Following are various reasons for which a partnership firm can be dissolved. Which of the following will lead to compulsory dissolution?
A. With consent of all partners.
B. When business becomes illegal.
C. When a partner dies.
D. When all partners become insolvent.
E. When a partner becomes insane.
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 4
The correct answer is option 4- B, D only.
A firm is dissolved compulsorily in the following cases:
- when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract;
- when the business of the firm becomes illegal; or
- 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.
A. With consent of all partners.- This is dissolution by agreement.
C. When a partner dies.- This is dissolution on happening of certain contingency.
E. When a partner becomes insane.- This is dissolution by court.