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 :

B, D only

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.