Chapter Two Partnerships PDF

Chapter two Partnerships Partnerships are one of the categories of commercial companies. they are established depending on personal consideration between partners, and are usually established to exploit medium and small projects. In Egyptian law, these companies have...

Chapter two Partnerships Partnerships are one of the categories of commercial companies. they are established depending on personal consideration between partners, and are usually established to exploit medium and small projects. In Egyptian law, these companies have three forms: the General Partnership, the limited partnership, and Joint-Venture company. All partners at these companies have common feature, that one of them must have the character of merchant. Within the framework of our study in this chapter, we will divide our discussion into three main sections, in which we study the three forms of partnerships. In the first section, we will discuss general partnership, while the second section deals with the limited partnership, and the finally we will deal joint-venture company. As follows: The first section: General Partnership Company. The second section : Limited Partnership company. The Third section: Joint-Venture Company. Page 1  The first Section General Partnership It is worth noting in this regard that the General Partnership is one of the most important partnerships in practice, and in the context of talking about the General Partnership as one of the companies that belong to Partnerships, we will divide our discussion in this topic into three topics, as follows: The first sub-section: characteristics of the General Partnership The second sub-section: formation of a General Partnership The third sub-section: management of the General Partnership Page 2  The first sub-section Characteristics of the General Partnership We can conclude from Articles 20, 21, and 22 of the old Trade Law, the Egyptian legislator stated the distinctive characteristics of General Partnership. Article 20 of it stipulates that it is “a company concluded by two or more people with the intention of trading in the form of a partnership between them with a specific title that would be its name.” Article 21 stipulates that “the name of one or more partners is sufficient to be the company's title.” Article 22 stipulates that “the partners in the General Partnership are jointly liable for all its undertakings.” We conclude from the above-mentioned articles that the General Partnership have five characteristics: 1- The General Partnership’s title consists of the names of its partners. 2- The partners acquires the statue of a merchant. 3- The partners is personally responsible for the company’s debts. 4- The partners are jointly liable for the company’s debts. 5- The partner’s share is not tradable. First: Title of General Partnership: General Partnership must have a title that would be its name, and its title consists of the name of one or more of its partners. It is not necessary that the title of a general partnership shall consist of the names of all partners it is sufficient to mention the name of one or more of them accompanied by " & Co". Page 3  The purpose behind this is so that others can know the identity of the partners who are personally and jointly liable for the company’s debts. It is not permissible to include in the company’s title the name of a person who is foreign to the company, because third parties are confident about this title and grant their credit to the company depending on the presence of the partners whose names appear in its title. It follows that if the name of a foreign person who is not a partner in the company is mentioned , with the intention of gaining the confidence of others , this act is considered a fraud, and if this name is added with the consent of its owner, he can be considered a partner in the crime of fraud. In the event of the death of the partner or his withdrawal from the company, his name must be removed from the company's title. The second: The partners acquires the statue of a merchant. A partner in a General Partnership acquires the statue of a merchant even if he did not have this statue before the formation of the company. The reason for considering him as a merchant is as follows: 1- The signature on the transactions conducted by the company shall be in its title that includes his name, as if he personally conducted these transactions in his name and for his own account. 2- He is responsible for the company’s debts on his own liability , as if these debts were his personal debts. When a partner acquires the statue of a merchant, it follows the following results: Page 4 1- He must have the capacity to engage in trade, by reaching the age of 21 or 18 years with permission from the court. 2- He is obligated by the merchants obligations , as keeping commercial books in which he records the profits that he gains from the company , but he is not obligated to register himself in the commercial registration office, sufficiency with registering the company itself. 