Partnership Dissolution: How To Put An End To Your Partnership

The Partnership Act of 1890 includes a definition as to what constitutes a business partnership

, this definition is as follows; "the relation which subsists between persons carrying on a business in common with a view of profit".

If the relationship between the partners breaks down for one or several reasons, a partnership dissolution may occur.

Dissolution of a partnership agreement means the termination of a partnership agreement between partners. This can occur when one of the partners in a business retires, dies or becomes bankrupt. Another common reason for dissolution of a partnership is when there is a business partnership dispute.

There are several reasons why a partnership may be dissolved.

Notice - If there is no written agreement in place the notice can be immediately effective, with no prior warning necessary.

Expiry of a fixed term - A partnership may come to an end after a fixed term agreement ends, if a new agreement is not signed, according to the Partnership Act, it becomes a partnership at will.

Charging Order over Partners Assets - Debt that has been built up by a certain partner may be sold to a creditor if the other partners can't pay or refuse to pay. This means that the partner that was in debt may be replaced by the creditor, so the creditor may now have a share of company assets. This is a position very few of the original partners want to be in.

Death or Bankruptcy - If one partner dies or becomes bankrupt, this causes an immediate dissolution of the partnership.

Illegality - If it illegal for business to be conducted under the partnership, maybe because of the way one partner has acted, the partnership is dissolved.

Court Order for Dissolution - In certain circumstances the court may rule that the partnership be dissolved.

A business partnership agreement between partners that clearly defines individual roles and what each party receives in the event of a partnership dissolution may have actually prevented a business partnership dissolution. It may have been easier to come to an agreement through negotiation or mediation. However, not every business has a clearly defined partnership agreement, and some partnerships to this day have no written agreement at all. If an agreement is absent, the decision will be governed by the 1890 Partnership Act. This puts partners in a compromising position in a business partnership dispute if there is no written agreement.

A business partnership dispute or dissolution can be a stressful, long and drawn-out process, so be sure to seek the best specialist legal advice available to ensure that everything goes smoothly and your views are effectively represented.

by: Tim Bishop

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