JAIIB LRAB Unit 53 - Dissolution Of Firm

A firm can be dissolved with the consent of all the partners or in accordance with a

contract between the partners.

COMPULSORY DISSOLUTION

A firm is dissolved:

(a) if all the partners (except one) are adjudicated insolvent; or

(b) by the happening of any event which makes it unlawful for the business itself to be carried on or the event makes the business unlawful if it carried on in partnership.

However, if the partnership firm is carrying on more than one separate businesses, the illegality of one or more does not cause the dissolution of the firm. The firm can continue to carry on its lawful adventures and undertakings.

54.4 DISSOLUTION ON THE HAPPENING OF CERTAIN CONTINGENCIES

A firm is dissolved in the following circumstances. To avoid dissolution in these cases, the partners should expressly agree that the firm shall not be dissolved in these circumstances:

(a) if the partnership is constituted for a fixed term, then by the expiry of that term;

(b) if the partnership is constituted to carry out one or more adventures or undertaking, then by the completion thereof;

(c) by the death of a partner; and

(d) by the adjudication of a partner as an insolvent.

54.5 DISSOLUTION BY THE COURT

At the suit of a partner the court may dissolve a firm on any of the following grounds:

(a) that a partner has become of unsound mind;

(b) that a partner (other than the partner suing for dissolution) has become permanently incapable of performing his duties as partner;

(c) that a partner (other than the partner suing) is guilty of conduct which is likely to affect prejudicially the carrying on of the business;

(d) that a partner (other than the partner suing) wilfully or persistently commits breach of agreements in relation to the management of the affairs of the firm or the conduct of its business or it is not reasonably practicable for the other partners to carry on the business in partnership with him, because of his conduct with respect to the business;

(e) that a partner (other than the partner suing) has transferred the whole of his interest in the firm to a third party;

(f) that the business of the firm cannot be carried on except at a loss; or

(g) on any other ground which renders it just and equitable that the firm should be dissolved.