Agreed to the response and act accordingly.
Retirement of a partner
Under the Partnership Act no person can be admitted into partnership without the consent of the other partner or partners unless there is any contract to the contrary (s. 31).
Any partner may. with the consent of all the other partners or in terms of the deed of partnership where the partnership is at will, by giving notice in writing to all other partners, to that effect, dissolve the partnership or retire from partnership.
A retiring partner, however, continues to be liable to third parties even If the liability Is taken over by the remaining partners (s. 32) Therefore in a deed of retirement it is necessary to provide that In the event of the retiring partner being held liable by a third party, the remaining partners shall indemnify him to that extent, when the liabilities are taken over by the remaining partners.
Insolvency of a partner also causes compulsory retirement of an insolvent partner (s. 35). It is, therefore, generally provided in a deed of partnership when there are more than two partners that the insolvency of any partner will not dissolve the partnership. If a partner retires, unless there is contract. to the contrary, the retiring partner cannot use the firm name, represent himself as carrying on the business of the firm or solicit the customers of the Firm. (s. 36).
Therefore, in a deed of retirement It is generally not necessary to make explicit that the retiring partner shall not do any of these things. But if he is to be restrained from carrying on similar business for a specified period or in a specified area, such condition can be provided in she deed of retirement and it is legal (s. 36(2)).
Concept Of Retirement Of A Partner
A partner or partners may retire from the firm due to the various reasons like old age, better opportunity, ill health, conflict between the partners and so on. The retirement of partner can took place in any of the following grounds:
i. In accordance with the constant or consensus among all the members.
ii. In accordance with the partnership agreement which has already been signed.
iii. In accordance with the written notice, if the partnership is at will.
Adjustments
The adjustments that need to be done at the time of retirement of a partner are as follows:
1. Calculation of new profit sharing ratio
2. Revaluation of assets and liabilities
3. Adjustment regarding undistributed profits and losses
4. Adjustment regarding goodwill
5. Adjustment of capital
6. Ascertainment of due amount to retiring partner
7. Mode of payment to the outgoing partners.
