There are several ways in which a firm can be dissolved:
Dissolution by Agreement: The firm can be dissolved if all the partners agree to it or if there is a contractual provision for dissolution.
Compulsory Dissolution: A firm may be dissolved involuntarily under certain circumstances. These include when all partners or all but one partner become insolvent, making them unable to enter into contracts. Additionally, if the firm's business becomes illegal or if an event occurs that makes it unlawful for the partners to continue the partnership (e.g., a partner becomes an enemy alien due to a declaration of war with their country and India).
Dissolution based on Contingencies: The firm may be dissolved based on certain contingencies specified in the partnership agreement. These include the expiry of a fixed term for which the firm was established, the completion of specific ventures outlined in the agreement, the death of a partner, or the declaration of a partner as insolvent.
Dissolution by Notice: In a partnership at will (where no fixed term is specified), any partner can give written notice to the other partners expressing their intention to dissolve the firm, leading to its dissolution.
Dissolution by Court: A partner can file a lawsuit seeking the dissolution of the partnership firm. The court may order dissolution on grounds such as a partner's insanity or permanent incapacity to fulfill their duties within the partnership. |
