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AIMS
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INTRODUCTION
There are seven grounds upon which a court can order the compulsory winding up of a company, if petitioned to do so. Alternatively, the members of the company may resolve to wind the company up voluntarily. Such a voluntary winding up could either be a members’ voluntary winding up or a creditors’ voluntary winding up. We begin this chapter by considering these different processes by which a company can be wound up, and then set out the order in which creditors of liquidated companies are paid. We conclude our study of company liquidation with an outline of certain types of liability which can arise as a consequence of insolvency.
Having completed our study of company law, we then consider the law relating to limited liability partnerships. We consider the nature of LLPs, how they are formed, how members join and leave, the members’ relationship with each other, minority protection and winding up.
Having considered the law relating to LLPs, we will then be in a position to consider the advantages and disadvantages of trading as a company, an LLP or a partnership, while referring to matters of law previously covered.
What are the procedures for dissolution of Partnership Firm in India ?
The Indian Partnership Act makes a distinction between dissolution of firm and dissolution of partnership. Section 39 provides that the dissolution of partnership between all the partners of a firm is called the dissolution of the firm.
Therefore, dissolution of the firm denotes complete breakdown of the contractual relationship between all the partners or termination of the partnership business. But when the existing contractual relationship is terminated and the business continues, it is a case of dissolution of partnership.
Therefore, in dissolution of partnership the change in contractual relation of the partners may arise because of admission of new partners, retirement of partners, expulsion or insolvency or death of a partner etc. Dissolution of the firm involves dissolution of partnership but dissolution of partnership may not imply dissolution of firm.
. Dissolution on the happening of certain contingencies:
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Subject to contract between the partners, a firm can be dissolved on the happening of following circumstances :
i. Expiry of the term when constituted for a fixed term.
ii. Completion of the venture or undertaking when the firm constituted to carry on a venture or undertaking.
iii. Death of a partner.
iv. Adjudication of a partner as an insolvent.
The partnership agreement may provide that the firm will not be dissolved in any of the above circumstances.
Advantages of a proprietary company include that:
• your liability for the company’s debts is limited, although this protection can be destroyed by creditors, including financiers, calling for guarantees from company directors
• it’s easy to transfer ownership by selling shares to another party
• shareholders (often family members) can be employed by the company
• taxation rates can be more favourable
• you’ll have access to a wider capital and skills base.
Disadvantages of a proprietary company include that:
• the company can be expensive to establish and maintain
• you are required to provide annual and other returns to the Australian Securities and Investment Commission (ASIC)
• your financial affairs are public
• directors’ activities are scrutinised by ASIC
• it can be costly to wind up the business.