Question

Does insolvency of a partner always result in dissolution of a firm?

• A. Yes
• B. Not at all
• C. Not if partnership deed does not so provide
• D. Not if exemption sought from registrar of firms

Answer 1

Answer: (C)

Not if partnership deed does not so provide

Partnership Deed contain all the conditions and legalities of partnership. It provide a guiding base for all future activities. So if partnership deed provides that insolvency of partner does not result in dissolution of firm then it will only be dissolution of partnership not the dissolution of partnership firm. Remaining partner can continue its operations.