What is a Dissolution of Partnership Deed?
A Dissolution of Partnership Deed is a document used by business partners to end a partnership and a Partnership agreement. Dissolution of Partnership Deeds set out the terms under which partners agree to dissolve and wind up partnerships and outline each step of the dissolution process.
For more information, read Ending a partnership.
When should I use a Dissolution of Partnership Deed?
Use this Dissolution of Partnership Deed:
when you and one or more other individuals are running a partnership
if all partners agree to bring the partnership to an end
DEED OF DISSOLUTION
THIS AGREEMENT is made as a deed on______________________________(the Deed)
BETWEEN the persons listed in Schedule 1 (the Partners).
- The Partners have been carrying on the Business (as defined below) in partnership.
- The Partners have agreed to dissolve and wind up this partnership on the terms of this Deed.
The Partners Agree That:
- These words and phrases have defined meanings:
Accounting Reference Date in each year; Accountants , the Partnership's accountants; Business the profession, trade or business of carried on by the Partnership; Business Day a day other than a Saturday, a Sunday or a public holiday in England and Wales; Dissolution Date ; Final Accounts a profit and loss account for the period beginning on the day after the last Accounting Reference Date and ending on the Winding-up Date and a balance sheet as at the Winding-up Date; Partnership the partnership carried on by the Partners for the purpose of engaging in the Business according to the Partnership Agreement; Partnership Account the Partnership's account held with ; Partnership Agreement the partnership agreement dated as subsequently amended between the Partners; Partnership Assets the Premises and all other assets (or rights in them) which are used by the Partnership for the purposes of the Business; Premises the offices or other premises occupied by the Partnership at , ; and Winding-up Date the date on which the winding up of the Partnership is completed.
- In this Deed, unless the context means a different interpretation is needed:
- words denoting the singular include the plural and vice versa, and words denoting any gender include all genders;
- a person includes firms, companies, government entities, trusts and partnerships;
- a party means a party to this Deed and includes its assignees and successors in title and, in the case of an individual, to their estate and personal representatives;
- reference to a paragraph or Schedule is to a paragraph or Schedule of or to this Deed (and the Schedules form part of this Deed); and
- reference to a statute or statutory provision includes any modification of or amendment to it, and all statutory instruments or orders made under it.
- The headings in this Deed are for convenience only and do not affect its meaning.
- The Partnership will cease trading and be dissolved on the Dissolution Date.
- The Partnership will be wound up according to this Deed.
Conduct Following the Dissolution Date
- From the Dissolution Date up until the Winding-up Date each Partner's authority to bind the Partnership according to the Partnership Agreement can only be exercised:
- to complete transactions which are unfinished at the Dissolution Date; or
- to fulfil their obligations under this Deed.
- From the Dissolution Date up until the Winding-up Date no Partner can withdraw any sum or assets from the Partnership without the agreement of all the Partners.
Realisation of Assets
- As soon as practicable after the Dissolution Date each of the Partners will return to the Partnership all Partnership Assets and all accounting records, letters and other documents (whether in paper or electronic form) in their possession or control which relate to the Partnership.
- As soon as practicable after the Dissolution Date the Partners will realise the Partnership Assets on the most favourable terms and/or at the most the most favourable prices reasonably obtainable.
- All proceeds of sale and other sums received from realising the Partnership Assets will be paid into the Partnership Account.
- As soon as practicable after the Dissolution Date the Partners will give notice to terminate all contracts and other arrangements relating to the Business which are not transferred to a third party.
Discharge of Liabilities
- The Partners will pay and discharge all debts and liabilities of the Partnership using the funds in the Partnership Account.
- If there are insufficient funds in the Partnership Account to discharge all debts and liabilities of the Partnership the Partners will bear any remaining debts or liabilities
- As soon as the Partnership Assets have been realised and the existing debts and liabilities of the Partnership have been discharged the Partners will instruct the Accountants to draw up the Final Accounts.
- The Final Accounts must be approved by each of the Partners as soon as possible after they are received from the Accountants. Once approved, the Final Accounts will become binding on each of the Partners, except in the case of manifest error which is discovered within three months of the Final Accounts being approved. The Partners will ensure that any such manifest error is rectified as soon as possible after it is discovered.
- If a Partner refuses or fails to approve the Final Accounts within Business Days of receiving them the Partners will refer any disputed point to be determined by an accountant whose identity and terms of appointment will be agreed by the Partners. If the Partners cannot agree the identity of the accountant, the accountant will be appointed by the President of the Institute of Chartered Accountants in England and Wales. The accountant appointed will act as an expert (not as an arbitrator) and their determination will be final and binding.
