Dissolution of a general partnership agreement

Dissolution of a general partnership agreement can be a difficult and complicated process for its participants. It requires a number of formalities and decisions regarding division of property or settlement of liabilities. In this article, we will present what steps should be taken in the event of the dissolution of a general partnership and what the legal consequences may be.

Table of Contents

• Reasons for dissolution of a general partnership
• Dissolution of a general partnership agreement by a partner
• How to terminate a general partnership agreement?
• The notice period for dissolution of a general partnership agreement
• Legal consequences of dissolution of a general partnership agreement
• Summary

Reasons for dissolution of a general partnership

According to art. 58 § 1 of the Code of Commercial Companies, a dissolution of a general partnership may be caused by:

• the reasons set out in the articles of association,
• a unanimous resolution of all partners,
• a declaration of bankruptcy of the partnership,
• the death of the partner or declaration of his bankruptcy,
• termination of the agreement by a partner or a creditor of a partner
• a final and non-appealable court judgement.

Termination of a general partnership agreement by a partner is possible if provided for in the partnership agreement. It is also possible in other cases permitted by law. In the case of a general partnership, this usually requires a written statement. The partner specifies the date of the end of cooperation and reasons for termination. The partner may terminate a general partnership agreement for various reasons. They may include a desire to change his business activity. Conflicts between partners or their improper business operations may also be a crucial reason. The lack of mutual agreement as to the way of conducting the business is also respected. It is important that the partner consider and analyzes his decisions before initiating the process. It is advisable to consider their consequences thoroughly. One should also pay attention to the regulations of the partnership’s statutes regarding the termination and to the provisions of the law on this subject.

Dissolution of a general partnership agreement by a partner

After termination, the general partnership may still exist if the agreement provides for such a possibility. It is also possible if the remaining partners decide to continue their cooperation. Otherwise, the company will face a liquidation procedure. Its assets and liabilities should be distributed among the partners.

How to terminate a general partnership agreement?

Termination of a general partnership agreement should be carefully considered. It must comply with the provisions of the agreement and the law. Below are some steps you should take to make your termination effective:

• Verify provisions of the agreement. Before terminating the agreement, analyze carefully the provisions of the agreement. Ensure that you are acting in accordance with its regulations. In some cases, the articles of association may require a written statement on termination.
• Inform the partners. You can do this in writing or verbally. However, for evidentiary purposes, it is advisable to prepare a written notice of termination.
• Set a notice period. The general partnership agreement may specify a termination period that one must observe. If such provisions are applicable, you must respect them.
• Submit a written notice. If the general partnership agreement requires a written notice of termination, you should provide it to the remaining partners. It should include information about the reasons for termination. It must also specify the date on which it is going to take effect.
• Divide the assets. After the termination of the agreement, it is necessary to divide assets among the partners. If there are no provisions in the agreement on this subject, the division should be proportional to the number of shares owned by partners.

The notice period for dissolution of a general partnership agreement

According to art. 61 § 1 of the CCC a partner of a general partnership may terminate the agreement concluded for an indefinite period of time six months before the end of the financial year. But, as stated in Art. 62 §. 2 of the CCC, a creditor of a partner may terminate it also six months before the end of the financial year, even if the partnership agreement was concluded for a definite period.

The general partnership agreement may specify a notice period. It must be observed for the termination of the agreement to be effective.

After this period, the agreement can be successfully terminated. As a result, the general partnership ceases to exist. In this case, its assets are distributed among the partners, proportionally to their shares.

Yet, if the general partnership agreement doesn’t specify a notice period, the provisions of the CCC state that it may be terminated at any time. Nonetheless, the notice period of at least 6 months must be respected.

Legal consequences of dissolution of a general partnership agreement

The legal consequences of terminating a general partnership agreement may vary. They depend on the reason for termination, as well as the provisions of the agreement and the law.

If the termination is in accordance with the provisions of the agreement, it may result in the dissolution of the general partnership within a specified period. In this case, the general partnership ceases to exist at the end of that period. Its assets are distributed among the partners in proportion to their shares.

If the termination is the result of a violation by one of the partners of the agreement or the law, the remaining partners may claim compensation for damages incurred as a result of this breach. They may also demand the exclusion of the breaching partner from the partnership.

In the event of termination of the general partnership agreement without valid cause, the remaining partners may claim compensation for the damages incurred. It may also result in the obligation of the terminating partner to pay a specific sum to the others.

Every instance of termination of a general partnership agreement requires careful analysis. One must focus on the provisions of the agreement and the law to determine legal consequences and possible claims that may arise.

Summary

The reasons for the dissolution of a general partnership agreement may vary. It is important to use the advice of a lawyer or tax advisor before making such a decision. This will help to avoid undesirable legal and financial consequences.

If you find the above article interesting and want to know more about the topic, we invite you to cooperate with us. Our accounting firm in Warsaw has specialists at your disposal. Contact us today and let us help you.