If a partner is expelled because of personal issues by majority of the partners it is________.a)Validb)Voidc)Voidabled)BonafideCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

VOID
eaning 'lacking or wanting' (something) is recorded from early 15c. Meaning 'legally invalid' is attested from mid-15c.

In some states, unless the partnership agreement provides otherwise, a partnership automatically dissolves upon expulsion of a partner. However, the partnership business doesn’t necessarily have to end. The remaining partners can always agree to form a new partnership and carry on the business. If they elect not to form a new partnership, the business will have to be wound up and terminated. See “Winding Up Business and Distributing Assets.” However, in many states, a partnership may continue after a partner is expelled even if the agreement is silent on this issue.

Either way, the expelled partner must be provided an accounting and paid for his or her share of the partnership business. If the partnership is dissolved, the business wound up, and the assets sold, all the partners will obtain a share of whatever is left after the partnership debts are paid. If the partnership business is continued by the remaining partners, the expelled partner will have to be paid for value of his or her partnership interest. How this is done should be spelled out in the partnership agreement. If not, the default provisions of your state partnership law will control. Generally, these require that the expelled partner be paid the fair market value of his or her interest in the partnership assets.

Answer

Understanding the Expulsion of a Partner
When a partner is expelled from a partnership due to personal issues by a majority of the partners, the legal standing of this expulsion can be classified as 'Void.' Here’s a detailed explanation:
Definition of Void Contracts
- A void contract is one that is not legally enforceable. In the context of partnership, if the expulsion is not in accordance with the partnership agreement or lacks a legitimate basis, it is considered void.
Majority Rule in Partnerships
- While partnerships often operate on the principle of majority rule, the reasons for expulsion must be justifiable and aligned with the partnership agreement. Personal issues alone do not typically warrant expulsion unless specified.
Legal Framework
- Most jurisdictions require a fair process for expulsion, which includes reasons that are substantial and objective. If expelled for personal issues without due process, the action lacks legal grounding.
Consequences of Void Expulsion
- If the expulsion is deemed void, the expelled partner retains their rights and obligations in the partnership. This may lead to disputes and potential legal implications for the remaining partners.
Conclusion
- In summary, the correct classification of expulsion due to personal issues, without valid justification or adherence to the partnership agreement, is 'Void.' This emphasizes the importance of following legal protocols and the partnership's outlined procedures when considering the expulsion of any partner.

Similar CA Foundation Doubts

A partner can be expelled if

A partner can be expelled by

Which of the following is incorrect?

A partner may be expelled from the firm on the fulfillment of the condition that the expulsion power is exercised.

A partner may be expelled from the firm on the fulfilment of the condition that power of expulsion is exercised

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