Can Partnership Deed Expire

Partnership Deed is the legal document drafted or created when two or more people join hands to run a business or carry on any assignment..

Dissolution of Partnership means bringing an end to the partnership or discontinuing the business under the said partnership firm. During dissolution all liabilities shall be settled by selling off assets or transferring them on the name of Partners as decided by them internally or as per deed of partnership.

Any profit/ loss shall be shared with the partners in the ratio as decided by the partners in the partnership deed.

Partnership Firm or Partnership:

Dissolution of partnership firm means an end of firm and it is different from termination of partnership which means when Partner decides to resign from his position, the firm continues but Partner exits. 

In the former case, the firm ends its name and business cannot be continued further but in a later stage the Partnership firm continues and the business is not hampered; however, the partner leaves from the Partnership.

Ways Of Dissolution: 

1. Partners Mutually Agree

This is one of the easiest ways for dissolution of partnership. Partner or Partners may give mutual consent or bring an end to Partnership 

2. Compulsory Dissolution of Partnership

1. When either Partner is declared insolvent
2. Partnership firm is involved in illegal activities like dealing in drugs or anything against the nature of law

3. Contingent Events:

1. Tenure is finished
2. Purpose is fulfilled
3. Death of the respective Partner

In Parvathammal V. CIT, it was observed by the court in the scenario of death of one of the Partner out of 2 Partners, “Unless when there was a specific arrangement in the original partnership deed, a partnership usually dissolves upon the death of a partner. Even if there were such an agreement, when one of the two partners in a partnership dies, the other partner immediately succeeds, and there is no partnership that exists that can be joined by a third party” 

4. By Notice:

Any partner can give notice of termination in advance as per terms and conditions of the Agreement.

5. If Court Deems Fit

When either Party turns insane or unsound mind or misbehaves with the other Partner or does not abide by the terms of the Agreement

Removal Of Partner:

1. Retirement of Partner:

Partner can be retired if:

1. Consent of all partners
2. By express agreement
3. Submission of notice in writing mentioning intention to retire the partner

2. Expulsion of Partner:

1. It must be as per terms of the Agreement
2. Majority must exercise the power
3. Shall be in good faith

3. Insolvency of Partner:

When any Partner is declared insolvent, partner ceases to be a partner on date of declaration as insolvent regardless of the fact that firm is dissolved or not.

Thus, dissolving a partnership firm means ceasing of business under the firm’s name. All liabilities are finally settled in this situation by selling assets or transferring them to a respective partner, resolving all accounts with the partnership firm.