Introduction

Two Different Kinds of "Dissolution"

The earlier chapters covered reconstitution of a firm — admission, retirement, and death of a partner — where the old partnership ends but the firm itself continues under a new agreement. This chapter deals with a more final event: the dissolution of the firm.

Section 39 of the Indian Partnership Act, 1932 draws a sharp line between the two ideas:

• Dissolution of partnership — the relationship changes between some of the partners, but the firm's business goes on (this is what reconstitution covers).
• Dissolution of the firm — the relationship breaks down between all the partners together. The firm ceases to exist.

Once a firm is dissolved, no further business is transacted except what is needed to wind up its affairs — selling off the firm's assets, paying its liabilities, and settling the partners' claims against each other.