Dissolution of Partnership/Firm LLB notes

Dissolution of Partnership/Firm

Definition of partnership (Article#4)

"Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all."

Who is Partner?

Persons who have entered into partnership with one another are individually called 'partners'. A partner has the legal status of a person.

What is Firm?

Persons who have entered into partnership with one another are collectively called 'firm'. As far as the legal status of a firm is concerned, it is neither a person nor a legal entity. It has no existence apart from its members. A firm carries a business under some name, it is called 'firm name'.

Dissolution of Partnership/Firm

The dissolution of a partnership among all the partners of a firm is called the "dissolution of the firm".

1)Dissolution by Agreement;-

A firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners.

2)Compulsory Dissolution;-

A firm is dissolved by;

l the adjudication of all the partners or of all the partners but one as insolvent

l the happening of any event which makes it unlawful for the business of the firm to be carried on

3)Dissolution on the happening of certain contingencies;-

A firm is dissolved;

l if constituted for a fixed term, by the expiry of that term

l if constituted to carry out one or more adventures or undertakings, by the completion thereof

l by the death of a partner

l by the adjudication of a partner as an insolvent

4)Dissolution by notice of Partnership at Will;-

Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

5)Dissolution by the Court;-

At the suit of a partner, the Court may dissolve a firm on any of the following grounds;

l Partner has become of unsound mind

l Partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner

l Partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business

l Partner, other than the partner suing, willfully or persistently commits breach of agreements 
relating to the management of the affairs of the firm of the conduct of its business

l Partner, other than the partner suing, has in any way transferred the whole of his interest in the firm to a third party

l Business of the firm cannot be carried on save at a loss

l On any other ground which renders it just and equitable that the firm should be dissolved