1. Meaning of Insolvency in Partnership

• Insolvency means a partner is legally declared unable to pay debts
  
• It is confirmed through a court order under insolvency laws
  
• The partner loses control over their financial affairs
  
• An official receiver takes charge of the insolvent partner’s estate
  
• It directly impacts the functioning and structure of the partnership firm
  

2. Automatic Removal from the Firm

• An insolvent partner is automatically disqualified from continuing in the firm
  
• Their relationship with the firm ends on the date of insolvency
  
• The partnership is considered dissolved unless the deed allows continuation
  
• A reconstituted deed may be needed to continue business without the insolvent partner
  
• The firm must update its legal and financial records accordingly
  

3. Loss of Rights and Responsibilities

• The insolvent partner loses all management and decision-making rights
  
• They are no longer entitled to share profits after the date of insolvency
  
• The firm cannot claim further obligations from the insolvent partner
  
• The estate of the insolvent partner may be liable for past firm debts
  
• All duties and benefits under the partnership agreement cease
  

4. Effect on Remaining Partners and Business

• The partnership may dissolve unless otherwise provided in the deed
  
• Remaining partners may choose to continue the business
  
• The firm’s assets and liabilities must be reassessed and recorded
  
• A public notice may be required to inform third parties
  
• Future liabilities must be protected through proper restructuring
  

5. Legal and Financial Consequences

• Creditors of the firm may claim against the insolvent partner’s estate
  
• Partners must ensure all firm obligations are reviewed and settled
  
• Business contracts may need revision to reflect partner changes
  
• Banks and clients must be notified of the change in partnership status
  
• Court proceedings may arise if disputes occur over claims or responsibilities