Winding Up of Activities after the Dissolution Of Partnership Firm
In India, the Dissolution of a partnership arrangement between all the willing partners is termed the Dissolution of the Partnership Firm. One can dissolve a Partnership Firm only with the consent of all the member partners or by a contract between the partners. A Partnership firm can be dissolved for any of the following reasons:
- Adjudication of the member partners or all the partners but one as an insolvent
- By an event which makes it unlawful for the Firm's business to be carried on or for the member partners to carry it on in the Firm
If the Partnership Firm carries on more than one separate adventure, the illegality of such adventures must not cause Dissolution in respect of its lawful undertakings.
Dissolution Of the Partnership Firm with Certain Contingencies
Subject to the Partnership Deed between the member partners, a Partnership firm can be dissolved in any of the following contingencies:
- If the Partnership was constituted for a fixed term, by the expiry of the term, the partners must dissolves the Partnership.
- If the Partnership was constituted to carry out one or more undertakings, then by the completion of the stated undertaking, the Partnership Firm must be dissolved
- In the event of the death of a member partner
- In the event of the adjudication of a member partner as an insolvent
Dissolution of Partnership Firm at Will
If the Partnership was established at will, then it must be dissolved by any of the member partners. He can issue a notice to the other member partners informing them of his intention to dissolve the Firm. The Partnership Firm will be dissolved from the date mentioned in the Notice as to the date of Dissolution. If no such date is mentioned in the Notice, then it will be dissolved from the date of the communication.
Dissolution of the Partnership Firm by the Court
The Court can dissolve a Partnership Firm, on the suit of a member partner, on any of the following grounds:
(a) One or more of the member partners has become of unsound mind. In such case, the lawsuit will be brought by the next friend of the concerned Partner who has become of unsound mind as by any other.
(b) A member partner, other than the Partner suing for the Dissolution, has become permanently incapable of performing his duties in the Firm
(c) A member partner, other than the Partner suing for the Dissolution, is guilty of conduct which will affect the carrying prejudicially on of the business as per the nature of the business
(d) A member partner, other than the Partner suing for Dissolution, wilfully commits a breach of Partnership agreements. It can be in relation to the management of the affairs in the Firm. Or it can be the Partner who conducts himself in a way that is not reasonably practicable for the other partners to carry on with their business in the Partnership with him.
(e) A member partner, other than the Partner suing for Dissolution,
- has transferred the whole of his interest in the Partnership to a third party, or
- he has allowed his share to be charged under the provisions of the following order:
- Order XXI of the First Schedule to the Code of Civil Procedure of 1908
- he has allowed the shares to be sold in the recovery of land revenue arrears or any dues recoverable as land revenue arrears due by the sued member partner
(f) The business of the Partnership Firm cannot be carried on save at a Loss
(g) Any other ground which renders it equitable that the Partnership must be dissolved
Member Partner's Acts Liabilities after Dissolution
Even after the Dissolution of the Partnership, the partners will be liable to third parties. The liability will be for any Act done by them which would become an act of the Firm, if done before its Dissolution.
This is done until a Public Notice is issued for the Dissolution. If the estate of a partner who dies or the Court adjudicates him as an insolvent or of a partner who is not known to the person dealing with the Partnership, retires, then he is not liable for any Acts after the date of cessation of his membership in the Firm.
Partner’s Rights for Business Winding up after Dissolution
On the Dissolution of a Partnership , the Authority entitles every partner against all the other partners. Such partners can apply for the Firm's property for the payment of the debts and liabilities of the Firm. He is also entitled to have the surplus distributed among the member partners according to their rights.
Continuing Authority of Partners for winding up the Firm
After the Partnership’s Dissolution, the Authority of the member partners to bind the Firm. They also bind the mutual rights and obligations of the member partners, continue irrespective of the Dissolution. It may not be necessary to wind up the affairs of the Partnership. Also, it may be unnecessary to complete unfinished transactions at the time of the Dissolution.
But the Firm is in no case bound by its Partner’s acts who had been adjudicated insolvent. This proviso does not affect the liability of person who has represented himself as a partner of the insolvent. A partner becomes insolvent after the adjudication .
To know more about the cases of Firm Dissolution or Partnership Firm-related services, connect with the LLP experts at Registrationwala. We offer the following services in relation to the Partnership Firm registration process:
- Partnership Firm registration fee structure
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- Online Partnership Deed Registration
- Issue of Partnership Registration certificate
- Online Partnership Company registration
