Dissolution of a partnership

Partnership at will

Partnership with no fixed term that can be dissolved by notice from any partner

Fixed-term partnership

Ends when the agreed term expires

Dissolution by notice

Any partner can dissolve a partnership at will by giving notice

Dissolution by purpose achieved

Occurs when the partnership's objective has been completed

Dissolution by death

Partnership dissolves on a partner's death unless agreement states otherwise

Dissolution by bankruptcy

Partnership dissolves on a partner's bankruptcy unless agreement states otherwise

Automatic illegality rule

Partnership automatically ends if continuing it becomes unlawful

Court-ordered dissolution

Court may dissolve a partnership where it is just and equitable or serious issues arise

Death or bankruptcy clause

Agreement can provide for automatic continuation despite death or bankruptcy

Retirement

Partner leaving the partnership

Retirement under PA 1890

Usually requires dissolution if no fixed-term arrangement exists

Continuation clause

Allows the business to continue after a partner leaves

Expulsion

Removal of a partner from the partnership

Power of expulsion

Only possible if expressly allowed by the partnership agreement

Outgoing partner's share

Amount payable to a departing partner

Delay in paying outgoing partner

Partner entitled to 5% interest or share of profits attributable to their share

Restraint of trade clause

Prevents outgoing partners competing with the firm

Valid restraint of trade

Must protect a legitimate interest and be reasonable

Arbitration clause

Requires disputes to be referred to arbitration

Distribution on dissolution

Order for distributing assets when partnership ends

Dissolution payment order

Creditors → partner loans → capital contributions → surplus to partners

the business continues without a final settlement of that partner's share (S42 PA 1890)

• 5% interest per year on the value of their share; OR

• A share of the profits attributable to the use of their share of the partnership assets.