissolve# from the date of the serving the notice.
Compulsory Dissolution (Sec 41)
Following are the reasons of compulsory dissolution
Unlawful business
A partnership of business is dissolved when business of the firm becomes unlawful, due to happening of any event.
Insolvency of partners
A partnership firm shall be dissolved, when all the partners become insolvent.
Contingent Dissolution (Sec.42)
The partnership firm may be dissolved due to following reasons:
Death of partner
On the death of a partner the partnership firm may be dissolved
Insolvency of partner
When one partner becomes Insolvent, partnership firm may be dissolved.
Expiry of period
If partnership firm is for fixed period. After the expiry of period, partnership firm may be dissolved.
Completion of work
A firm may be formed to complete a particular work. The completion is the end of the firm
Dissolution by Court (Sec 44)
The partners can apply to the court for dissolution of partnership firm due to the following cases:
Breach of agreement
If a partner breaches the agreement of partnership, the court may issue the order of dissolution.
Unsound mind
When a partner has become unsound mind any partner can go to the court for the dissolution of partnership firm.
Unable to perform duty
When a partner has unable to perform his duties, the other partners can move to the court, for dissolution of partnership firm.
Misconduct
When a partner is guilty of misconduct in the operation of business the court may issue order dissolution.
Transfer of Share
If a partner transfer his share to the third person in partnership without the consent of all partners.
Regular losses
When the partnership firm cannot be carried on expect of loss, the firm can be dissolved
Other grounds
The court may issue the order of dissolution of the firm on any other grounds considered fit by the court of law.
Conclusion;Ways of Dissolution of Partnership Firm
- Dissolution by mutual consent: If all the partners of a firm agree to dissolve the partnership, it can be dissolved by mutual consent. In such a case, a dissolution agreement is signed by all the partners, which outlines the terms and conditions of the dissolution.
- Dissolution by notice: If the partnership agreement specifies a notice period for dissolution, a partner can dissolve the partnership by giving notice to the other partners. The notice period is usually agreed upon in the partnership agreement.
- Dissolution by expiry of partnership term: If the partnership agreement specifies a fixed term for the partnership, the partnership is automatically dissolved at the end of the term.
- Dissolution by the death of a partner: If a partner dies, the partnership is automatically dissolved, unless the partnership agreement specifies otherwise.
- Dissolution by the insolvency of a partner: If a partner becomes insolvent, the partnership may be dissolved, unless the partnership agreement specifies otherwise.
- Dissolution by court order: A court can order the dissolution of a partnership on various grounds, such as fraud, misconduct, or incapacity of a partner.
Once a partnership is dissolved, the partners need to settle the accounts of the partnership, pay off its debts and distribute the remaining assets among themselves as per the terms agreed upon in the partnership agreement or as per the applicable laws
