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, a Relative Partnership Company has no statutory minimum capital requirement.
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
It is a commercial partnership formed between two or more partners in which each partner is liable for the company's debts in proportion to their capital contribution.
A minimum of two partners is required, and partners may be natural persons or legal entities.
The company must engage exclusively in commercial activities. Establishing the company for non-commercial purposes may result in invalidation.
Partners are liable for company debts proportionate to their partnership shares. Creditors must first pursue the company before pursuing partners individually.
All decisions require unanimous consent of the partners, and this requirement cannot be altered by the company’s articles of association.
Dissolution may occur due to expiration of duration, completion or impossibility of the company’s purpose, bankruptcy, mutual agreement of partners, court order, withdrawal of a partner, or death or incapacity of a partner under certain conditions.
Partnership shares cannot be transferred without the consent of all partners and may consist of cash or non-cash contributions.
Managerial authority is governed by the articles of association, and managers are legally responsible to partners in a manner analogous to an attorney's responsibility to a client. What is a Relative Partnership Company?
What is the minimum number of partners required?
What activities may a Relative Partnership Company conduct?
How is partner liability determined?
How are decisions made within the company?
Under what circumstances may the company be dissolved?
Are partnership shares transferable?
What are the powers and responsibilities of company managers?
Can one partner sign a contract that becomes binding on everyone else?
In many partnership structures, a partner may have authority to act on behalf of the partnership within the scope of the business. Whether the other partners are legally bound depends on the partnership agreement, the nature of the transaction, and the applicable law. Those details should be reviewed carefully.
What happens if one partner stops contributing money but still wants an equal share of the profits?
The answer depends on the partnership agreement and the legal framework governing the partnership. If the agreement addresses capital contributions and profit sharing, those terms will usually play a significant role in resolving the dispute.
Can a partner sell their ownership to someone else without asking the others?
That depends on the partnership agreement and the applicable legal rules. Many partnership arrangements restrict the transfer of ownership interests without the consent of the remaining partners.
If a partner makes a bad business decision, are all the partners responsible for the loss?
Potentially, yes. Liability may depend on the type of partnership, the authority of the partner who acted, and whether the action was within the ordinary course of the business. Each situation should be evaluated based on its specific facts.
Can a partnership continue if one of the partners passes away?
In many cases, the answer depends on the partnership agreement and the governing law. Some partnerships continue with the remaining partners, while others may require additional legal steps following the death of a partner.
What if the partnership agreement says one thing but everyone has been doing something different for years?
A written agreement is generally very important, but the parties’ conduct may also become relevant in certain disputes. Determining the legal effect of long standing business practices requires a careful review of both the agreement and the surrounding facts.
Can a partner be removed if they keep making decisions without telling the others?
Removal of a partner is not automatic. Whether it is possible depends on the partnership agreement, the applicable law, and the seriousness of the conduct involved. A review of the governing documents is usually the first step.
If there is no written partnership agreement, how does the court decide who owns what?
When there is no written agreement, the court may consider evidence such as financial contributions, business records, communications, witness testimony, and the parties’ conduct. Every case depends on its own evidence.
Can one partner inspect all of the company’s financial records even if the others disagree?
Partners often have important rights relating to the partnership’s books and records, but the extent of those rights depends on the governing agreement and applicable law. If access has been denied, the circumstances should be reviewed before determining the available legal options.
If partners decide to end the business, does every debt have to be paid before anything is divided?
In general, partnership liabilities are addressed before the remaining assets are distributed among the partners. The exact order of distribution depends on the applicable law, the partnership agreement, and the financial position of the business.