Q.1: How a partnership can be dissolved?
Ans: DISSOLUTION OF PARTNERSHIP [Section 39 To 47]
The Partnership Act as introduced a distinction between the “Dissolution of Partnership” and “Dissolution of Firm” Section 39 of Partnership Act describes, “The dissolution partnership between all the partners of a firm is called the dissolution of firm”
It means that dissolution of the firm includes the dissolution of a partnership on the other hand when partnership is dissolved, the firm may or may not dissolved because the surviving partners may conduct the business on the retirement, death or insolvency of partners. So it is dissolution of partnership but not dissolution of firm.
Partnership may be dissolved without dissolving the firm. If firm is dissolved all the business activities must came to an end. The assets of the firm disposed of and distributed among the creditors and the balance if any distributed among the members of the firm.
When a firm is dissolved all the business activities must become to an end.
DISSOLUTION BY AGREEMENT [Section 40]
Section 4Q of the Partnership Act says that a firm may be dissolved with the consent of all partners or in accordance with a contract between the partners.
COMPULSORY DISSOLUTION [Section 41]
Section 41 of the Partnership Act says Insolvency becomes the cause of compulsory dissolution. The business of the firm is declared unlawful due to happening of any event firm shall be dissolved.
CONTINGENT DISSOLUTION [Section 42]
Section 42 of the Partnership Act says that the partnership firm may be dissolved due to the following reasons:
(I) EXPIRY OF PERIOD
It constituted for a fixed term by the expiry of that term partnership firm may be dissolved.
(II) COMPLETION OP VENTURE
On the completion of venture for which it was formed the firm may be dissolved..
(III) INSOL VENCY OP PARTNER
By the adjudication of a partner as an insolvent the firm will be dissolved.
(IV) DEATH OP PARTNER
The firm may be dissolved by the death of partner.
DISSOLUTION BY NOTICE [Section 43]
Section 43 of the Partnership Act says;
(i) When a 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.
(ii) The firm is dissolve as from the date mentioned in the notice as the date of dissolution or if no date is so mentioned as from the date of communication of the notice.
DISSOLUTION BY COURT (Section 44)
The court may dissolve the firm on the following grounds:
1. BREACH OF AGREEMENT
When a partner commits a breach of agreement willfully relating to the business, a court may dissolve the firm.
2. CONTINUOUS LOSS OR ASSURANCE OF LOSS
If a firm is suffering a continuous loss and there is no chance of profit in fixture then a firm can be dissolved by the court.
3. MIS-CONDUCT OF A PARTNER
Where a partner is guilty of misconduct in the operation and conduct of business then court may issue the order to dissolve.
4. TRANSFER OF SHARE OF INTEREST
If a partner transfers his share or interest to others without the consent of other partners then court can dissolve the firm.
5. UNSOUND MIND
If any partner becomes mad then the court can dissolve a firm,
6. INCAPABILITY OF A PARTNER
If a partner is not capable to perform his duties due to any attack of disease, in this situation firm will also dissolve,
7. ANY OTHER GROUNDS
The court may issue the order of dissolution of the firm on any other ground considered fit by the court of Law.
Chapter 15: THE PARTNERSHIP ACT, 1922 – DEFINITION, NATURE AND KINDS OF PARTNERSHIP Next Post:
SETTLEMENT OF ACCOUNTS