Core Module: BLP Paper B
Partnerships
Dissolution of the Partnership
Dissolution is when partnership comes to an END. It should be dealt with in the Partnership
Agreement (by express terms), otherwise with PA 1890 provides the details.
[s.27 and 32-35]
26 Retirement from partnership at will – by notice of one only partner.
32 Dissolution by expiration of fixed term or notice.
If partners continue after expiry date of the fixed term then they will be
presumed to be partners on the same terms as before except their new
partnership will be a partnership at will (S.26 will apply)
NB. S.26 / 32: the notice need not state any reason and can have immediate
effect. It need not be in writing unless partnership was by deed.
33 Charging order over partner’s assets: notice of dissolution given by other
partners to a partner whose shares in the partnership assets has been charged
under S.23 by order of the court as security for payment of that partner’s private
debt.
33 Death or bankruptcy – automatically terminates the partnership. The trustees in
his bankruptcy / PRs can collect for his estate the share he was entitled to.
34 Illegality – Where it is illegal to carry on the business of the partnership, it will
be dissolved. this cannot be excluded by agreement.
35 Court order: If “just and equitable” to do so – very wide discretion. This
effectively enables the partner to break his agreement with the other partners
without being liable for breach of contract.
Express terms on dissolution:
Payment of outgoing partner’s share – where a person ceases to be a partner by reason of
retirement, expulsion, death or bankruptcy, and the others continue to be in partnership,
they will need to pay for the outgoing partner’s share in the business.
The agreement should contain the appropriate terms (i.e. how much does outgoing partner
receive). If it does not then S.42 PA 1890 applies.
Following dissolution
1. Disposal of business: sold and proceeds pay off creditors and partners. Business can be sold
as a whole or assets broken off and sold separately.
S.39 PA: every partner has the right to insist on a disposal and payment as above, if necessary
by application of the court.
2. Goodwill of business can be sold: the benefit of business’s reputation and connections.
Valued by taking a number of year’s profit (perhaps 2)
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