Multiple choice

Ram, Sham and Mohan are in partnership. Ram and Mohan are declared insolvent while Sham wants to continue the firm. Which of the following is true?

  1. Firm is also declared insolvent.

  2. Sham has to repay the debts of the firm.

  3. Firm is automatically dissolved, and hence Sham cannot continue.

  4. The court has to give order for dissolution.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When all the partners of a firm are declared insolvent, or all but one partner is insolvent, the firm is compulsarily dissolved.

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