What must occur before partners can settle their accounts during liquidation?

Before partners can settle their accounts during the liquidation process, it is essential that all creditors must be fully paid. Liquidation involves the winding up of a partnership's affairs, and it is crucial to prioritize the payment of debts owed to creditors before any distribution can occur among the partners.

This priority reflects the legal obligation that partnerships have to their creditors. Only after satisfying all creditor claims can the remaining assets be apportioned among the partners according to their respective rights, typically as established in the partnership agreement or by the partnership laws of the jurisdiction.

The other options do not accurately address the sequence of priorities in liquidation. While settling accounts might involve ensuring debts to shareholders are settled, that is secondary to the priority of creditors. Similarly, closing the business completely would be a consequence of the liquidation process but not a prerequisite for settling accounts. Additionally, agreeing on a new business plan is irrelevant in the context of liquidation, as the focus is on winding up existing operations rather than planning new ones.