Reconstruction or Dissolution of Partnership

Following are the conditions in which a partnership stands dissolved:

1. Admission of a Partner
2. Retirement
3. Expulsion of a Partner
4. Insolvency of a Partner
5. Death of a Partner

1) Admission of a Partner:

No new partner can be admitted to a firm without the consent of all the partners. The person who is so admitted as a partner into an already existing firm is called “Incoming Partner”. If a new partner is admitted, partnership is dissolved. Incoming partner is generally liable for the debts incurred by the firm after his admission.

2) Retirement of a Partner:

Retirement of a partner means that one of the partners disconnects with the firm and remaining partners continue the business. A partner who gets retired is called “retiring or outgoing partner”.

3) Expulsion of a Partner:

Expulsion of a partner dissolves the partnership. Partnership Act does not give any general power to the partners to expel any partner from the firm. It , however  , provides that  a partner may be expelled from the firm only when:

• The power of expulsion exists in an express contract between the partners.
• This power is exercised by a majority of partners.
• The power has been exercised in good faith.

4) Insolvency of a Partner:

If a partner is adjudged insolvent, he ceases to be a partner from the date of adjudication and partnership stands dissolved.

5) Death of a Partner:

The death of a partner dissolves the partnership but the firm is not dissolved if the remaining partners decide to continue the business.