Dissolution of A Partnership
Dissolution of a partnership occurs when there is a change in the relationship of the partners, as a result of a partner ceasing to be associated or a part of carrying on the business. Situations which can be a catalyst for dissolution are
- Action by partners - taking the form of either the notice of dissolution of a previously indefinite partnership agreement which is given by a partner which is agreed to by the other partners, or when the partners agree to dissolve the partnership after the termination of a single or multiple undertakings. An example of the latter would be the partners' prior agreement an expiration date (though the partners may at will choose to continue the partnership after a pre-agreed expiration date if they so choose). Any such action to dissolve the partnership by partners is a grounds for automatic dissolution.
- Operation of law - the partnership may be dissolved in the event of a partner's death or bankruptcy, so long as the other partner(s) agree to the dissolution. Operation of law is also grounds for automatic dissolution.
- Illegality - a partnership is automatically dissolved when an event renders the purpose of the partnership illegal or against public policy
- By the court - when none of the automatic grounds for dissolution listed above are present, one or more partners may apply for dissolution through a court. Examples include insanity, permanent incapacity, one partner's conduct which a court finds detrimental to the business, wilful or persistent breach of the partnership agreement, or whenever a court finds dissolution of the partnership to be just and equitable.
Read more about this topic: Partnership (Australia)
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