3- The bankruptcy of the company ensues the bankruptcy of the partners and vice versa, as the bankruptcy of the company means that it has stopped paying its commercial debts, which means that the partners have stopped paying their commercial debts. The third: The partner is personally responsible for the company’s debts: The partner in the General Partnership is personally responsible for its debts as if they were his own debts, and the partner’s personal responsibility , means , his responsibility for all the company’s debts on his own liability as if these debts were his personal debts. His responsibility is not limited to the amount of his share in the company, but rather goes beyond it to include all his money and proprieties. Jurisprudence has justified the personal responsibility of a partner for the company’s debts, that , the signing of the company’s pledges takes place at its title , which includes the names of all partners, as if each partner had personally pledged the company’s obligations and these obligations became his responsibility. Page 5 The fourth: The partners are jointly liable for the company’s debts: The meaning of the joint liability of the partners is that the company’s creditor has the right to recover his debt not only from the company, but also from the partners until his right is fulfilled. Accordingly, the company’s creditors have a guarantee on the partners’ funds in addition to the company’s funds, so the partners obligation to pay the company’s debt is considered an original obligation. Any agreement that exempts a partner from the jointly liable is null. The partner's joint liability for the company's debts , it follows that : 1- The company’s creditors may claim from any partner - according to his choice - the entire debt, and this partner cant confront the claim by recourse against the other partners or against the company. 2- If one of the partners fulfills the entire debt, the other partners are discharged from the debt, and this partner who fulfilled the debt has the right to return to the rest of the partners to recover what he paid. However, in order to mitigate the effects of the partner’s joint liability, the judiciary decided that the company’s creditors may not have recourse against the joint partner’s funds unless he demands the debt from the company and obtains a judgment against the company. Page 6  The new partner who joins the company shall be responsible for its debts prior to his joining, unless he agreed otherwise and this agreement is chartered. A partner who withdraws from the company is not responsible for the debts subsequent to his withdrawal, provided that the withdrawal is chartered. If it is not chartered, he remains responsible for the company’s debts subsequent to his withdrawal. The Fifth: It is not permissible for a partner to transfer his share to others without the approval of the rest of the partners : The principle is that , a partner’s share cannot be transferred without the approval of the rest of the partners, because the General Partnership is a partnership that is based on personal consideration, and transferring the share to a third party leads to bringing in a foreign person among the remaining partners as a partner in the company, so the remaining partners must agree to that, and in In the event of the death of a partner, his share does not pass to his heirs, as the company ends and dissolved with the death of one of the partners. However, it is permissible for the partners to agree that a partner may transfer his share to others, but a certain majority of the partners must be required to agree to the transfer , and the person to whom the share was transferred , must be identified. It is not permissible to agree on the absolute right of a partner to transfer his share to others , in order to preserve the personal consideration. It is also permissible to agree on the transfer of the deceased partner’s share to his heirs. In this case, the company does not end or dissolved with the death of the partner, but rather the Page 7 company continues between the remaining partners and the heirs of the deceased partner. partner of the partner ( Al-Radif ) : When a partner shares another person in his share without the approval of the rest of the partners , and this other person is called partner’s partner. The prevailing opinion from jurisprudence is that a joint venture company was established between the partner and his partner with the object of exploiting the share , and no relationship shall arise between partner’s partner and the company, so he cannot demands the company's profits from the share , or to view the company's books. However, the partner’s partner can through an indirect lawsuit, demand the profits from the company, considering that the company owes the partner profits and that later owes his partner - partner’s partner - profits according to the agreement that was concluded between them, meaning that partner’s partner is considered the debtor of the debtor according to the indirect lawsuit. Page 8  The second sub-section Formation of a General Partnership The memorandum of association of a General Partnership must contain the general substantive elements of contracts and those specific to corporate contracts, in addition to the formal elements, which are represented in writing and chartering in the commercial registry. We will review in detail in this requirement the substantive and formal elements of the incorporation contract of a general partnership company as follows: First: The substantive elements of the memorandum of association: The general substantive elements of contracts must be present in General Partnership memorandum of association, such as consent, capacity, object, and reason. The consent of the partners must meet all the terms of the memorandum, and the company’s object and reason