Download GENERAL PARTNERSHIP March 24, 2011

GENERAL PARTNERSHIP
General Characteristics
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Quintessential representative of personal companies
Can be created only for business purposes or management of its assets
by at least two founders
Emphasis on personal involvement and abilities of members
Designed for small businesses (restaurants, travel agencies, crafts)
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GENERAL PARTNERSHIP
Establishment
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Legal act necessary for establishment - founding agreement
Incorporation - upon registration in the Commercial Register
Contributions into company’s assets not mandatory, must be made
only if required by the founding agreement
Members (partners) - both individuals and legal entities
Person whose property was subject to insolvency or member of
statutory body of company declared insolvent within last 3 years
cannot be a member in general partnership
Members individuals must have impeachable character (clean criminal
record)
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GENERAL PARTNERSHIP
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If contributions agreed but obligation to invest not fulfilled by a
member, any other member is authorized on behalf of company to sue
defaulting member for performance
If agreed in founding agreement contribution may be done by providing
services or works for company
Corporate organization
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No specific corporate bodies created
Management of the company carried out by members (partners)
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GENERAL PARTNERSHIP
Rights and duties of members
• Right to participate in management
• Each member is authorized to manage the company and act on behalf of the
company in all matters (statutory body)
• Founding agreement may grant the management right only to one or more
members
• “Managing members” are liable to other members for proper management
of the company
• “Non-managing” members have the right to be informed and to inspect the
books and other documents of the company
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GENERAL PARTNERSHIP
• Right of one or more members to manage the company can be
terminated
• as agreed in founding agreement
• by court upon request of any other member if managing member grossly
violates his duties
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“Managing member” may resign from his position
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GENERAL PARTNERSHIP
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Matters pertaining to the existence of the company may be decided only
by all members or majority of members stated in the founding
agreement
Examples of such decisions
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change of founding agreement
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termination of a company
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approval of financial statements
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disposition of major assets
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appointment of one or more “managing members”
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other matters stated in founding agreement
Members decide unanimously unless founding agreement states
otherwise
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GENERAL PARTNERSHIP
Property Rights
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Right to participate in profits of the company; each member participates
equally in profits unless founding agreement states otherwise
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Member who provided contribution is entitled to profit equal to 25% of
his contribution
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If the aggregate profit does not suffice, it is divided (up to 25% of
contributions in the aggregate) among contributing members pro rata their
contributions and the rest equally among other members
• Each member is authorized to be reimbursed for costs expended for
arranging corporate matters
• In case of liquidation - right to participate in liquidation balance
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GENERAL PARTNERSHIP
Duties of members
• Reflect the personal nature of general partnership
• Obligation to participate in carrying out the business of the company
• Obligation to perform member’s tasks with due care
• Obligation to provide contribution in company’s assets – only if
provided for in the founding agreement
• Obligation to share losses of the company
• Obligation to refrain from carrying out outside the company
business activity identical or similar to that carried out by the
company (ban on competition conduct)
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GENERAL PARTNERSHIP
Liability of members for obligations of a company
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All members are personally and fully liable for obligations of the
company
Liability is joint, several and unlimited
General provisions on suretyship are applicable to liability of members
for obligations of the company
• Member may be requested by the company’s creditor to pay only if
company does not perform
• Member has a subrogation right towards the company
• Member has a right to be compensated by other members in proportion to
their liability
• Any member may resign from company through change of founding
agreement, in such case is liable for debts arisen before resignation
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GENERAL PARTNERSHIP
• New member can accede through change of founding agreement, such
member is liable for company´s debts even before his accession
Specific remedies
• Each member is authorized to
• Claim on behalf of the company damage caused to the company by the
other member
• Seek with the court decision on termination of the company for important
reasons, in particular, if the other member materially violates his obligations
• Company may seek with the court expulsion of member who materially
violates his obligations
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GENERAL PARTNERSHIP
Termination of general partnership
• For reasons applicable to all companies
• Decision of all members to terminate the company with liquidation
• Decision of all members on termination through a transformation
• Decision of a court
• For reasons specific only to general partnership
• Upon the death of a member (natural person)
• Upon termination of a member (legal entity)
• Upon declaration of bankruptcy over assets of a member
• Unless founding agreement and agreement of remaining members allow
for continuation of company
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LIMITED PARTNERSHIP
General Characteristics
• Personal company with certain capital features
• Two types of partners
• unlimited partner
• limited partner
• Can be created only for business purposes by at least one limited and
one unlimited founder
• Personal involvement of unlimited members reflected in company’s
management
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LIMITED PARTNERSHIP
Establishment
• Legal act necessary for establishment - founding agreement
• Incorporation - upon registration in the Commercial Register.