Disposal of Partnership Monies
- After the Final Accounts have been approved under paragraphs 15 and 16, the amount held in the Partnership Account will be distributed according to the Final Accounts and in the following order of priority:
- in paying or making reserves for any tax or other debts or liabilities of the Partnership owed to any persons other than the Partners. If the amount in the Partnership Account is insufficient to make all such payments or reserves the Partners will make up the shortfall by contributing to it
- in paying to each Partner any unpaid interest on their capital and any loans made by them to the Partnership. If the amount in the Partnership Account is insufficient to make all such payments, the amount will be paid to the relevant Partners in the same proportions as the sums standing to the credit of their capital accounts bear to each other and/or the amount of the loans bear to each other (as applicable);
- in paying to each Partner any undrawn balance of their share in the Partnership's profits. If the amount in the Partnership Account is insufficient to make all such payments, the amount will be paid to the relevant Partners
- in repaying to each Partner any loans made by them to the Partnership. If the amount in the Partnership Account is insufficient to make all such repayments, the amount will be repaid to the relevant Partners in the same proportions as the amount of the loans bear to each other;
- in repaying to each Partner their capital in the Partnership. If the amount in the Partnership Account is insufficient to make all such repayments, the amount will be repaid to the Partners in the same proportions as the sums standing to the credit of their capital accounts bear to each other; and
- in dividing any balance between the Partners
- After the Winding-up Date no Partner may use the name of the Partnership or any similar name for any profession, trade or business they are concerned with.
- For a period of six years beginning on the Winding-up Date, will keep safe custody of all accounting records, letters and other documents (whether in paper or electronic form) relating to the Partnership. During this period each of the Partners will be entitled to inspect these accounting records, letters and other documents at their own expense.
- During the period between the Dissolution Date and the Winding-up Date the Partners will ensure that:
- a notice of the dissolution of the Partnership is published in the London or Edinburgh Gazette, and in a newspaper circulating in the locality of the Premises; and
- as far as practicable, notice in writing of the dissolution of the Partnership is given to all third parties who had dealings with the Partnership in the twelve months before the Dissolution Date.
- Each Partner will (and wherever possible will ensure that any third party will) promptly do all things and sign all documents reasonably required to dissolve and wind up the Partnership and generally give effect to this Deed.
- This Deed contains the whole agreement between the parties relating to its subject matter and supersedes all prior discussions, arrangements or agreements that might have taken place in relation to the Deed. Nothing in this paragraph limits or excludes any liability for fraud or fraudulent misrepresentation.
- No variation to this Deed will be valid or binding unless it is recorded in writing and signed by or on behalf of each of the Partners.
- Any notice (other than in legal proceedings) to be given under this Deed must be in writing and delivered by pre-paid first class post to or left by hand delivery at the address of each notified party as set out in this Deed, or sent by fax to each notified party's fax number or sent by email to the business email address of the partnership.
- Notices which are:
- sent by post will be deemed to have been received, where posted from and to addresses in the United Kingdom, on the second Business Day after the date of posting, and where posted from or to addresses outside the United Kingdom, on the tenth Business Day after the date of posting;
- delivered by hand will be deemed to have been received at the time the notice is left at the proper address;
- sent by fax will be deemed to have been received on the next Business Day after transmission; and;
- sent by email will be deemed to have been received on the next Business Day after sending.
- The Contracts (Rights of Third Parties) Act 1999 will not apply to this Deed and no third party will have any right to enforce or rely on any provision of this Deed.
- Unless otherwise agreed, no delay, act or omission by a party in exercising any right or remedy will be deemed a waiver of that, or any other, right or remedy.
- Provisions which by their intent or terms are meant to survive the termination of this Deed will do so.
- If any court or competent authority finds that any provision of this Deed (or part of any provision) is invalid, illegal or unenforceable, that provision or part-provision will, to the extent required, be deemed to be deleted, and the validity and enforceability of the other provisions of this Deed will not be affected.
Governing Law and Jurisdiction
- This Deed and any non-contractual obligations arising in connection with it will be governed by and interpreted according to the law of England and Wales. All disputes arising under or in connection with the Deed will be subject to the exclusive jurisdiction of the English and Welsh courts.
SCHEDULE 1 - Details of Partners
This Deed has been executed on the day and year first before written.
|Executed as a deed by acting by
|in the presence of:
|Name of witness
About Dissolution of Partnership Deeds
Learn more about making your Dissolution of Partnership Deed
How to make a Dissolution of Partnership Deed
Making a Dissolution of Partnership Deed online is simple. Just answer a few questions and Rocket Lawyer will build your document for you. When you have all of the details prepared in advance, making your document is a quick and easy process.
To make your Dissolution of Partnership Deed you will need the following information:
Partner and partnership details
What are the partners’ details?
What is the partnership’s annual accounting date?
What is the name of the partnership’s accountant?