must be legitimate. The specific substantive elements of the company’s memorandum must also be present. Each partner must provide a share in the company, and shares in-service are accepted in the General Partnership. The partners must also have the intention of participating, and the memorandum of association should not include any of leonine conditions. If one of the general or specific substantive elements of the company’s memorandum is neglected, it is null. Page 9 Second: The formal elements of the company’s memorandum: A- Writing: The memorandum of the General Partnership must be in writing, and writing is a condition for its concluding and proving. The memorandum includes all the essential information about the company, as well as the conditions agreed upon by the partners. B- The chartering: The partners must register and charter the company's memorandum to inform others of its existence. There are two types of registration and chartering: a legal chartering and a charter in the commercial registry, as follows: 1. Legal chartering: What is meant is the chartering that stipulated by the Commercial Law and its procedures. The procedures for the chartering as follows: 1. Depositing a summary of the company’s memorandum of association with the court clerk within whose jurisdiction the company’s head office is located. 2. Paste a summary of the company’s memorandum of association for a period of three months on the board prepared in court for judicial announcements. 3. publish a summary of the memorandum of association in one of the newspapers. Page 10 The duty to carry out these procedures falls on the partners, especially on those who bear the burden of managing the company. * Summary data that must be chartered: 1. Names, titles and characteristics of the partners, as well as their home addresses. 2. Company title. 3. The names of the partners authorized to manage and who sign by the title of the company. 4. The company’s start time and end time. * chartering of emergency amendments to the memorandum summary: If any amendment occurs to the summary of the memorandum of association or other data is added to it, such as extending or shorten the duration of the company or changing its directors, this addition or amendment must be published. 2. Chartering in the commercial register: In addition to the legal chartering procedures, the Commercial Registry Law stipulates in its first article that the companies must be registered in the commercial registry, and any change that occurs to these data must be noted in the registry, and the company manager is obligated to register the company in the commercial registry. It is worth noting that the failure to register the company in the commercial registry has no impact on the validity of the company's memorandum of association , while failure to legal chartering results in the invalidation of the company. Page 11  Not chartering company’s memorandum and its consequences: Negligence in taking the chartering procedures required by commercial law leads to the nullity of the company. If the chartering occurred, but the partners neglected to charter one of the statements, such as limiting the powers of the company’s director, for example, then the penalty is not the nullity of the company, but rather this statement not being invoked against others.  Who has the right to uphold the nullity: Nullity does not occur by force of law, and the court cannot rule on it on its own, but it must be requested from the concerned parties as follows: 1- Partners: Partners may invoke nullity against each other. A partner’s use of this right may be in the form of an " initiated lawsuit " , such as if he asks the company to recover the share he provided because it was not chartered , or it may be in the form of a " plea " before the court , that the director of the company Files a lawsuit to claim him to pay his share, so he make a plea by adhering to the nullity of the company because it was not chartered. The partners cannot upholding invalidity in front of others , because the registration process falls on their responsibility and it is not acceptable to allow them to benefit from their negligence. Page 12 2- The company’s creditor : The company's creditors have the choice between upholding nullity or not. The creditor may have an interest in the company's nullity, but often the interest of the company's creditors is to maintain it and not upholding the nullity so that the shares provided by the partners remain in the company's possession. 3- Personal partner's creditor : The personal creditor of the partners has the right to request the invalidation of the company in order to return the share of his debtor-partner to his liability and include it within the scope of the general guarantee assigned to them over his money. This is achieved for them by using the right of their debtor-partner to uphold the nullity through an indirect lawsuit.  Correction of the violation that leads to the nullity : A General Partnership may be established with a formal defect, such as lack of chartering, and its existence may continue in this manner for a long time. Then, it is surprised by a judicial request to annul it from some of its creditors. This matter is undesirable from both economically and legally sides. Therefore, the legislator was keen to enable the partners to close the means of nullity, so he permitted them to cure the company from its defect.  