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The reconstitution of a firm take place when there is anychange in the composition of the
partnership. Thefollowing are the various ways in which the firm isreconstituted :
1.Introduction of a partner (Section 31) : A person may be admitted as a partner either
a.With the consent of all the existing partners or,b.In accordance with a contract
already entered intobetween the existing partners for the admission of anew
partner.2.Retirement of a partner (Section 32) : A partner may be retire from the firm
in any of the following ways :a.With the consent of all the other partners; orb.In
accordance with an express agreement among the partners.3.Insolvency of a partner
(Section 34) : The effectsresulting from the insolvency of a partner aresummarized
below :a.He ceases to be a partner on the date of the orders of adjudication.b.Unless
otherwise agreed, the firm is dissolved.4.Rights of Transferee of a partners share
(section 29) :A partner may transfer his interest in the firm by sale,mortgage or charge fully
or partially.

14) Dissolution of a firm

Dissolution of a firm means the dissolution of partnershipbetween all the partners of a firm.
In such a situation, thebusiness of the firm is discontinued, its assets arerealized, the liabilities
are paid off and the surplus (if any)is distributed among the partners according to theirrights.
15)Right and liabilities of a partner on dissolution
Rights of a partner on Dissolution : The various rights of apartner on dissolution are as
follows :a.Partners general line (section 46) : Every partner or his representative is
entitled 1.To have the firms property applied in payment of the firms debts, and
2.
To have the surplus distributed amongst thepartners or the representatives according totheir
respective rights.

b.
Right to claim the return of premium on prematurewinding up (section 51) : If a partner
joined a firm fora fixed term and had paid a premium and the firm isdissolved before the
fixed term, he is entitled toreturn of the premium.Liabilities of a partner on Dissolution : The
variousliabilities of a partner on dissolution are as follows :
a.
Continuing Liability for acts of partners done afterdissolution (section 45) : Until a public
notice is givenof dissolution, the partners continue to be liable forany act done by any of
them after dissolution andsuch act is deemed to be an act done before thedissolution.
b.
Continuing authority of partners after dissolution(section 47) : After the dissolution of a firm,
theauthority of a partner to bind the firm and the othermutual rights and obligations of the
partnerscontinue.
16) Settlement of accounts
Unless otherwise agreed by the partners, the accounts of a dissolved firm shall be settled
according to theprovisions of section 48, 49 and 55. These provisions areas follows :

a.Treatment of Losses (Section 48(a)) : Losses including deficiencies of capital are to be

paid in thefollowing manner :1 . F i r s t o u t o f p r o f i t s . 2 . T h e n o u t o f c a p i t a l . 3.Lastly
by partners individually in their profit- sharing ratio.b.Application of Assets (Section
48(b)) : The assets of the firm shall be applied in the following manner andorder :1.In
paying firms debts to the third parties;2.In paying to each partner rateably what is
dueto him on account of advances.3.In paying to each partner rateably what is due to
him on account of capital.c.Payment of firms debts and partners private debts (section
49) : Where there are firms debts andpartners private debts, the following provisions
shallapply :1.Firms property shall be applied first in payment of firms debts then the
surplus.2.Partners private property shall be applied first in payment of his private debts
and thesurplus.

17)
Public notice (section 72)
When a public notice is required to be given in thefollowing three cases:a.On the
retirement or expulsion of a partner, or
b.
On the dissolution of the firm,c.On the election to become or not to become a partner by
a minor on his attaining majority.When a public notice is not required to be given in
thefollowing two cases:a . O n t h e d e a t h o f a p a r t n e r ; b.On the insolvency of a
partner.

English
Concept and Nature of Partnership
Definition and Concept of PartnershipAccording to Section 4 of the Indian Partnership Act 1932,
Partnership is the relation betweenpersons who have agreed to share the profit of the business carried on
by all or any one of themacting for all.According to Prof. Haney, Partnership is the relation existing
between persons competent to makecontracts who agree to carry on a lawful business in common with a
view to private gain.Here, business means and includes every trade occupation and profession which is
legal.Features of Partnership1.

Contract or Agreement between the partners regarding the partnership.2.

Association of two or more persons3.

Nature of activity. It must involve some legal business activity including profession, trade oroccupation.4.

Sharing of profits equally or in proportion of the capital contributed by the partners.5.

Mutual agency: Every partner is both an agent and principal for himself and other partners.
Test of Partnership
T
here are various features of a partnership; a single trait cannot decide the existence of thepartnership.
T
here may be a business but not sharing of profit. Again, there may be sharing of profitbut no relation of
agency between the partners.
T
he real test therefore is mutual agency i.e.whether a partner can act as an agent of all the other partners.We
can conclude that all the features, most importantly the feature of mutual agency must befulfilled for
determining the existence of partnership.
Duration and Types of Partnership
Agreement between the partners and firm is the basis of formation of partnership.
T
hisagreement may be written or oral. But written agreement is always preferred.
T
heagreement must satisfy all the necessary elements of a valid contract.
T
he duration of a partnership depends upon the nature of agreement between or amongthe
parties.
1.

Partnership at Will2.

Partnership for a fixed term3.

Particular Partnership.
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