Courts and legal advisory firms across India have reported a notable rise in partnership firm dissolution cases in the aftermath of the COVID-19 pandemic, as economic stress, shifting business models, and internal disagreements continue to strain small and medium-sized enterprises.

According to data from legal chambers and district commercial courts in states like Maharashtra, Tamil Nadu, and Gujarat, the number of partnership-related disputes and dissolution filings has nearly doubled since 2020. Many of these cases involve unresolved debt obligations, profit-sharing conflicts, and failure to adapt to post-pandemic business challenges.

“Several partnerships formed before or during the pandemic are now collapsing due to inconsistent revenue, lack of digitization, or divergence in strategic vision among partners,” said Advocate Seema Kapoor, a Mumbai-based commercial litigation expert. “In many cases, there was no clear exit clause or conflict resolution mechanism in the Partnership Deed.”

The financial strain imposed by lockdowns, supply chain disruptions, and shrinking consumer demand left numerous small firms unable to sustain operations. While some partners sought restructuring or fresh capital, others preferred to withdraw, leading to a surge in unilateral dissolution notices and legal claims over asset division and liabilities.

Legal experts note that informal or unregistered partnerships were particularly vulnerable, as many lacked formal documentation or agreed-upon exit terms. The result has been an increase in protracted disputes, often involving personal assets used as collateral for firm obligations.

In response, professional bodies and legal advisors are urging entrepreneurs to adopt better governance practices, update their Partnership Deeds to include dispute resolution clauses, and seek mediation before proceeding with formal dissolution.

The rise in dissolution cases reflects broader structural challenges in the small business ecosystem, underscoring the need for resilience, adaptability, and clear legal frameworks for partnerships navigating uncertain economic conditions.