What is the nature of the partnership's business?
What is the name of the partnership?
What is the partnership’s business address?
What is the date of the Partnership agreement?
What is the name of the bank where any partnership accounts are held?
On what date will the partnership be dissolved?
How will the partners bear any debts or liabilities on dissolution if there are insufficient funds in the partnership accounts?
How will the partners bear any tax liabilities on dissolution if there are insufficient funds in the partnership accounts?
How will the partners share any money left in the partnership accounts if there are insufficient funds to pay any undrawn partner profit shares?
How will the partners share any money left in the partnership accounts after settling all other outstanding payments?
What is the name of the partner responsible for the safe custody of the partnership records?
Within how many business days of receiving the final accounts must the partners approve them?
Is the partnership a business offering professional services? If so:
For how many years from the date of the dissolution will the partners maintain run-off cover?
What amount of run-off cover will be maintained?
How will the partners contribute to the premiums for the run-offer cover?
Which country's law will apply to this Dissolution of Partnership Deed?
Common terms in a Dissolution of Partnership Deed
A Dissolution of Partnership Deed should be used to properly end a partnership. To this end, this Dissolution of Partnership Deed covers:
The Dissolution of Partnership Deed starts by providing a brief overview of the document.
This section sets out meanings for certain defined terms used throughout the Dissolution of Partnership Deed. For ease of identification, all defined terms are capitalised throughout the Deed. Examples of the defined terms include ‘Dissolution Date’, ‘Partnership’ and ‘Winding-up Date’.
This section details that the partnership will cease trading and be dissolved on the date specified in the Dissolution of Partnership Deed and will be wound up in accordance with the Deed.
Conduct following the dissolution date
This section outlines that, after the dissolution date, the authority of each partner to bind the partnership can only be used to complete unfinished transactions or fulfil obligations under the Deed. It also states that no partner can withdraw any sum or assets from the partnership without the agreement of all partners during this period.
Realisation of assets
This section outlines that each partner is required to return all partnership assets, accounting records, letters and other documents relating to the partnership after the dissolution date. It also specifies that the partners must realise (ie sell) partnership assets on the most favourable terms and prices and any proceeds must be paid into the partnership account. Finally, it states that partners must terminate all contracts and arrangements relating to the business that are not transferred to a third party as soon as possible after the dissolution date.
Discharge of liabilities
This section states that the partners are responsible for paying and discharging all debts and liabilities of the partnership using the funds available in the partnership account. If there are not enough funds available, the partners will be responsible for covering any remaining debts or liabilities.
This section outlines the process for preparing and approving the final accounts of the partnership. The partners must instruct their accountants to prepare the final accounts after the partnership assets have been sold and the existing debts and liabilities of the Partnership have been discharged. If a partner refuses or fails to approve the final accounts within the specified timeframe, any disputed points will be referred to an accountant whose determination will be final and binding.
Disposal of partnership monies
This section outlines the order of priority for distributing any amount held in the partnership account after the final accounts have been approved.
This section clarifies that, after the winding-up date, no partner is allowed to use the name of the partnership or any similar name for their profession, trade or business.
This section outlines that, for 6 years after the winding-up date, the designated partner must keep all accounting records, letters and documents relating to the partnership, and during this time each partner can inspect them at their own expense.
This section states that between the dissolution date and the winding-up date, the partners are responsible for:
publishing a notice of the dissolution of the partnership in the London or Edinburgh Gazette and a local newspaper, and
giving written notice to third parties who had dealings with the partnership in the 12 months before the dissolution date.
If applicable, this section requires that the partners maintain a run-off professional indemnity insurance policy for the benefit of the partnership for a set number of years after the dissolution date. This insurance should cover claims made against any of the partners for negligence or wrongful acts that occurred during the operation of the partnership, with premiums paid and contributions made equally.
This section stipulates that each partner is responsible for promptly taking all necessary actions and signing all documents required to dissolve and wind-up the partnership, and otherwise give effect to the provisions of the Dissolution of Partnership Deed.
This section states that the Dissolution of Partnership Deed constitutes the complete agreement between the parties regarding its subject matter and replaces any prior discussions, arrangements or agreements relating to it. This does not limit or exclude any liability for fraud or fraudulent misrepresentation.
This section specifies that any variations to the Dissolution of Partnership Deed will only be effective if they are made in writing and signed by or on behalf of all the partners.
This section outlines the rules for giving notices under this Dissolution of Partnership Deed. This includes the requirement that all notices (and other communications) must be in writing and delivered either by post, hand, fax or email. It also sets out the timeframes for deemed receipt of notices depending on the method of delivery.
