Chapter VI - Dissolution of a Firm
Section 39
Section 39: Dissolution of a firm
Section 39 defines 'dissolution of the firm' as the dissolution of partnership between all the partners, which distinguishes it from a change in the firm's constitution.
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This article is for general information. Refer to the Indian Partnership Act, 1932 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
The dissolution of partnership between all the partners of a firm is called the “dissolution of the firm”.
Key takeaways
All the partners
Dissolution of the firm means that the partnership ends between all the partners of the firm.
Not every change of partners
Where partners change and the others carry on, section 17(a) deals with the reconstituted firm, subject to contract.
Meaning of dissolution of the firm
The definition separates two events: the end of the partnership between all the partners, which is a dissolution of the firm, and a change in the constitution of the firm, such as the admission or retirement of a partner, after which the firm carries on. Section 17(a) provides, subject to contract, that the mutual rights and duties in a reconstituted firm remain as they were before the change, as far as may be.
Routes to dissolution in Chapter VI
A firm may be dissolved:
- by consent of all the partners or under their contract (section 40);
- compulsorily, on the events in section 41;
- on the contingencies in section 42, subject to contract;
- by notice, where the partnership is at will (section 43); or
- by the Court, on the grounds in section 44.
After dissolution
Partners remain liable to third parties for acts that would have been acts of the firm until public notice of the dissolution is given (section 45). Every partner may have the firm's property applied to its debts and the surplus distributed (section 46); the partners' authority continues so far as necessary to wind up (section 47); and section 48 sets the rules for settling accounts.
Check the applicable state law
The India Code consolidated central text (as on 7 July 2025) records no State amendment to section 39, although several States have amended other sections of the Act, mainly those on registration of firms. Confirm the law of the State where the firm carries on business, and the firm's own partnership agreement, before acting.
Practical checklist
Do
- Decide and record whether an event is a dissolution of the firm or a change in its constitution.
- Give public notice of a dissolution to limit continuing liability under section 45.
Avoid
- Do not treat a single partner's exit as dissolving the firm without checking the agreement and sections 40 to 44.
- Do not stop winding-up steps once trading ceases.
Glossary
- Dissolution of the firm
- Dissolution of partnership between all the partners of a firm.
- Reconstituted firm
- A firm that carries on after a change in its partners (section 17(a)).
Frequently asked questions
Is the retirement of one partner a dissolution of the firm?
Not by definition. Section 39 refers to the dissolution of partnership between all the partners; whether the firm is dissolved depends on the agreement and the events in sections 40 to 44.
How can a firm be dissolved?
By agreement (section 40), compulsorily (section 41), on certain contingencies (section 42), by notice for a partnership at will (section 43) or by the Court (section 44).
Are partners free of liability as soon as the firm is dissolved?
No. Section 45 keeps partners liable to third parties for acts that would have been acts of the firm until public notice of the dissolution is given.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026