Notwithstanding the dissolution of a firm, the partners continue to be liable as
such to third parties for any act done by any of them which would have been an act
of the firm, if done before the dissolution, until public notice is given of the
1)Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or
of a partner who, not having been known to the person dealing with the firm to be a
partner, retires from the firm, is not liable under this section for acts done after the
date on which he ceases to be a partner.
(2) Notices under sub-section (1) may be given by any partner.
On the dissolution of a firm every partner or his representative is entitled, as against
all the other partners or their representatives, to have the property of the firm
applied in payment of the debts and liabilities of the firm, and to have the surplus
distributed among the partners or which representatives according to their rights.
After the dissolution of a firm the authority of each partner to bind the firm, and the
other mutual rights and obligations of the partners, continue notwithstanding the
dissolution, so far as may be necessary to wind up the affairs of the firm and to
complete transactions begun but unfinished at the time of the dissolution, but not
Provided that the firm is in no case bound by the acts of a partner who had been
adjudicated insolvent, but this proviso does not affect the liability of any person who
has after the adjudication represented himself or knowingly permitted himself to be
represented as a partner of the insolvent.
In settling the accounts of a firm after dissolution, the following rules shall, subject
to agreement by the partners, be observed :
(a) Losses, including deficiencies of capital, shall be paid first out of profits, next out
of capital, and, lastly, if necessary, by the partners individually in the proportions
in which they were entitled to share profits;
(b) the assets of the firm, including any sums contributed by the partners to make
up deficiencies of capital, shall be applied in the following manner and order :
(i) in paying the debts of the firm to third parties;
(ii) in paying to each partner rateably what is due to him from the firm for advances
as distinguished from capital;
(iii) in paying to each partner rateably what is due to him on account of capital; and
(iv) the residue, if any, shall be divided among the partners in the proportions in
which they were entitled to share profits.