Effects of nullity: If the company is ruled null, the effect of the nullity varies depending on the person who upholding it: Page 13  1- If one of the partners requests the nullity : The effect of nullity is limited to the future and does not extend to the past, so the company must be dissolved and liquidated. As for the period between the formation of the company and the ruling of its nullity, it is considered a " de-facto company " and all the provisions of an de-facto company apply to it , meaning that it may still conduct business engage in contracts and have some legal rights and responsibilities 1- If a third party requests the nullity : The nullity will have a retroactive effect and will not be invoked against him by the actions undertaken by the company in the period between its establishment and the ruling on its invalidation. Page 14  The third section General Partnership management The general rule, is that all partners have the right to manage the company, as the interest of each partner lies in managing the project to achieve the common goal, but the work is carried out that the partners appoint one or more managers to manage the company. First: Appointing of a company's manger : The company is managed by one or more managers from among the partners. It is permissible for a person other than the partners to assume the management of the company, but this rarely happens. The director of the General Partnership may be a consensual manager, or he may be a non-consensual manager: A- The consensual manager : Is the one who is appointed in the company’s memorandum, or he is appointed at a later time when the company is established, by amending the memorandum so that it stipulates the appointment of a manager in it. B- Non-consensual manger : Is the one who is appointed in an agreement or contract independent and separate from the memorandum. In the event that there is no manager, whether consensual or non-consensual, that is, the memorandum did not stipulate the appointment of the manager, nor did the partners agree in an separate agreement to appoint him, then each partner has the Page 15  right to assume management and is considered authorized by the other partners to manage the company. The rest of the partners, or one of them, has the right to object to any work carried out by one of the partners before it is completed. The validity or cancellation of the work will depend on what is decided by the majority of the partners. Second: dismissal of the company's manger : The method of dismiss a manager depends on whether he is a consensual manager and a partner in the company, or a consensual manager but not a partner in the company , or a non- consensual manager , according to the following details: A- If the manager is a consensual manager and a partner in the company: It is not permissible to dismiss him except with his consent, because the agreement on his appointment is part of the memorandum of association , and in his dismissal, there is an amendment to this memorandum , and this amendment may not be made except with the consent of all the partners, including the manager - who is at the same time a partner -. If consensus is not achieved or the manager - partner - refuses to be dismissed from management, it is permissible to request his dismissal from the court if there is justification for that, such as if he committed serious negligence or committed fraud or treason that harmed the interests of the company and the partners. The consensual manager - the partner - may not resign from management except with the consent of the partners, because retirement is considered an amendment to the company’s memorandum. However, he may retire if there are strong reasons Page 16 that justify him, such as illness, old age, or infirmity, and this results in the dissolution of the company. B- If the manager is consensual but not a partner , or not consensual manger He may be dismissed at the will of the partners and without the need to obtain his consent. because in the case he is consensual manger but not a partner , the partners can made an amendment to the memorandum without his agreement , and in the case that he is not consensual manger , his appointment is not part of the memorandum. He may also retire from management, provided that this resign occurs at an appropriate time, in application of the rules of agency, as this manager is considered an agent for the company, and the agency may be terminated by both the principal and the agent alike, on the condition that would be an appropriate time. The dismissal of this manger or his retirement from management does not result in the dissolution of the company because he is not a partner. Third: The director’s powers and their limits: The memorandum association usually specifies the powers granted to the manager and their limits, for example, the acts and decisions that he can carry out on his own will, those on which he must seek the opinion of the partners before carrying them out, and finally the acts that he is prohibited from undertaking. But if the memorandum is silent about specifying the manager’s authority, then we must logically consider that the partners have granted the manager the necessary powers to reach the intended purpose and achieve the company’s goal. Page 17 Accordingly, he has the right to undertake all the acts that fall within the purpose of the company, whether these acts may be acts of management or acts of disposal. But he is