Vision classes
DISSOLUTION OF FIRM
Dissolution of partnership firm occurs due to the following reasons;
- Compulsory dissolution
- When all the partners or all partners except one become insolvent
- When the business becomes illegal
- When all the partners except one decide to retire
- When all the partners except one die
- When the partnership agreement comes to an end as per the provisions mentioned in the agreement.
- Dissolution by Notice – In case of partnership at will, if any partner serves notice to other partners regarding his intention to dissolve the firm then it’ll amount to dissolution of partnership firm.
- Dissolution by Agreement – When all the partners mutually agree to dissolve the firm, it is considered to be dissolution of firm.
- Dissolution of the firm by Court – Under Section 44 of the Partnership Act, 1932, the court may order dissolution of the firm under following circumstances;
- A partner becomes insane
- Sheer impossibility of the business being carried on except at a loss
- Any other ground on which the court is satisfied that the business cannot be carried & it would be just & equitable that the business is wound up.
Section 39 of the Indian Partnership Act 1932 states that the dissolution of partnership firm among all the partners of the partnership firm is the Dissolution of the Partnership Firm. The dissolution of partnership firm ceases the existence of the organization.After this, the partnership firm cannot enter into any transaction with anybody. It can only sell the assets to realize the amount, pay the liabilities of the firm and discharge the claims of the partners.
However, the dissolution of a firm may be without or with the intervention of the court. It is noteworthy here that the dissolution of partnership may not necessarily result in the dissolution of the firm.But, dissolution of partnership firm always results in the dissolution of the partnership.
