How Is A Firm Dissolved?

What is Dissolution of a Firm?

Dissolution of a partnership firm might occur without the interference of the court or by the court’s order, in any of the ways stated. It has to be noted that dissolution of the enterprise necessarily brings in dissolution of the partnership. Dissolution of a firm takes place in any of the following ways :

  1. Dissolution by Agreement: An enterprise is dissolved :
    • With the consent of all the partners
    • In accordance with an agreement between the partners
  1. Mandatory Dissolution: An enterprise is dissolved mandatorily in the below mentioned cases:
    • When all the partners or one partner, become bankrupt, rendering them incapable to sign an agreement
    • When the business concern of the enterprise is illegal
    • When some occurrence has taken place which makes it illegitimate for the partners to take over and carry on the business concern of the enterprise in partnership, for example, when a partner who is a citizen of a nation becomes an alien antagonist because of the allegated declaration of war with his nation and India
  1. On the occurrence of certain emergencies: Subject to agreement between the partners, an enterprise is dissolved :
    • If established for a steady period, by the expiry of that time frame
    • If established to carry out one or more deals, by the accomplishment thereon
    • When the fellow partner is deceased
    • By the judgment of a partner as a bankrupt
  1. Dissolution by Notice: If the partnership is at will, the enterprise may be dissolved if one of the partners furnishes a notice in written proof to the other fellow partners, bespeaking his motive of pursuing dissolution of the enterprise
  1. Dissolution by Court: At the suit of a partner, the court may order a partnership enterprise to be dissolved in any of the following mentioned aspects:
    • When a fellow partner turns out to be a mentally ill person
    • When a partner becomes ineffective in performing his responsibilities
    • When a partner is found guilty of misconduct or unethical behaviour which skeptically influence the business concern of the enterprise

The above mentioned is the concept that is explained in detail about the Dissolution of a Firm for the class 12 Commerce students. To know more, stay tuned to BYJU’S.

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