Tag: payment of firm's debts and separate debts, realisation of assets and liabilities

When a partner is guilty of misconduct, the other partners can move to the court for dissolution because the misconduct of one partner brings bad name to the firm. When court has just and equitable reason to dissolve then court may order for dissolution. If the firm is suffering from continuous loss, then the court may order for dissolution if there is no capital available for further growth.  

Liquidation is the process in which company stops operating and sell its assets so that cash can be arranged to pay its debts. It is an event that occurs when a company is insolvent and can not pay its obligations when due. The business is no longer in existence once the liquidation process is complete.

No compulsory audit is provided by the Indian Partnership Act, 1932. But as per the Indian Taxation Act, 1961 Tax audit of partnership firm is mandatory if the turnover exceeds Rs. one crore in case of business and Rs. Twenty Five lakhs in case of profession. 

Dissolution of partnership firm means that the firm closes down its business and comes to an end. A realization account is opened for disposing off all the assets of the firm and making payment of all the liabilities. It is a nominal account. The object of such an account is to find out the profit or loss on realization of assets and payment of liabilities. 

Indian Contract Act clearly states that no person less than the age of 18 years can be a party to contract and a partnership is a contract between the partners. Hence a minor together with two major persons can not form a partnership. A minor can only be admitted to the benefits of partnership. 

According to Section 115 of the Companies Act, A special notice with the intention of removing a director by the specified number of members of the company has to be passed.  A special notice required to be given to the company shall be signed by members holding not less than 1 percent of the  total voting power. Opportunity can be given to the director to submit his statement in writing against his removal from company. 

In piecemeal distribution of cash, there are two methods:
1. Proportionate Capital Method: The partners whose capitals are more than the proportionate to other partner's capital should first be refunded so much as to bring down their capitals to proportionate levels. 
2. Maximum Loss Method: An alternative method of piecemeal distribution is to calculate the maximum possible loss on every realisation after the outside liabilities and the partner's loan has been paid.  

Voluntary winding up is the process in which a company is unable to carry out it operations or the period for carrying the operations expires or if it is unable to meet its financial obligations. It can carry this process either by passing special resolution or by ordinary resolution. There are two kinds of voluntary winding up. They are;

According to the provisions of the Indian Partnership Act, 1932, a court can order the dissolution of the partnership firm in the following cases: