What steps should partners take to dissolve a partnership and divide its assets in Kenya?

Partners should

1. Document the break-up

2. Preserve records

3. Prepare final accounts

4. Pay liabilities

5. Transfer or sell partnership property

6. Record the final distribution.

Do not divide cash or assets informally before creditors and partner accounts are addressed.

A partnership breaks up under the following circumstances:

1. When its fixed term expires

2. The number of partners drops below two

3. The court orders it.

For an open-ended partnership, or some fixed-term partnerships, dissolution follows if at least half the partners decide to dissolve it. The partnership may continue only as necessary to wind up affairs and complete unfinished transactions.

On winding up, section 41 of the partnerships Act requires this order: partners pay money they owe the partnership; the partnership pays outside creditors; it pays amounts due to partners other than capital; it accounts for capital; then any surplus is shared in the profit-sharing proportions. If assets cannot meet external debts, partners contribute to the deficiency in their loss-sharing proportions, subject to statutory limits on liability.

Please note that dissolution is complete only when partnership property and trust property are transferred appropriately, liabilities and claims are settled and any liquidator has ceased office.