Dissolution of partnership firm is a process in which relationship between partners of firm is dissolved or terminated. If a relationship between all the partners of firm is dissolved then it is known as dissolution of firm. In case of dissolution of partnership of firm, the firm ceases to exist. This process includes the discarding and disposing of all the assets of firm or and settlements of accounts, assets, and liabilities.
The dissolution of partnership takes place in any of the following ways:
1. Change in the existing profit sharing ratio.
2. Admission of a new partner
3. The retirement of an existing partner
4. Death of an existing partner
5. Insolvency of a partner as he becomes incompetent to contract. Thus, he can no longer be a partner in the firm.
6. On completion of a specific venture in case, the partnership was formed specifically for that particular venture.
7. On expiry of the period for which the partnership was formed.
Section 45 Indian Partnership Act, 1932
LIABILITY FOR ACTS OF PARTNERS DONE AFTER DISSOLUTION.
(1) Notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm, if done before the dissolution, until public notice is given of the dissolution :
Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable under this section for acts done after the date on which he ceases to be a partner.
(2) Notices under sub-section (1) may be given by any partner.
Draft of Notice
NOTICE is hereby given that the partnership heretofore subsisting between the undersigned AB of ….. ………………….., and CD of ………………………, carrying on business of …………… at …………………, under the firm name of …………………….., has been dissolved by mutual consent (or by effluxion of time, or, by the death of the said (CD) as from the …………. day of ………… so far as the same concerns the said CD who has thus ceased to have any interest in the said business.
All debts due to or by the said firm will be received and paid respectively by the said AB who will continue to carry on the said business on his sole responsibility under the same old firm name (or under the new firm name of, etc.).
Date………………………..
AB
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