prohibited from carrying out acts that are not consistent with the purpose of the company. He is prohibited from donate the company’s money or contract with himself in the name of the company without a license from the partners because his personal interest conflicts with the company’s interest. The rule, is that the manager himself manages the company, and he is prohibited from delegating others to carry out all the company’s work unless the memorandum authorizes him to do so. Otherwise, he is responsible for the work of the representative as if the work had been issued by him personally. The authority of mangers in the event of multiple mangers and their limits: Sometimes there is more than one manager of a General Partnership, and in this case, we are faced with one of the following assumptions: 1- The memorandum shall specify for each manger his powers. In this case, each manger must respect the limits of the powers assigned to him. 2- The memorandum stipulated that the managers work together as a board of directors so that decisions are taken unanimously or by majority. 3- The memorandum is silent about specifying the power of each manager. In this case, each of these managers may carry out any of the various management tasks, and any of the remaining managers may object to the work before it is completed. Then the matter will be presented to all the managers to decide on by Page 18  a majority. If the two sides are equal, what matters is the decision issued by the majority of partners. Fourth: The company’s responsibility for the manger’s actions: The company is a legal person with no will, so, the will of the manager is the will of the company, so the company is responsible for the acts of the manager that fall within the limits of his authority. The company’s responsibility for the manager’s acts may be a contractual liability or a tort liability, and we show for each of them separately, as follows: A- Contractual liability: To be liable for all contracts concluded by company’s manger , two conditions must be met: The first condition : These contracts must be in the company’s name and for its account: The contracts must be signed in the company’s name. However, if the manager concludes a contract on behalf of the company and signs it in his own name and not in the company’s name, then the rule is that the company is not responsible for this behavior and the manager alone is obligated. The rule is that the company is responsible for all contracts that he concludes as long as they are signed in its name , even if the manager is in bad faith and works for himself , on condition that the third party in good faith. However, if the bad faith of the third party is proven and he knew that the manager was working for his own account and that he was misusing the company's name and going against the will Page 19 of the partners , then the company will not be responsible for the manager’s acts , and the other can referring to the manager personally. The second condition: These contracts must be within the limits of the power that granted to the manager in the memorandum association or within the limits that are consistent with its purpose: If the manager exceeds the limits of his power, the company is not bound by his acts, and the third party, even if he has good faith, has not the right to return against the company on condition that the limits of the manager’s authority have been stipulated in the memorandum association and it has been published. For example, If the memorandum stipulates that the manager is prohibited from selling the company’s real estate and then he violates it. And ignores this restriction and sells a property owned by the company, his act, in selling the property, does not bind the company, and the third party who contract with him has no choice but to return against the manger personally. As for the restrictions that are imposed on the manager’s powers and have not been chartered, they do not bind the third party, and the manager’s act in this case is bind the company. B- Tort liability: The company shall be responsible for the errors committed by the manager during the performance of his job or because of it, resulting in harm to others. Page 20  The second Section Limited Partnership The limited partnership company is considered the second type of partnership, and the limited partnership company has its own specificity that distinguishes it from the general partnership, especially the idea of limited liability. As a result, we divide our discussion in this section into two sub-sections, which we present as follows: The first sub-section: The meaning and Characteristics of the limited partnership company. The second sub-section : Management of the limited partnership company. Page 21  The first sub-section The definition and Characteristics of a limited partnership company (A)- Definition : Article 23 of the Commercial Code defines a limited partnership company as “ a company that is concluded between one or more responsible and joint partners and between partners who are owners of funds in it and are outside the management and are called limited partners.” As is clear from this definition, the limited partnership includes two types of partners: (a) General partners: They are considered to be in the same position as the partners in a general partnership in terms of their personal and joint responsibility for the company’s debts. (b) limited partners: They are not