Distinguish between dissolution of partnership and dissolution of firm. What are the grounds on which court can order dissolution of firm?

Dissolution of Partnership and Dissolution of Firm : A change in business relations among partners is known as ‘Dissolution of Partnership’. In the dissolution of partnership, the firm continues to exist but is reconstituted. On admission, retirement or death of a partner, the partnership is reconstituted but the firm continues to exist. On the other hand, dissolution of the firm means -discontinuation or closure of business and winding up the firm.

Dissolution of Partnership and ‘Dissolution of a Firm’ are distinguished as follows :

Dissolution of Partnership:

  1. It does not affect continuation of business. It involves only reconstitution of the partnership business.
  2. It involves reconstitution of the firm and requires revaluation of the assets and reassessment of liabilities.
  3. It may or may not involve dissolution of the firm.
  4. It does not require final closure of books.
  5. Dissolution of partnership is not ordered by the Court.

Dissolution of Firm:

  1. It means discontinuation of the partnership business.
  2. It means winding-up of the firm and requires realization of assets and settlement of liabilities.
  3. It necessarily involves dissolution of partnership.
  4. It requires final closure of books of the firm.
  5. A firm may be dissolved by the order of the Court.
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