A firm is dissolved compulsorily in the following cases:
A. When a partners becomes insane
B. When the business of the firm becomes illegal
C. When all the partners or any one become insolvent
D. When a partner becomes permanently incapable of performing his duties as a partner
E. When some event has taken place which makes it unlawful for the partners to carry on the business
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) - B, C and E only.
Compulsory Dissolution: A firm is dissolved compulsorily in the following cases:
(i) when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract;
(ii) when the business of the firm becomes illegal; or
(iii) 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
- A. When a partners becomes insane- Dissolution by Court
- D. When a partner becomes permanently incapable of performing his duties as a partner- Dissolution by Court