responsible for the company’s debts except within the limits of the shares they own, and they do not have the right to interfere in the company’s management. (B) - Characteristics : First: The partner’s share is not tradable. It is not permissible for a partner in a limited partnership company , whether a general partner or a limited partner , to give up his share to others, except with the approval of the all general and limited partners. The share of a general or limited partner does not transfer upon his death to his heirs, and the death of a Page 22 general or limited partner result in the dissolution of the company, unless otherwise agreed. Second: character of the merchant: The prevailing opinion from jurisprudence is that the general partner acquires the status of a merchant once he joins the company, while the limited partner does not acquire the status of a merchant by joining the company. Third: Company's title The limited partnership company must take a title that serves as its name. Only the names of the general partners may be included in the company’s title and not the names of the limited partners, as it is important for others to know the names of the partners who are personally and jointly liable for the company’s debts. In the event that the name of the limited partner is entered in the company’s name with his knowledge and his consent , he becomes a general partner and is personally and jointly liable for the company’s debts , in order to protect the good faith of third party who thought he was a general partner due to his name appearing in the company’s name , But vis-à-vis the rest of the partners, he remains a limited partner. However, if his name was entered without his knowledge or consent, he remains a limited partner vis-à-vis third parties and partners, and he must prove his lack of knowledge or consent to the inclusion of his name in the company’s title. Page 23 Fourth: Liability of partners: General partner are liable with all their money for the company’s debts because their liability is personal and joint for the company’s debts. limited partners, their liability for the company’s debts is limited to the amount of their shares in it, so they does not bear the company’s losses in excess of his share , If the losses exceed the limits of his share It is not permissible to ask him to pay from his own money, as he is not responsible for the company’s debts except within the limits of his share. According to Article 27 of the Commercial Code “ limited partners are not bound by the loss except with limits the money they paid....” so If the limited partner provides his full share to the company, he is not responsible for anything after that. Page 24  The Second sub-section Management of a Limited partnership company All of the rules that we have previously presented regarding the management of the general partnership company apply to the management of the limited partnership company in terms of the method of appointing the manager , his legal position, his dismissal, his powers, and the company’s liability for his work. However, the Egyptian legislator obliges the limited partner to not interfere in the management of the company, and this is due to the limited liability of this partner , the general rule is to prevent the limited partner from interfering in the management of the limited partnership company , and this management must be for one of the general partners or a person foreign to the company, and the goal of preventing the limited partner from interfering in the management is to protect others who may become confused due to the limited partner’s intervention in management, he believes that he is a general partner and accordingly gives the company his confidence and gives it great credit, then it becomes clear to him that he is not liable except within the limits of his share only. Although the legislator stipulates that the limited partner is prevented from interfering in management, jurisprudence and judiciary differentiate between two types of management regarding the application of this ban , " external management acts " and " internal management acts ". Page 25 The first type: External management acts. External management acts means " acts that requires , the company to deal with others " , The limited partner is prohibited from carrying out these acts. If the limited partner violates this legal prohibition and undertakes an external management acts , that is, he deals with others regarding the company’s activity without the rest of the general partners authorizing him to carry out this act, then the limited partner will be solely personally responsible before others for the obligations arising from this work and will be responsible in all his money for the debts generated by this work and not only within the limits of his share, that is, he is turned to a general partner regarding to the external management acts he has undertaken, in order to protect the good faith third parties with whom he has dealt. Second: Internal management acts. It means " acts that is related to the company’s activity without requiring communication with others " that is, it does not require the limited partner to appear as a representative of the company before others. For example, to review the company’s books and documents and monitor the manager’s acts. These works are permissible for the limited partner to carry out because he uses his basic rights as a partner in the