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Partnership Dissolution in Bangladesh

Table of Contents

The dissolution of a partnership firm in Bangladesh is governed by the [Partnership Act, 1932]. Dissolution is not simply the cessation of business operations; it is the formal termination of the legal relationship among all partners within the firm. This process requires strict adherence to statutory procedures and careful attention to legal and financial obligations.

Legal Provisions Related to Dissolution#

The Partnership Act, 1932 prescribes several circumstances under which a partnership may be dissolved:

Dissolution by Agreement
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Dissolution may occur through mutual agreement among all partners, as permitted under Partnership Act 1932, Section 40. The partnership deed may also specify conditions or procedures for dissolution, which the partners are required to follow. This approach reflects the importance of clear contractual arrangements at the outset of the partnership.

Compulsory Dissolution
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Certain circumstances necessitate compulsory dissolution under Partnership Act 1932, Section 41. If all partners, or all except one, are declared insolvent, dissolution is mandatory. Additionally, if the business of the firm, or the act of carrying it on in partnership, becomes unlawful due to legislative changes or other events, the firm must be dissolved. Notably, if the firm operates multiple distinct ventures, the illegality of one does not automatically dissolve the others.

Dissolution on Contingencies
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Unless otherwise stipulated in the partnership agreement, specific events automatically trigger dissolution under Partnership Act 1932, Section 42. These include the expiry of a fixed term for the partnership, the completion of the particular venture or undertaking for which the firm was established, the death of a partner, or the insolvency of a partner.

Dissolution by Notice
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In the case of a “Partnership at Will”—a partnership without a fixed duration—any partner may initiate dissolution by providing written notice to all other partners, as outlined in Partnership Act 1932, Section 43. The dissolution takes effect either from the date specified in the notice or, if no date is specified, from the date the notice is communicated.

Dissolution by the Court
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Where continuation of the partnership becomes impracticable, partners may apply to the court for dissolution under Partnership Act 1932, Section 44. Grounds for judicial dissolution include a partner’s unsoundness of mind, permanent incapacity, conduct prejudicial to the business, persistent breaches of the partnership agreement, transfer of a partner’s entire interest, continuous losses, or any other situation deemed just and equitable by the court.

Step-by-Step Process
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The event or decision that triggers dissolution marks the commencement of a structured winding-up process.

flowchart TD A["Triggering Event or Decision"] --> B["Cessation of Business Operations"] B --> C["Realisation of Assets and Settlement of Debts"] C --> D["Settlement of Accounts Among Partners"] D --> E["Issuance of Public Notice"] E --> F{"Is the Firm Registered with RJSC?"} F -- Yes --> G["Submit Dissolution Notice to RJSC (Form VI)"] F -- No --> H["No RJSC Notification Required"] G --> I["Execution of Deed of Dissolution (Best Practice)"] H --> I I --> J["Completion of Dissolution Process"]

Cessation of Business Operations
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Upon dissolution, the firm must cease normal business operations. The focus shifts to realising assets, settling outstanding debts, and resolving financial matters among the partners (Partnership Act 1932, Sections 46 and 47). Partners retain authority only to the extent necessary for the orderly completion of existing transactions.

Settlement of Accounts
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The Act prescribes a specific order for the settlement of accounts (Partnership Act 1932, Section 48). First, debts owed to third parties are paid. Next, any loans or advances made by partners to the firm are repaid. Thereafter, partners recover their capital contributions. Any remaining surplus is distributed among the partners according to the agreed profit-sharing ratio. Losses are addressed first from profits, then capital, and finally, if required, by contributions from partners in their profit-sharing proportions.

Public Notice
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Issuing a public notice of dissolution is a statutory requirement (Partnership Act 1932, Sections 45 and 72). Until such notice is published (typically in the Official Gazette and widely circulated newspapers), partners may remain liable to third parties for actions undertaken by any partner after the commencement of dissolution. The notice serves to formally inform the public and limit future liabilities.

RJSC Notification
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If the partnership is registered with the Registrar of Joint Stock Companies and Firms (RJSC), a formal notice of dissolution (usually via Form VI) must be submitted in accordance with Partnership Act 1932, Section 63. This ensures that the Register of Firms is updated to reflect the legal closure of the partnership.

Deed of Dissolution
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Although not strictly required by the Act, creating a formal “Deed of Dissolution” is highly recommended as best practice. This written agreement clearly documents how assets were divided, liabilities were settled, and any final arrangements agreed upon by the partners. Having a Deed provides clear evidence of the dissolution terms and helps prevent future misunderstandings or disputes among the former partners.

The dissolution of a partnership firm in Bangladesh is a process that demands transparency, diligence, and compliance with statutory requirements. In complex cases or where disagreements arise, professional legal advice is recommended to ensure that the process is conducted in accordance with the law and that all parties’ interests are adequately protected.


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Key Contact

For assistance with navigating the dissolution process for your partnership firm in Bangladesh, please reach out to: