A firm is compulsorily dissolved :
Answer & explanation
Correct answer: option 3
The correct answer is Option 3 - When the business of the firms becomes illegal.
A firm is compulsorily dissolved When the business of the firms becomes illegal.
Compulsory Dissolution: A firm is dissolved compulsorily in the following cases:
(a) when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract;
(b) when the business of the firm becomes illegal; or
(c) when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, e.g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.
OTHER OPTIONS
- When the business of the firm can not be carried on except at a loss- Dissolution by court.
- When a partner persistently commits breach of partnership agreement- Dissolution by court.
- When a partner becomes insane- Dissolution by court.