Dissolving a Partnership at Will by Notice
ARTICLEPARTNERSHIP LAW
Amirul Syafiq
5/9/20253 min read
Let’s be clear — we’re not talking about your partner in a romantic relationship. This is about your business partner — the one who co-runs your firm, shares in your profits, and (hopefully) contributes equally to the workload.
But what happens when things go south, and you're ready to say, "I'm out" — without a formal agreement in place?
Can a partner in a partnership simply walk away and dissolve the partnership by giving notice?
This article explores the legal answer to that question under the Partnership Act 1961 (Malaysia), with a deep dive into two important cases:
Sukhinderjit Singh Muker v Arumugam Deva Rajah [1998] 2 MLJ 117, and
Teoh Swee Hee v Tio Hock Thye & Ors [1996] MLJU 409
Both cases illustrate how Malaysian courts handle partnerships at will — and what rights and remedies exist when things fall apart.
Statutory Right to Dissolve a Partnership by Notice
Under Subsection 34(1)(c) of the Partnership Act 1961, a partnership at will may be dissolved:
“... by any partner giving notice to the other or others of the intention to dissolve the partnership.”
Subsection 34(2) of the Partnership Act 1961 adds that the partnership is dissolved either on the date stated in the notice or, if none is stated, on the date the notice is communicated. Subsection 28(1) of the Partnership Act 1961 reinforces this position by permitting a partner to determine the partnership at any time by giving notice, provided no fixed term has been agreed upon.
Sukhinderjit Singh Muker v Arumugam Deva Rajah
In this case, the plaintiff issued a written notice to dissolve a law partnership in which no formal agreement existed. The court found that:
The firm was a partnership at will.
The plaintiff was legally entitled to dissolve the partnership unilaterally by giving notice.
There was no implied agreement restricting dissolution.
Justice Mokhtar Sidin J held:
“Once the partner exercises his discretion and gives notice... the partnership is effectively and properly dissolved.”
— [1998] 2 MLJ 117 at 125
The court ordered a winding up of the firm and the appointment of a receiver and manager, rejecting the defendant’s claim that it was merely a “technical retirement.”
Teoh Swee Hee v Tio Hock Thye & Ors
In this earlier case, the plaintiff had initially announced his retirement from the partnership via a newspaper notice. After no settlement was made, he later issued a notice of dissolution.
Justice Abdul Hamid Embong J ruled:
The partnership was at will and was validly dissolved under Section 34(1)(c).
The plaintiff’s retirement notice and subsequent dissolution notice were not contradictory but part of a progressive determination of the partnership.
The continued use of partnership assets and goodwill by the remaining partners triggered Section 44, entitling the outgoing partner to a share of the profits or interest on capital.
Interestingly, the court emphasized that goodwill—though intangible—is an asset of the partnership. The defendants had rebranded the business slightly and continued using the same premises and equipment, which the court viewed as retaining the original goodwill.
The court held:
“Goodwill although invisible is an asset of the partnership... To deny the plaintiff his share in this goodwill would in the circumstances be most unjust.”
— [1996] MLJU 409
An inquiry was ordered to determine the plaintiff’s share of profits post-dissolution, and the plaintiff was allowed to elect between profits or interest under Section 44.
Lessons from Both Cases
Both cases reaffirm that:
In the absence of a fixed term or written agreement, the law permits any partner to dissolve the partnership unilaterally by notice.
Even where a partner retires, they retain rights under Section 44 if the partnership business continues without a final account.
The continuing use of assets and goodwill without proper settlement entitles the outgoing partner to either:
A share of profits attributable to the use of their assets, or
Interest at 8% per annum on their capital share.
Practical Implications
For partners and partners-to-be, these cases underline the critical importance of having a written partnership agreement. Such an agreement can:
Specify procedures for withdrawal, expulsion, and dissolution;
Define how assets (especially goodwill) are to be valued and distributed;
Prevent abrupt dissolution by requiring consent or minimum notice periods.
Conclusion
The abovementioned precedents have provided clear guidance: a partner in a partnership at will may lawfully dissolve the partnership by serving notice—without the need for consensus. Where business continues after such dissolution, the rights of the outgoing partner persist, especially in relation to unsettled accounts and continued use of assets.
These decisions promote commercial fairness and protect against the unjust enrichment of continuing partners at the expense of the outgoing partner.
For assistance with partnership disputes, dissolution actions, or drafting of partnership agreements, kindly reached us.
Contributed by:
Amirul Syafiq
Associate
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