A limited partnership is a partnership in which at least one partner is liable to the creditors for the obligations of the partnership without limitation (the general partner) and the liability of at least one partner (the limited partner) is limited to the agreed amount ( the “commendam sum”). The articles of association of a limited partnership must be made in the form of a notarial deed. The limited partnership is created upon its registration in the register of entrepreneurs held in the National Court Register.
Capital requirements of limited partnership
The contributions may be made by partners in cash or in kind. There are no requirements as to the minimum level of contributions. The provision of services or work for the partnership may represent an in-kind contribution of a general partner, whereas it may represent an in-kind contribution of a limited partner only if the value of his other contributions to the partnership is not lower than the commendam sum. The capital share of a general partner equals the value of the contribution effectively made. A limited partner’s contribution may be made in a value lower than the commendam sum. The partners have no the right nor the obligation to increase the agreed contribution.
Management of limited partnership
Management of the affairs of the limited partnership may not be entrusted to third parties to the exclusion of the partners. As a rule, each general partner has the right and obligation to manage the affairs of the partnership and a limited partner does not have the right or obligation to manage the affairs of the partnership. The partners may not receive remuneration for managing the affairs of the partnership. As a rule, each general partner may, without a prior resolution of the partners, manage the affairs within the ordinary business of the partnership. However, where prior to conclusion of such a matter at least one of the remaining general partners objects to the conclusion of the matter, a prior resolution of all general partners is required.. Where in matters which fall within the ordinary course of business of the partnership a resolution of the partners is required, the unanimity of all partners who have the right to manage the affairs of the partnership is required. In matters which fall outside of the ordinary course of business of the partnership, the consent of all general partners is required, including those who have been excluded from managing the affairs of the partnership.
Representation of limited partnership
Each general partner has the right to represent the limited partnership. The right of representation may not be limited with effect towards third parties. The articles of association may provide, however, that a general partner is deprived of the right to represent the partnership or that he is authorized to represent the partnership only together with another general partner or the holder of the commercial power of attorney. A limited partner may represent the partnership only as an attorney in fact. A limited partner who effects an act in law in the name of the partnership without disclosing his power of attorney or outside of his powers is liable without limitation for the consequences of such act in law as against third parties.
Transfer of the rights and obligations of a partner in limited partnership
The rights and obligations of a partner in a limited partnership may be transferred to another person only where the articles of association so provide. As a rule, all rights and obligations of a partner in a partnership may be transferred to another person only upon the written consent of all of the remaining partners. In the case where all rights and obligations of a partner are transferred to another person, the withdrawing partner and the acceding partner are jointly and severally liable for the obligations of the withdrawing partner arising in connection with his membership of the partnership and for the obligations of the partnership.
Share in profits and participation in losses of limited partnership
As a rule each general partner is entitled to an equal share in the profits and participates in the losses in the same proportion, irrespective of the type and value of the contribution. The articles of association may release a general partner from participation in losses. If, as a result of a loss sustained by the partnership, the capital share of the general partner has diminished, the profits need to be first of all used to supplement the share of the partner. A limited partner participates in the profits of the partnership proportionately to his contribution actually made to the partnership. The profit due to him for a given financial year needs to be used first of all to supplement his contribution actually made up to the value of the agreed contribution. A limited partner participates in the loss only up to the value of the agreed contribution. A partner may request that the entire profits be divided and distributed at the end of each financial year, except if the partnership sustained loss. Moreover, a partner may demand every year a 5% interest on that partner’s capital share, even if the partnership has sustained a loss. Each general partner has a right to personally inquire about the state of the assets and business of the partnership and to personally review the books and documents of the partnership. A limited partner may demand a copy of the financial report for the financial year and may review books and documents in order to check its accuracy.
Liability for the obligations of limited partnership
Each general partner is liable for the obligations of the partnership without limitation with all his assets jointly and severally with the remaining general partners. However, his liability is subsidiary to the liability of the partnership, i.e. a creditor of the partnership may conduct execution from the general partner’s assets only where execution from the assets of the partnership has proved ineffective. The liability of a limited partner for the obligations of the partnership is limited to the amount agreed in the articles of association i.e. the commendam sum”.
Liquidation of limited partnership
The liquidation of a limited partnership is conducted in the event of its dissolution, unless the partners agree on another mode of bringing the operations of the partnership to an end. The reasons for dissolving the limited partnership are the following:1/ the reasons set out the articles of association, 2/ a unanimous resolution of all partners to this effect, 3/ a declaration of bankruptcy of the partnership, 4/ the death of the general partner or declaration of his bankruptcy, 5/ termination of the partnership by a partner or a creditor of a partner, 6/ a final court decision. As a rule, if the partnership has been formed for an undefined time, a partner may terminate the partnership six months before the end of the financial year. The creditor may terminate the partnership six months before the end of the financial year, even if the partnership has been formed for a defined time, provided that during the previous six months ineffective execution of the movables of the partner has been conducted by the partner’s creditor and the creditor under an execution title received an attachment order concerning the claims of the partner arising in the event of the partner’s withdrawal or dissolution of the partnership. The liquidators draw up a balance sheet as at the date of the opening and as at the date of closing liquidation. The assets of the partnership are used first of all to pay the obligations of the partnership The remaining assets are divided among the partners in accordance with the provisions of the articles of association and if the articles of association do not include appropriate provisions, the shares are repaid to the partners. Any surplus is divided among the partners in the proportion in which they participate in the profit. If the assets of the partnership are not sufficient for repayment of the shares and debts, the shortfall is divided among the general partners in accordance with the provisions of the articles of association, and if there are no such provisions, in the same proportion as that in which the general partners participate in the loss. In the case of the insolvency of one of the general partners, the share of that partner in the shortfall is divided among the remaining partners in the same proportion. If bankruptcy of the partnership is declared, the partnership is dissolved following the bankruptcy procedure.
