Chap 6 Company Law PDF

PART II. COMPANY LAW  The Code of Commercial Companies (CCC) Framework: Tunisian company law governs the establishment, operation, and management of companies. Key Legislation: The Code of Commercial Companies (CCC, 2000) is the primary legal framework. Additional Sources: Supplement...

PART II. COMPANY LAW  The Code of Commercial Companies (CCC) Framework: Tunisian company law governs the establishment, operation, and management of companies. Key Legislation: The Code of Commercial Companies (CCC, 2000) is the primary legal framework. Additional Sources: Supplemented by the Code of Contract Obligations and the Code of Commerce (1959). Purpose: Defines company formation, structure, rights, obligations, and stakeholder relationships. Importance: Essential knowledge for entrepreneurs, investors, and business owners in Tunisia.  Definition of a company Article 2 of CCC «a company is a contract by which one or more persons put in common their assets or labor force or both in order to share profits, or to beneficiate from the resulting economy. However, in Unipersonal limited liability partnership the company is composed of a unique associate». There are many reasons behind the choice of a company: Economic Advantages: Companies offer traders additional benefits, such as better organization and protection against losses in large-scale commercial activities. Support for National Economy: States encourage company creation as companies are key components of economic growth and structure. Social Benefits: Society provides incentives for company formation to boost economic development and stability. Partnerships vs Corporations Partnerships (société de personnes) and corporations (société de capitaux) are two different forms of business organizations, each with its own characteristics and legal implications. Their main differences are : -Legal entity -Liability -Management and decision -Taxation -Transferability and ownability -Continuity and succession Legal Entity: A corporation is a legal entity that is separate and distinct from its owners, known as shareholders. A partnership, on the other hand, is not a separate legal entity; it is a business structure where two or more individuals (partners) share the profits, losses, and responsibilities of the business. Liability:  In a corporation, shareholders generally have limited liability, which means their personal assets are protected from the company's debts and liabilities. The liability of shareholders is limited to their investment in the corporation.  In a partnership, partners have unlimited personal liability, which means their personal assets can be used to satisfy the debts and liabilities of the partnership. This means that in a partnership, each partner is personally liable for the partnership's debts and liabilities, including those incurred by other partners. Management and Decision-Making:  In a corporation, the board of directors is responsible for managing the company's affairs and making decisions on behalf of the shareholders. Shareholders typically have voting rights based on their ownership percentage and elect the board of directors.  In a partnership, all partners generally have an equal say in the management and decision-making of the business, unless otherwise agreed upon in a partnership agreement. Partnerships tend to have a more flexible and informal management structure compared to corporations. Taxation:  Corporations are subject to corporate income tax at the entity level, and shareholders are also subject to individual income tax on dividends or other distributions they receive from the corporation.  Partnerships, on the other hand, are pass-through entities, where profits and losses are passed through to the partners and taxed at their individual tax rates. Partners are responsible for reporting their share of the partnership's income and losses on their individual tax returns. Forms of Partnerships in Tunisia  The two most commonly used forms in Tunisia are:  General Partnerships “Societe en Nom Collectif (SNC)”  Limited Partnership « société en commandite simple General Partnerships  Partners: Partners have the personal quality of traders (commercial capacity) or capacity to trade.  Company Object : is a commercial company by its object  Company Name ( no free choice / must be composed of all partners or one of them name + “et companie”  Company share capital: no minimum capital is required  Liability : partners are jointly and severally liable for any legal actions and debts the company may face  Example Business Formation: John and Sarah form "John and Co. Bakery," agreeing to equally share responsibilities, profits, and losses. Joint and Several Liability: Both are personally liable for debts, with creditors able to claim personal assets. Shared Management: Both manage daily operations and share decision-making equally. Equal Profit and Loss Sharing: Profits and losses are shared equally as per their partnership agreement. Pass-through Taxation: The partnership does not pay taxes; profits and losses are reported on each partner’s individual tax returns. Limited Duration: The partnership may dissolve if a partner leaves or as specified in the partnership agreement. Limited partnerships  Composition: The company consists of General Partners (Associés commandités) and Limited Partners (Associés commanditaires).  General Partners: Have the status of traders and manage the company with increased authority due to higher risks.  Limited Partners: Do not have trader status and entrust fund management to general partners.  Company Name: Must reflect the name of a general partner.  Share Capital:  General partners can contribute in cash, in-kind, or industry expertise.  Limited partners can only contribute in cash or in-kind.No minimum share capital is required. Liability: General partners have unlimited personal liability for the company's debts. Limited partners are liable only up to the amount of their contributions. Example Partnership Formation: James and Nada form a limited partnership, "Real Estate Ventures LP," to invest in real estate. Roles:  General Partner (James): Manages day-to-day operations, makes decisions, assumes risks, and has unlimited liability for the partnership's debts and obligations.  Limited Partner (Nada): Passive investor with limited liability, only up to her investment amount. She contributes capital, shares in profits or losses, but has no role in management or decision- making.  Key Characteristics: General partners manage and take risks, while limited partners provide capital and benefit financially without management involvement. CHAPTER. CORPORATIONS Corporation Definition: In Tunisian law, a corporation is a separate legal entity with its own legal personality, allowing it to conduct business, own property, and enter into contracts independently. Owner Liability: Limited to the amount of their investment. Forms of Corporations in Tunisia: Société Anonyme (SA): Joint stock company with capital divided into shares; used for large businesses. Shareholder liability is limited to their shares. Société à Responsabilité Limitée (SARL): Limited Liability Company (LLC) for small and medium-sized enterprises (SMEs). Partner liability is limited to their contributions. Société Unipersonnelle à Responsabilité Limitée (SUARL): Single-member LLC, similar to SARL but owned by one individual.  Joint stock company As per the article 160 CCC of Tunisia: A Corporation is a company of shares, beneficiating with legal personality and formed of at least 7 members liable only to the amount of their contributions. Share Capital Requirements: Minimum of 5,000 dinars for closely held corporations. Minimum of 50,000 dinars for publicly held corporations. Shareholder Rights: Contributions to the capital determine the number of shares allocated to each shareholder. Liability: Shareholders’ liability is limited to their contributions. Corporate debts are not recoverable from shareholders’ personal assets. Publicly Held Corporations: These are companies that issue and transfer securities and seek public funding through public offerings (Article 162, CCC). Legal Definition (Law of 09/14/1994): Corporations declared as publicly held in their articles of association.