Question 4 of 53beginner💡 UnderstandTrue / False1 mark
A firm is compulsorily dissolved when a partner decide to retire.
Correct Answer
False. A firm is compulsorily dissolved when all the partners or all but one partner become insolvent, or when the business of the firm becomes illegal. Retirement of a partner does not lead to compulsory dissolution.
Exercise: Test your Understanding – I | Q: 4 | (Page 3)
For More Understanding
Explanation
The provided context explicitly defines 'Compulsory Dissolution' in section 2, limiting it to cases where partners become insolvent or the business becomes illegal/unlawful. Retirement is listed separately in the context of 'Dissolution of Partnership' versus 'Dissolution of Firm', indicating it changes the relationship between partners but does not trigger a compulsory dissolution of the firm itself.