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ACCA Applied Skills · Corporate and Business Law (Global) · Partnerships

Chen, Dalia and Eli are partners in a firm formed for a fixed three-year term. After one year, Eli is declared bankrupt. The partnership agreement is silent on this event. Under general partnership law, what is the most likely effect?

The firm is dissolved as regards all partners because bankruptcy of a partner triggers dissolution by default. The agreement is silent, so nothing displaces the rule, and no court order is required, even though the partnership was formed for a fixed term.

  1. AThe firm is dissolved as regards all partners, unless the agreement provides otherwiseCorrect
  2. BThe firm continues unchanged and Eli remains a partner
  3. COnly a court can dissolve the firm in these circumstances

Explanation

Bankruptcy of a partner is a default ground for dissolution under general partnership law, even for a fixed-term firm, unless the agreement says otherwise. The agreement here is silent, so the default rule applies. No court order is needed for this automatic ground.

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