ExpertHard2 marksMultiple Choice
The formation and constitution of business organisationsThe formation and constitution of business organisationsPartnerships
ACCA · Question 10 · The formation and constitution of business organisations
Section A
Under the Partnership Act 1890, what is the liability of a retiring partner for debts incurred by the partnership AFTER their retirement?
Section A
Under the Partnership Act 1890, what is the liability of a retiring partner for debts incurred by the partnership AFTER their retirement?
Answer options:
A.
They are automatically released from all liability the moment they retire.
B.
They remain liable to existing creditors unless they give actual notice of their retirement.
C.
They are only liable if the remaining partners become insolvent.
D.
They remain liable for all future debts indefinitely.
How to approach this question
Consider the steps a retiring partner must take to sever their legal ties with the firm and protect themselves from future liabilities.
Full Answer
B.They remain liable to existing creditors unless they give actual notice of their retirement.✓ Correct
Under the Partnership Act 1890, a retiring partner remains liable for debts incurred after retirement to persons who dealt with the firm before retirement, unless actual notice is given to those persons. Notice in the London Gazette is sufficient for those who had not previously dealt with the firm.
Common mistakes
Assuming that simply leaving the partnership ends all liability immediately.
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