WHAT IS DISSOLUTION?

Dissolution is the legal event that terminates a legal agreement or entity such as adoption, marriage, corporation, or a union. It is the last stage of liquidation. Dissolution of a partnership is the first stage in the termination of a partnership.  Dissolution also refers to the termination of a contract or legal relationship. A divorce is an example of the dissolution of a marriage. It is the term for the legal process for reversing the adoption process. This applies to a majority of adoptions that are terminated. Dissolution is the last stage of liquidation under corporate law, which brings a company to an end. Dissolution of a partnership is known as the termination of a partnership under partnership laws.

What is Dissolution of a Firm?

Dissolution of a firm occurs without or with the interference of the court in any way stated. Dissolution of the enterprise brings dissolution of the partnership. It can take place in the following ways:

1.         Dissolution of the firm by Agreement: In this kind of dissolution, an enterprise is dissolved with all the partner’s consent and by the agreement between all the partners

2.         Mandatory Dissolution: In mandatory dissolution, an enterprise is mandatorily dissolved when all the partners become bankrupt or render them incapable of signing an agreement or even when the enterprise's business concern is illegal.                                                               

3.         When some occurrence that makes it illegitimate for the partners has taken place to carry on and take over the business that concerns the enterprise in partnership.                               

4.         On the occurrence of emergencies: An enterprise is dissolved if it is established for some time or established to carry out more deals, by the accomplishment or when one partner is deceased or by one of the partners declaring and rendering as bankrupt.

5.         Dissolution by Notice: The firm is dissolved if the partnership is at will. One of the partners furnishes a notice to the other fellow partners in written proof, bespeaking the motive of pursuing dissolution.                                                                                                    

6.         Dissolution by Court: The court can order a partnership enterprise to dissolve if a mentally ill partner or a partner is ineffective in performing his roles and responsibilities, or a partner is found guilty of unethical behaviour that influences the business of the enterprise.

CONCLUSION

Dissolution is the ending of a corporation voluntarily by filing a notice as ordered by the court after the shareholders' vote or involuntarily through government action in case of failure to pay the taxes. The corporate assets are liquidated and distributed to pay off the corporate debts during dissolution.

Author: Ankita Agarwal