Partners wishing to resign from a partnership must comply with certain formalities. If they do not they can still be regarded by other people as a partner and therefore responsible for debts incurred after their 'resignation'.
To dissolve a partnership it is necessary to prepare a Notice of Resignation, an example of which is provided below.
The following procedure must be followed:
- Serve a copy of the Notice of Resignation on all other partners.
- Serve a copy of the Notice of Resignation on all current and past creditors of the partnership.This will allow the retiring partner to avoid any debts incurred with these creditors by the other partners after dissolution but not any debts outstanding at the time of dissolution.
- The notice must then be published within fourteen days of the resignation in the Government Gazette at a cost of about $45. This will protect the retiring partner from any creditors who may do business with the other partners but only after the publication of the notice.
- If the partnership has a registered trading name it will also be necessary to complete a Change in Proprietors of Business Name form. These are available from the Office of Consumer and Business Affairs.
If the above procedure is complied with, the resigning partner is not liable for debts incurred after the resignation. The resigning partner is still liable for debts previously incurred, although the continuing partners will often agree to pay those debts and 'indemnify' the resigning partner if necessary. However, if the remaining partners can not pay a debt that they have indemnified, the creditor can still take action against the retiring partner. It is recommended that legal advice be sought prior to resigning from a partnership.
SAMPLE NOTICE OF RESIGNATION
Partnership Act, 1891- 1975
Notice of Discontinuance of Partnership
Take notice that as from 3 April 2011 the partnership of John Citizen of 100 Rose Terrace Adelaide 5000 and Mary Citizen of 100 Rose Terrace Adelaide 5000 in the State of South Australia who traded as Citizen Fabricators was dissolved.
John Citizen has retired from the partnership.
Mary Citizen will continue to operate the business under the name of Citizen Fabricators and shall be responsible for all the debts and liabilities thereof.
Dated 3 April 2011
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