company. Page 26  The third section Joint venture company The joint venture company is a type of Partnerships because it is based on personal consideration, and we will discuss in detail its condition and legal status in general requires revealing its specificity. This is done by dividing this topic into four main sub- sections, which we will present in detail. The statement is as follows: First sub-section: Definition of the joint venture company and its characteristics. Second sub-section: Formation of a joint venture company. Third sub-section: The life of the joint venture company. Fourth sub-section: Termination of the joint venture company. Page 27  First sub-section Definition and characteristics of joint venture company First: Definition : A joint venture company is “a hidden company, held between two or more partners , in which , only one of the partners deals in his name and appears before others, with the commitment of all partners to provide a share of money or service , to carry out a specific works , with their intention to share what may arise from the work. of the company from profits or losses, and concealing the company’s existence from others.” The joint venture company, unlike the general partnership and the limited partnership, is a hidden company that does not exist except among the partners. It does not have a legal personality, and therefore it has no name or title , and it has no financial liability independent of the partners. Second: Characteristics: (A) - A joint venture company is a partnerships : A joint venture company is a partnerships because it is based on personal consideration between the partners. The joint venture company is often formed among partners who have a friendship, kinship, or neighborliness. If it were not for this relationship and trust between the partners, they would not have decided to join the company. It follows that it is a partnerships that The death or bankruptcy of one of the partners lead to dissolve the company, but the partners may agree otherwise. Page 28  Also, since it is a partnerships shares cannot be traded except based on the consensus approval of the partners, or based on the majority approval stipulated in the memorandum association. (B) - A joint venture company is a hidden company: Concealment is the basis of the joint venture company, and it is the distinguishing nature of the joint venture company from other companies. that it is a company in which the intention of the partners is to form it in secret, so that no one else knows about its formation or the persons of the partners in it or their names , The company does not exist except between partners. As a result, the company is not subject to the legal registration procedures required in other partnerships. Therefore, despite the Commercial Registry Law stipulating the necessity of registering partnerships in the commercial registry, the joint-venture company is not subject to the registration, due to its hidden nature. This is what Article 64 of the Commercial Law stipulates that the joint ventures are not required to follow the procedures established for other companies. (C) Its legal nature is determined according to the purpose of its activity. Legally, a joint venture company is considered a company in the full sense because it aims to achieve profit, although the joint venture company is a partnerships , it is distinguished by the fact that its legal nature depends on the purpose of its activity. If the purpose of its activity is to carry out commercial work It is considered a commercial company and is subject to commercial law. However, if the purpose of its establishment is a civil activity Page 29 such as agriculture, it is a civil company and it is subject to the provisions of the civil law. (D) Partners liability is by agreement: The limit of liability depends on the agreement of the partners. If the partners agree that their liability is like the liability of the general partners in a General Partnership company, their liability will be a personal and joint liable for all of their funds. If they agree that their liability will be like the liability of limited partners in a limited partnership, their liability will be limited to the limits of the shares they own in the capital of the company. The liability of the partners depends on their agreements. It may be personal and joint, or it may be limited liability. Page 30  Second sub-section Formation of a joint venture company It is necessary for the establishment of a joint venture company to fulfill all the general and specific substantive elements that we previously mentioned when talking about the general theory of companies , but As for the formal elements are not obligatory in this type of company. requesting such elements contradicts with the nature of the joint venture company, given its lack of a legal person whose existence must not be informed to others. Regarding the requirement of writing in its memorandum association , jurisprudence differentiates between commercial and civil joint ventures. As for commercial joint ventures, it is not required that the memorandum association be in writing. However, if it is for civil joint ventures, the memorandum association must be written, otherwise it will be invalidated in application of the text of Article 507 of the Civil Code. Page 31  Third sub-section The life of a joint venture company In the context of talking about the life of the joint