• Limited members obligated to make capital contributions in the amount
set forth in founding agreement, no minimal amount stated by law
• Members (partners) - both individuals and legal entities
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LIMITED PARTNERSHIP
Corporate organization
• No specific corporate bodies created
• Management of day to day business carried out by unlimited members
(partners)
• Other matters decided by unlimited and limited members jointly –
majority voting pursuant to founding agreement
• Founding agreement may be changed by agreement of all members
unless founding agreement provides for majority of unlimited and
limited members
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LIMITED PARTNERSHIP
Rights and duties of members
• Right to participate in management – unlimited members
• Each unlimited member is authorized to manage the company and act on
behalf of the company in all matters
• Founding agreement may grant the management right only to one or more
unlimited members
• Right of one or more unlimited members to manage the company can be
terminated
• by decision of other unlimited members as agreed in founding agreement
• by court upon request of any unlimited member if managing member grossly
violates his duties
• Managing member may resign from his position
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LIMITED PARTNERSHIP
Right to participate in management – limited members
• Rights and duties determined by size of capital contribution unless
founding agreement states otherwise
• Right to be informed and to inspect the books and other documents of
the company
• Vote on matters outside day to day business and change of founding
agreement together with unlimited members
• Voting separate by unlimited and limited members unless founding
agreement states otherwise
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LIMITED PARTNERSHIP
Property Rights
• Right to participate in profits of the company
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Profits divided into two parts - one for unlimited partners, one for limited
partners
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Part for unlimited members divided equally
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Part for limited members divided in accordance with their capital
contributions
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Both unless founding agreement states otherwise
• In case of liquidation - right to participate in liquidation balance
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Each member authorized to the amount adequate to its contribution
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In case of insufficient balance limited members take priority
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The rest divided pursuant to rules applicable to division of profits
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LIMITED PARTNERSHIP
Duties of members
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Reflect distinctions in nature of unlimited and limited members
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Unlimited members - the same position and duties as members of
general partnership
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Limited members – duties similar to duties of members of limited
liability company
• Obligation to provide contribution in company’s assets
• Limited members do not share losses of the company unless provided
for this in founding agreement
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LIMITED PARTNERSHIP
Liability of members for obligations of a company
• Unlimited members are personally and fully liable for obligations of the
company
• Liability of unlimited members is joint, several and unlimited
• Limited member is liable jointly and severally with other members
(unlimited and limited) for obligations of company up to the amount of
his unpaid contribution as registered in commercial register
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• Founding agreement may stipulate that limited partners are liable for
obligations of the company up to the amount set forth in the founding
agreement (liability amount)
• Liability amount is registered in Commercial Register
• Liability amount may not be lower than the aggregate of contributions
of limited partners
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LIMITED PARTNERSHIP
Termination of limited partnership
• For reasons applicable to all companies
• Decision of all members to terminate the company with liquidation
• Decision of all members on termination through a transformation
• Decision of a court
• For reasons applicable to general partnership with regard to unlimited
partners
• Upon the death of unlimited member (natural person)
• Upon termination of unlimited member (legal entity)
• Upon declaration of bankruptcy over assets of unlimited member
• Death, termination or bankruptcy of limited partner does not affect the
existence of company
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