Tag: modes of dissolution of firm

Questions Related to modes of dissolution of firm

Under section $44$ of the Partnership Act, which of these cannot be a ground for dissolution of a firm.

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  1. Continued losses

  2. Persistent breach of agreement

  3. Just and Equitable

  4. Insolvency of any partner

Show answer
Correct Option: D
Explanation:

According to Section 44, continued losses, willfully or persistent breach of contract and any other reason that court may find just and equitable can be ground for dissolution of firm. 
Under section 41 of Indian Partnership Act, insolvency becomes basis of dissolution of firm in case all the partners become insolvent or all except one partner become insolvent. Insolvency of one partner does not become ground for dissolution of firm.

On sale of the goodwill after dissolution which of the following rights are available to the seller of the goodwill?

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  1. To advertise his business

  2. To use his firms name

  3. To represent himself as carrying on the business of the firm

  4. To solicit customer from those dealing with the firm

Show answer
Correct Option: A
Explanation:

When the goodwill of a firm is sold after dissolution, a partner may carry on a business competing with that of the buyer and seller has the right to advertise his business. But he can not use the firm name and represent himself as carrying on the business of the firm because it may mislead the customer. And also seller can not solicit customer. 

Which of these can be treated as just and equitable ground for dissolution of a partnership firm under the Partnership Act?

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  1. Loss of mutual confidence

  2. Dead lock amongst the partners

  3. Both

  4. None of these

Show answer
Correct Option: C
Explanation:

Partnership completely depends on trust and good faith. Partnership can not continue without trust. Dead lock situation is that situation in which no agreement can be made because no party is willing to give in and a partnership is a contractual agreement. If no contract can be made no partnership can be made. So these are treated as just and equitable ground for dissolution.

Does insolvency of a partner always result in dissolution of a firm?

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Yes

  2. Not at all

  3. Not if partnership deed does not so provide

  4. Not if exemption sought from registrar of firms

Show answer
Correct Option: C
Explanation:

Partnership Deed contain all the conditions and legalities of partnership. It provide a guiding base for all future activities. So if partnership deed provides that insolvency of partner does not result in dissolution of firm then it will only be dissolution of partnership not the dissolution of partnership firm. Remaining partner can continue its operations. 

A partnership firm can be dissolved except by __________.

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  1. By mutual consent

  2. By agreement

  3. By court notice

  4. By public auction

Show answer
Correct Option: D
Explanation:

A public auction is an auction held on behalf of a government in which the property to be auctioned is owned by government. But in case of partnership, partnership firm is not owned by government. A partnership firm can be dissolved by mutual consent, by agreement, by court notice. 

Application for dissolution of a firm on the ground of misconduct of a partner can be made by :

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Any partner

  2. Any partner other than who is guilty of misconduct

  3. Police officer

  4. CBI

Show answer
Correct Option: B
Explanation:

Partnership completely depends on trust and good faith. A partner acts as both agent and principal. If a partner misconduct then it can affect the image of firm. On the basis of this, any partner other than who is guilty of misconduct can file a suit for dissolution.  

XY Associates a partnership firm is having two partners X and Y. In a fatal road accident X lost his life. The firm now stands __________.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Dissolved

  2. In temporary suspension of business

  3. Liquidated

  4. Not affected at all

Show answer
Correct Option: A
Explanation:

Partnership is an agreement between two or more than two persons. Minimum two persons are required for partnership. In this after the death of X, only Y left. No single person can continue the partnership. So the firm stands dissolved.

State which statement(s) is/ are true :

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Dissolution of firm necessarily involves dissolution of partnership.

  2. Dissolution of partnership necessarily involve dissolution of the firm.

  3. Both

  4. None

Show answer
Correct Option: A
Explanation:

Dissolution of partnership is different from dissolution of firm. Dissolution of partnership does not necessarily involves dissolution of firm. But if there is dissolution of firm then it will lead to dissolution of partnership, because in dissolution of firm all assets are sold, liabilities are paid and business ceases to exist. 

In order to file a suit against a client for non-payment of dues an unregistered firm is required to first :

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  1. File or FIR with the local police

  2. Get registered before filling the suit

  3. File a suit before a lower court

  4. Write off the amount as the some cannot be recovered in any case

Show answer
Correct Option: B
Explanation:

Registration of partnership is not compulsory under law. But if partnership firm is not registered, it can not enforce its claims against a third party in the court of law. So, to file a suit against a client registration is compulsory. 

A partnership firm is dissolved except by ___________.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Expiry of term

  2. Due to marriage of any partner

  3. Due to death of any partner

  4. Due to insolvency of any partner

Show answer
Correct Option: B
Explanation:

A partnership firm is dissolved when all partners become insolvent or all except one become insolvent. In the case of death of partner also , court may order to dissolve the firm. A partnership firm gets automatically dissolved after expiry of fixed period of time for which partnership firm is formed. But partnership firm can not be dissolved due to marriage of any partner, because marriage does not affect the working of firm.