venture company, we divide our discussion into three main aspects, so that we initially discuss the ownership of shares in the joint venture company, then we move secondly to talk about its management, then finally its expiration and liquidation, and we discuss the details of each of them in turn, as follows: First: Ownership of shares in the joint venture company: The partner in a joint venture company is obligated to provide the share he pledged upon concluding the memorandum association , and this applies equally to whether this share is in cash, in-kind, or in service A joint venture company has no financial liability independent of the partners thus a question arises about determining who owns the partners’ shares. The partners often agree to regulate this issue, and the agreement do not go out from one of the following solutions: 1- That each partner retains ownership of his share, and each partner invests his share in accordance with the purpose for which the company was formed, and then participates with the other partners in dividing the profits or losses that arise from investing the shares. 2- That each partner retains ownership of his share , and one of the partners is entrusted with investing the shares , and the profits and losses resulting from this investment are divided among the partners. Page 32 3- That the partners agree to transfer ownership of their shares to one of the partners who invests them. The transfer of ownership shall be a fictitious transfer to facilitate the investment of the shares. It is permissible to prove the fictitious transfer of ownership of the shares to this partner by all means of proof. 4- The partners may agree that ownership of their shares shall be considered common property among them in proportion to their shares and shall be subject to the provisions of common property. 5- If there is no agreement between the partners regarding the issue of ownership of shares, the rule is that each partner retains ownership of his share, since the company does not own these shares, as it has no financial liability. Second: Management of the joint venture company: Since the joint venture company does not have a legal personality and does not exist before others, a manager is not appointed to represent it before others and conclude transactions in its name and on its account. Rather, it is managed in accordance with what was agreed upon between the partners in its contract. 1 - The agreement may stipulate that each partner shall carry out the activity for which the company was established in his name, and be solely responsible before the third party with whom he deals. As for the other partners, they have no liability towards this third party, and this partner may have recourse against the rest of his partners in the loss and bear their shares this loss. 2- The partners may agree to entrust one of them to carry out the operations required to achieve the purpose for which the company Page 33 was established. The person who is entrusted with carrying out these operations is called the joint venture manager, and he carries out these tasks in his name, and he alone becomes the creditor or the debtor facing others. Third: Termination of the joint-venture company and its liquidation: The joint venture company shall be terminated if there is one of the reasons that lead to the termination of companies in general. Since the joint venture company is a partnerships, it is also terminated for reasons that lead to the disappearance of personal consideration, such as the death of one of the partners, his bankruptcy, or his withdrawal from the company, unless otherwise agreed upon. The termination of the joint venture company is not followed by liquidation, because liquidation assumes the existence of a legal person with independent financial liability , and the joint venture company does not have a legal personality and therefore lacks independent financial liability. Rather, the matter is limited to making a final account between the partners to determine the share of each of them in the profit and loss. Page 34  Glossary for chapter two Company Memorandum of ‫العقد التأسيسي للشركة‬ Association. legal personality of the company ‫الشخصية االعتبارية للشركة‬ Dissolution of the company ‫حل الشركة‬ expiration of the company ‫انتهاء الشركة‬ Liquidation of the company and ‫تصفية الشركة وتقسيم أموالها‬ division of its funds Objective criteria ‫معيار موضوعي‬ Formal criteria ‫معيار شكلي‬ Consent ‫الرضا‬ Capacity ‫االهلية‬ Valid ‫صحيحة‬ consent vices ‫عيوب اإلرادة‬ error )‫الغلط (خطاء‬ Fraud ‫التدليس‬ Coercion ‫االكراه‬ Void ‫باطل‬ Voidable ‫قابل لإلبطال‬ unfair competition ‫منافسة غير شريفة‬ substantive elements ‫اركان موضوعية‬ Page 35 multiplicity of partners ‫تعدد الشركاء‬ contribution ‫مساهمات‬ Cash contribution ‫مساهمة نقدية‬ In-kind contribution ‫مساهمة عينية‬ Transfer of ownership ‫نقل ملكية‬ Usufruct of property ‫حق االنتفاع بالعقار‬ Service contribution ‫مساهمة بالخدمات‬ The chartering ‫االشهار‬ (&CO). ‫وشركاه‬ domicile of the company ‫موطن الشركة‬ Head office ‫المقر الرئيسي‬ Board of Directors ‫مجلس اإلدارة‬ General Assembly ‫جمعية عمومية‬ Consensus ‫اجماع‬ Majority ‫اغلبية‬ Franchise ‫امتياز‬ Nationalization ‫جنسية‬ Merger by annexation ‫االندماج بالضم‬ Merger by union ‫الندماج باالتحاد‬ company's expiration ‫انقضاء الشركة‬ Page 36 Liquidation of the company ‫تصفية الشركة‬ Liquidator ‫ال ُمصفي‬ The statute of limitations of ‫تقادم الدعاوي‬ Lawsuits Page 37 Page 38