Relative Partnership Company

Relative Partnership Company

Pursuant to Article 183 of the Commercial Code, a Relative Partnership Company is a commercial entity formed under a specific business name between two or more partners, where each partner’s liability is proportional to the amount of capital they have contributed to the company. Furthermore, under Article 184 of the Commercial Code, the company name must include the phrase “Relative Partnership Company” and the name of at least one partner. If the company name does not include the names of all partners, an additional phrase such as “and Partners” or “and Brothers” must be included.

Formation of a Relative Partnership Company

In this type of company, the company capital is referred to as partnership shares. These shares are not issued as negotiable commercial instruments and cannot be transferred without the unanimous consent of all partners.

All company capital must be provided by the partners. The partnership share may be contributed in cash or in kind. If the contribution is in cash, it must be paid in full at the time of company formation, unlike in joint-stock companies, where partial payment commitments may be permitted. If the contribution is non-cash, it must be fully delivered and properly valued. Unlike joint stock companies, there is no statutory minimum capital requirement for a Relative Partnership Company.

Liability of Partners in a Relative Partnership Company

Under Article 183 of the Commercial Code, each partner is liable for the company’s debts in proportion to their partnership share. Creditors must initially seek payment from the company itself. If the company is dissolved and its assets are insufficient to satisfy the debts, creditors may then pursue the partners individually in proportion to their respective shares.

Personal creditors of a partner have no claim against the partner’s interest in the company prior to company dissolution.

Number of Partners in a Relative Partnership Company

A Relative Partnership Company must be formed by at least two partners and must be established exclusively for commercial activities. There is no statutory upper limit on the number of partners. Partners may be either natural persons or legal entities.

Due to the personal liability of partners, some legal scholars argue that persons lacking legal capacity, such as minors or legally incapacitated individuals, should not be permitted to become partners. However, based on interpretations of Articles 139 and 140 of the Commercial Code, this viewpoint is not universally accepted.

Scope of Business Activities

According to Article 183 of the Commercial Code, the company must engage exclusively in commercial activities as defined under Article 2 of the Commercial Code. If a Relative Partnership Company is established with a non-commercial purpose stated in its articles of association, a request for invalidation of the company may be submitted to the court.

Authority of Managers in a Relative Partnership Company

Under Article 105 of the Commercial Code, any limitation placed on the authority of managers in the company’s articles of association is legally valid not only with respect to the managers, company, and partners, but also with respect to third parties.

Liability of Managers

According to Articles 121 and 51 of the Commercial Code, the liability of managers toward the partners is equivalent to the liability of an attorney toward their client.

Decision Making in a Relative Partnership Company

Decisions within a Relative Partnership Company must be made by unanimous consent of all partners. The company’s articles of association cannot establish a voting majority rule that contradicts this unanimity requirement.

Dissolution of a Relative Partnership Company

The grounds for dissolution of a Relative Partnership Company are generally similar to those applicable to general partnership companies. According to Article 189 of the Commercial Code, the company may be dissolved under the following circumstances:

• Expiration of the company’s duration.
• Completion or impossibility of achieving the company’s business objective.
• Bankruptcy of the company.
• Mutual agreement of all partners.
• Request by one partner and acceptance of the request by a competent court.
• Withdrawal of a partner, provided it is not intended to cause harm, and written notice is given at least six months in advance.
• Bankruptcy of one partner if the bankruptcy trustee requests dissolution, and the company fails to prevent it.
• Death or legal incapacity of a partner, unless continuation of the company is approved by the remaining partners and the legal successor of the deceased partner. If the successor does not declare acceptance or rejection within one month of the partner’s death, silence is deemed acceptance.

Frequently Asked Questions About Relative Partnership Companies