This section covers ‘boilerplate clauses’, which are included in most Dissolution of Partnership Deeds. These clauses address various points relating to the operation of the Deed and include:
excluding the Contracts (Rights of Third Parties) Act 1999 or the Contract (Third Party Rights) (Scotland) Act 2017 so that third parties (ie parties that aren’t the partners) who would otherwise have the ability to enforce obligations under this Deed are not able to do so
clarifying that all provisions that are meant to survive the termination of this Deed will do so
Governing law and jurisdiction
This section sets out the jurisdiction of the Dissolution of Partnership Deed. The jurisdiction specifies the legal system that should be used to resolve any disputes. This is necessary due to the differences between the legal systems of England and Wales and of Scotland.
Schedule 1 - Details of Partners
Schedule 1 to the Dissolution of Partnership Deed sets out the names and addresses of all partners.
If you want your Dissolution of Partnership Deed to include further or more detailed provisions, you can edit your document. However, if you do this, you may want a lawyer to review or change the Dissolution of Partnership Deed for you, to make sure it complies with all relevant laws and meets your specific needs. Ask a lawyer for assistance.
Legal tips for making a Dissolution of Partnership Deed
Remember to inform all relevant parties
It is important to inform all relevant third parties when dissolving a partnership because these parties may have ongoing business relationships with the partnership and may be affected by its dissolution. When dissolving your partnership, make sure to provide notice to all relevant third parties so that they have ample time to make alternative arrangements and to protect their own interests. This is especially important because failure to provide notice may result in legal and financial consequences for the partners, such as liability for outstanding debts or legal claims.
Devise a strategy for closing your business
It is important to carefully consider the specifics of your situation and to decide on a strategy for closing your partnership, taking into account all stakeholders and areas of your business. This can involve reviewing your initial business plan and creating a timeline of tasks, including contacting relevant parties, completing paperwork and closing customer accounts. Other important steps may include collecting overdue payments (like loans and invoices), terminating your commercial lease, consulting with your workforce (including making all necessary redundancies), and notifying insurance and banking providers.
Understand when to seek advice from a lawyer
Ask a lawyer for:
tax-related advice (or speak to your accountant)
advice on employment law considerations, if the partnership has employees or salaried partners
advice on situations where one or more of the existing partners intends to carry on the business of the partnership after dissolution
in situations where only one of the partners is leaving (or a new partner is being admitted) and the other partners intend that the partnership continues
Dissolution of Partnership Deed FAQs
What is included in a Dissolution of Partnership Deed?
This Dissolution of Partnership Deed template covers:
the date on which the partnership will cease trading and be dissolved and how it will be wound up
what the partners can and cannot do from the date of dissolution until the partnership is wound up
the return of documents, the realisation of the partnership's assets and the termination of contracts and other arrangements
the discharge of the partnership's liabilities
the preparation and approval of the partnership's final set of accounts
the distribution of any partnership monies after any liabilities have been discharged
the retention of records
notification of the dissolution
Why do I need a Dissolution of Partnership Deed?
You need a Dissolution of Partnership Deed to formally and legally dissolve your partnership with your business partners. The deed outlines the terms and conditions for the dissolution of your partnership and helps to provide clarity and transparency. A Dissolution of Partnership Deed is essential as it outlines how the partnership’s business assets and liabilities will be divided between the partners.
You can only use a Dissolution of Partnership Deed if all partners agree to end the partnership. Ask a lawyer if all partners don’t agree to the dissolution of the partnership and/or if you have any questions about the dissolution process.
For more information, read Ending a partnership.
What is the difference between the dissolution date and the winding-up date?
The dissolution date is the date on which the partnership relationship between the partners ceases to exist. In other words, the date on which the partners cease to carry on the business of the partnership. After this date, the partners will complete any unfinished work, settle any liabilities, realise any partnership assets and otherwise wind up the partnership.
The winding-up date is the date when the winding-up of the partnership is completed. The winding-up process involves the liquidation of the partnership's assets, the settlement of any outstanding debts or obligations and the distribution of any remaining assets to the partners. This is the date on which the partnership stops existing.
How should assets held in the partnership accounts be distributed?
Assets held in the partnership accounts should be distributed in the following order:
to settle taxes and debts owed to external lenders
for interest on partner capital and/or loans
for any undrawn partner profits
for repaying partner loans
for repaying partner capital contributions, and
for dividing any balance between the partners
How should the partners share any money left in the partnership accounts after settling all outstanding payments?
When all the outstanding payments have been settled, the partners can decide to divide the balance either:
in the same proportions as they shared profits, or
in the same proportions as the amounts in the partners’ respective accounts
For how long should the partnership records be kept?
One of the partners should be responsible for looking after the accounting records, letters and other documents for the required period of time. This Dissolution of Partnership Deed states that the partnership records should be kept for 6 years after the date on which the winding-up of the partnership is completed.