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DISSOLUTION OF PARTNERSHIP


A partnership may be brought to an end either by death of one or more of the partners or by dissolution.  Dissolution may be effected by agreements between the partners themselves or by an order of the court.  the circumstances in which a partnership may be dissolved without any reference to court as set out in Section 36-38 PA.  Here subject to any agreements between the partners partnership may be dissolved:
1.                  If entered into for a fixed term, it comes to an end upon the expiration of that term;

2.                  If it is entered into for a single venture or undertaking it comes to an end upon the completion of that venture or undertaking;

3.                  Where it is entered into for an undefined period then it can be brought to an end by any partner giving notice to the other partner or partners of his intention to dissolve it.  No specific period of notice is required. A partnership is always dissolved as from the date mentioned in the notice as the date of dissolution and if no date is mentioned then the partnership is dissolved on the date on which notice is received.  Once notice to dissolve the partnership has been received, it cannot be withdrawn except with a consent of all the partners. 

Under Section 37 PA subject to any agreement between the partners every partnership is dissolved as regards all partners by the death of bankruptcy of any one of them.  But it is possible that the death of a partner may not lead to termination of the partnership if the articles provide for the continuation of the business by survivors either alone or in partnership with the representatives of the deceased partners.  This also applies in the case of bankruptcy of a partner.

A partnership is in every case dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry it on in partnership.

Under Section 39 PA there is dissolution by Court.  IN the absence of any agreement between the partners, any partner may apply to court for an order that the partnership be dissolved.  This procedure may be resorted to in the following cases:

1.                  When a partner is adjudged a lunatic or he is shown to the satisfaction of the court  to be of permanently unsound mind and in either of these events the application may be made on behalf of the insane person by his ‘Guardian ad litem’

2.                  When a partner other than the suing partner becomes in any way permanently incapable of performing his part of the partnership contract;

3.                  When a partner other than the suing partner has been guilty of such conduct as in the opinion of the court is calculated to affect prejudicially the carrying on of the business;

4.                  When a partner other than the partner suing wilfully or persistently commits a breach of the partnership agreement  or otherwise conducts himself in matters relating to the partnership business in such a way that it is not reasonably practicable for the other partners to carry on business with him;
5.                  When the business of the partnership can only be carried on at a loss;

6.                  Whenever in any case circumstances have arisen which in the opinion of the court renders it just and equitable that the partnership be dissolved.

Under Section 41 PA on dissolution of a partnership or retirement of a partner any partner may publicly notify the same and require the others to assist in all other acts for dissolution.  After dissolution the authority of each partner to bind the partnership and the other right of obligations of a partner continue as far as necessary to wind up the affairs of the partnership and complete any transactions which were began but not finished by the time of dissolution.

GOODWILL
Goodwill may be defined as the benefit or advantage which a business has in its connection with customers.  It is based on the probability that all the customers will continue to come back to the old place of business or will continue to deal with a firm of the same name.  It is the attractive force which brings in customers and which distinguishes between an old established business from a business at its start.

Goodwill is a partnership asset and like other assets on dissolution of the firm it must be sold so that proceeds may be applied towards the firm’s debts and liabilities.

LIMITED PARTNERSHIPS
As in ordinary partnerships the number of members is limited to 20.  In every case however, there must be at least one general partner and one limited partner.  A general partner is liable  for all the depths and obligations of the firm.  The limited partner’s liability for debts and obligations of the firm is limited to the amount he contributes. 

A body corporate may become a limited partnership if so authorised by its memorandum of association.  Unlike an ordinary partnership a limited partnership must be registered as such in accordance with the requirements of Section 4 of the limited partnership Act Cap 30 Laws of Kenya.  Registration is effected by delivering to the Registrar of Companies a statement signed by the partners and containing the following particulars:
1.                  The firm name;
2.                  The general nature of the business;
3.                  The principle place of business;
4.                  The full names of each of the partners;
5.                  The term if any for which the partnership is entered into and the date of commencement;
6.                  A statement that the partnership is limited  and that the description of each limited partner as such;
7.                  The sum contributed by each limited partner and whether  such sum is paid in cash or by which method;
If a proposed limited partnership is not registered, then it is deemed to be an ordinary partnership and every proposed limited partner will be regarded as a general partner. 

In general the common law and rules of equity applicable to partnerships as  general partnerships also apply to limited partnership subject to the modifications set out in Section 5 of the Limited Partnership Act. Under this Section a limited partner may not take part in the management of the business and he has no power to bind the firm.  If he takes part in the management he thereby ceases to enjoy limited liability and becomes liable for all debts and obligations of the firm incurred while he sought expert just as if he were a general partner.

The limited partner may always inspect the books of accounts of the firm and examine the stakes and prospects of the partnership business. Unless specifically provides in the partnership agreement, a limited partnership cannot be dissolved by the death or bankruptcy of a limited partner and the lunacy of a limited partner is not a ground for dissolution of the partnership by court.

In the even of dissolution of a limited partnership, its affairs should be wound up  by the general partners unless the court otherwise orders.  subject to any agreement between the partners, any difference arising as to ordinary matters connected with the partnership may be decided by a majority of the general partners.  With the consent of the general partners, a limited partner may assign his share in the partnership and upon such assignment the assignee becomes a limited partner with all the rights of the assignor.  The general partners are not entitled to dissolve the partnership by reason of any limited partner suffering to be charged for a separate debt.
A person may be introduced as a partner without the consent of the existing limited partner or partners.  A limited partner may not dissolve the partnership by notice.

 
 
 

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