DISSOLUTION OF FIRM

MODES OF
DISSOLUTION
 By consent [S. 40]

 By Agreement [s.40]
- with the consent of all the partners
-in accordance with a contract between
the partners
 By Compulsory Dissolution [s.41]
- Insolvency [all partners have been
adjudicated as insolvent]
- [only one partner remains solvent all others
are adjudicated as insolvent]

- Illegality of business (section 23 or 56)


Contingent Dissolution [s.42]

- Expiry of term
- Completion of Business
- Death of Partner
- Insolvency
By Notice [s. 43]
such notice
1. should be in writing
2. should be signed by partner giving it.
3. should be served upon all the partners.
Date of dissolution: will be the date mentioned
in the notice if no date then date of
communication of notice.
 Dissolution by Court [s.44]
- Insanity [person of unsound mind]
- Permanent Incapacity [illness mental or
physical]
- Misconduct [where it is willful
misconduct & is likely to effect the carrying
on of business]
- Persistent Breach of Agreement [in
management affairs]
 Transfer of Interest
- transfer whole of his interest
- permission by partner of his whole
interest to be charged under execution of
decree against him
- allowance by partner to sell his
partnership interest for recovery of arrears
of land revenue.
 Just & Equitable
 Mode of settlement of accounts between
partners 
 Sec. 48. Two principles:
- 1. payment of losses
- 2. Application as to assets:
 Firstly : debts of firm to third party

 Second : paying each partner rateable what is due to him from

firm

 Third : paying each partner rateable what is due to him on

account of capital

 Fourth : Residue will be divided among the partners in ratio in

which they were entitled to share profits