- Company already made SR. 20,000 of payment on their NCB loan by time of dissolution.
- Company’s net profit at time of dissolution is SR. 200,000
ASSIGNMENT (4)
Chapter 37 – Termination of Partnership
Last Date for submission is 19 / 11 / 2015
th
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Sara, Nada, and Maha are partners in The Innovation Co. (the “Company”) a general
partnership that was working in the retail business. Sara and Nada contributed in the
Capital of the company by SR. 10,000 each, while Maha’s contribution was SR. 5,000.
The Partnership Agreement provided for “equal contribution of management to each
partner as well as equal share of profits”. During the first 5 years the Company was
doing very well, so the partners decided to expand the operation of the Company and they
agreed that they need more funds in order to do that. Therefore, Sara suggested giving the
company SR. 5000 as a loan and the other partners agreed. However, because Sara’s loan
was not enough for the expansion plans, the partners decided to get a loan from a bank.
Consequently, they received SR. 50,000 from National Commercial Bank (“NCB”)
After securing all the funds they needed, the partners started executing their expansion
plans. The plans proved to be a success and they were able to make good profits.
5 years later Sara, Nada and Maha disagreed on an issue regarding the operation of the
Company, and after exhausting all their efforts to fix the problem, they agreed to dissolve
the Company and wind up the business.
How should the partners distribute the Company’s assets in accordance with the law?
Putting in mind the following:
1. Company already made SR. 20,000 of payment on their NCB loan by time of
dissolution.
2. Company’s net profit at time of dissolution is SR. 200,000.
State the Rule of law that governs distribution of assets when winding up a general
partnership and explain in details how you are going to distribute the Company’s assets.
