Business Partnership Dissolution

Dissolution of a partnership occurs on the following events:

Notice (PA 1890 S26 & S32) – Notice can be given by any partner to the others. No reason need be given and the notice can have immediate effect, in fact it does not neccessarily have to even be in writing. Of course any well written partnership agreement will have a clause that supersedes these sections.

Expiry of a Fixed Term (PA 1890 S27 & S32) – Where the partners have agreed a fixed term to carry on as a partnership then on expiry of this term the partnership will be dissolved unless their agreement provides for it’s continuation (S32). If however the partners carry on after the expiry of the fixed term then they will be deemed to be carrying on business as before however the business will now be a partnership at will (S27).

Charging Order over Partner’s Assets (PA 1890 S33) – Where a creditor obtains judgement over a partner he may use S23 to enforce the judgement. Basically S23 allows the creditor to place a charge over partnership assets, the creditor cannot make a direct claim over any of the partnership assets. At this stage the other partners are entitled to pay off the creditor and look to the partner for the money otherwise the creditor may obtain an order from the court for the sale of the partner’s share in the assets. Of course such a sale will be most disatisfactory to the other partners as a third party may end up owning a part of a partnership asset as such the other partners have the right to give notice to dissolve the partnership.

Death of Bankruptcy (PA 1890 S33) – Death or bankruptcy will automatically terminate the partnership so that the PR’s of the deceased can collect for the estate the amount to which the former partner was entitled.

Illegality (PA 1890 S34) – Where it is or it becomes illegal to carry on the business of the partnership then the partnership will dissolve.

Court Order for Dissolution (PA 1890 S35) – The court can order dissolution of a partnership on various grounds including where it is ‘just and equitable’ to do so.

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