RELEVANT PROVISIONS FOR PARTNERSHIP DISSOLUTION (VICTORIA)
Under the Partnership Act (1958), Vic (‘Partnership Act’):
1 The rights each partner has in the termination of a partnership and
2 What process is used to equally distribute the partnership assets?
The rights of each partner in the termination of the partnership are in Division 4 of the Partnership Act.
Section 36 Dissolution of partnership by expiration or notice:
“Subject to any agreement between the partners, a partnership is dissolved:
a) If it is a fixed term partnership and the term has expired.
b) If it is entered into for a single adventure or undertaking and that adventure/undertaking has terminated
c) If any partner gives notice to the others of his intention to dissolve the partnership. In this case, the partnership is dissolved from the date mentioned in the notice as the date of dissolution (or if there is, no date on the notice then from the date the notice was communicated.)”
Section 42 continuing authority of partners for purposes of winding up:
“After the dissolution of a partnership the authority of each partner to bind the firm and the other rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership.
The firm is not bound by the acts of a bankrupt partner, but this section does not affect the liability of any person who has after the bankruptcy represented him or knowingly suffered him to be represented as a partner of the bankrupt.”
Section 43 Rights of partners as to application of partnership property:
“On the dissolution of a partnership, every partner is entitled as against the other partners to have the partnership property applied in payment of the firm’s debts and liabilities and to have the surplus assets after such payment applied in payment of what may be due to the partners respectively after deducting what may be due from them as partners to the firm. For this purpose, any partner on termination of the partnership can apply to the court to wind up the business and affairs of the firm.”
THE PROCESS USED TO EQUALLY DISTRIBUTE THE PARTNERSHIP ASSETS:
Section 48 Rule for distribution of assets on final settlement of accounts:
“In settling accounts between the partners after dissolution of partnership, the following rules apply:
a) Losses including losses and deficiencies of capital shall be paid first out of profits, next out of capital, and lastly if necessary by the partners individually in the proportion in which they were entitled to share profits.
b) The assets of the firm including the sums contributed by the partners to make up losses or deficiencies of capital shall be applied in the following manner and order:
i. In paying the debts and liabilities of the firm to persons who are not partners therein
ii. In paying to each partner rateably what is due from the firm to him for advances as distinguished from capital
iii. In paying to each partner rateably what is due from the firm to him in respect to capital
iv. The ultimate residue (if any) shall be divided among the partners in the proportion in which profits are divisible”
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