Dissolution of a Partnership Firm.
Forms of partnership under Islamic Law.
Sir. Usman Arshad
Muhammad Hashaam Khalid
Dissolution of a partnership Firm:
Dissolution of a partnership firm means the ending of contractual relationship b/w all the partners. It means the closing of partnership business. According to partnership act: “ if there is dissolution of partnership among all the partners of a firm, it is a case of dissolution of a firm. Here all the members cease to carry on the business, the assets & liabilities are divide as per agreement”. The difference b/w dissolution of partnership firm and dissolution of a partnership is given below: Dissolution of a Firm:
Dissolution of partnership firm is the closing of partnership business. Here all the partners cease to carry on the business. The relationship b/w the partners is broken. Which causes the closure of business. After payment of all liabilities,the capital is returnd to partners. Dissolution of partnership:
Dissolution of partnership is the end of partnership only not the end of business. If one partner of a firm is dies,retires or unable to pay the debts, the remaining partners may agree to continue the firm under the same name. the remaining partners may purchase the share of outgoing. We can say that “dissolution of partnership may or may not include the dissolution of firm. But the dissolution of firm include the dissolution of partnership”. Modes of dissolution of a firm:
The conditions under which the dissolution of a firm may take are as follows:-- 1)
Dissolution by Agreement.
Dissolution by Notice.
Dissolution by the court.
Dissolution by Agreement:
Partnership is created by agreement. Similarly,it can be dissolved by an agreement at any time. A firm is dissolved in case of: a)
All the partners gives concent to it.
As per term of partnership agreement already made b/w the partners. 2)
Dissolution by Notice:
In case of partnership at will or the business has no fixed duration, it can be dissolved by any partner. A partner can dissolve it by giving written notice of dissolution to other partners duly signed by him. Notice must be very clear and certain. A notice once given cannot be withdrawn without the consent of other partners. The partnership stand dissolved from the date mentioned in the notice. 3)
In case, any of the following events take place then it becomes compulsory for the firm to dissolute: a)
When all the partners become insolvent.
When all the partners except one become insolvent.(unable to pey debt) c)
When the firm’s business become unlawful on the happening of a subsequent event. e.g. trading with alien country. 4)
A firm may be dissolved on the happening of any of the following contingent event:- a)
If the firm is established for fixed period, then the firm is dissolves automatically. b)
If the firm has been established for the achievement of specific task, on achievement of that task, firm ceases to exist, unless there is an agreement to the contrary. c)
On death of any of the partner dissolves the partnership. d)
The insolvency of any of the partner may dissolve the firm. e)
Resignation by any of the partners dissolves the partnership. 5)
Dissolution by the court:
If the partner files a suit in court, The court may order for the dissolution of the firm on the following grounds:- a)
On the application of any of the partner, court may order for the dissolution of the firm if a partner has become of an unsound mind. b)
If a partner has become permanent in capable of discharging his duties and obligations then court may order for the dissolution of firm on the application of any of the partner. c)
Please join StudyMode to read the full document