Dissolution of a Firm
A firm may be dissolved in the following manner
- Dissolution by Court
- Dissolution by agreement
- Dissolution by operation of law
- Dissolution on the happening of certain contingencies
- Dissolution by notice
Dissolution by Court
The court may dissolve a firm at the suit of any partners on any of the following grounds namely :
- Insanity of a Partner : that a partner has become of unsound mind. The insanity of a partner does not ipso facto dissolve the firm and the next friend or continuing partners has to file suit foe dissolution.
- Permanent Incapacity of a Partner : that a partner has become permanently incapable of performing his duties as partner.
- Conduct Affecting Prejudicially The Business : that a partner is guilty of conduct, which is likely to affect prejudicially the carrying on the business of the firm.
- Breach of Partnership Agreement: that a partner willfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct of it - s business or otherwise conducts himself in matters relating to the business, that it is not reasonably practical for the other partners to carry on the business with him.
- Transfer of Interest of a Partner: that a partner has in any way transferred the whole of his interest in the firm to a third party.
- Loss: that the business of the firm cannot be carried on save at a loss
- Just And Equitable:
on any other ground that renders it just an equitable that the firm should be dissolved.
Dissolution by Agreement
A firm may be dissolved with the consent of all the partners or in accordance with the contract between the partners. The partnership agreement may contain a proviso that the firm will be dissolved on the happening of certain contingency.
Dissolution by Operation of Law
A firm is compulsorily dissolved on the following grounds
- Insolvency of partners
- By the happening of any event which makes it unlawful for the business of the firm to e carried on.