Limited Partnerships and Participation Accounts in Business
Limited Partnerships: Concept and Types of Partners
A limited partnership is a type of partnership used for exercising a commercial activity. It is characterized by the coexistence of two types of partners: general partners and limited partners. General partners have unlimited liability for the debts, while limited partners have a limited response. The personal character is more pronounced in the general partners than in the limited partners. The limited partnership is governed by Arts. 145-150 BCC.
Constitution and Signature of a Limited Partnership
The charter must include the same entries as in a general partnership and, in addition:
- Identity of the limited partners.
- Contributions required of each partner.
- Regime for the adoption of resolutions.
The firm name of the limited partnership is formed as in the general partnership but with some peculiarities. It may include the names of all the general partners, any of them, or only one, with the addition in the latter two cases of “and company,” and in any case, of “limited partnership.” The firm name can never include the names of limited partners. The penalty for the inclusion of a limited partner’s name is that they become liable without limit against third parties but without becoming a general partner.
Internal Relations in a Limited Partnership
The general partners have the same rights and obligations as partners of a general partnership. The limited partners have a special regime:
- Their input must be stated in writing (this not only indicates their share of contribution but also how far their responsibility reaches).
- It is expressly forbidden for them to participate in the administration of society.
If this prohibition is breached, with malice, abuse of authority, or gross negligence, compensation for damages may be demanded, and even the partial termination of the contract. As regards the distribution of profits and the share resulting from the liquidation of the company, the same criterion is applied to distribution groups (distribution in proportion to what was contributed, unless otherwise agreed). The right to information on the progress of society is restricted to the provisions of the social contract.
Participation Accounts
The BCC does not define this contract. It merely points out in Art. 239 that traders may be interested in each other’s operations, contributing to it with the capital that shareholders so agree and becoming party to the prosperous or adverse outcomes in proportions determined. It is a partnership of capital and management for the development of a commercial activity. It is a formula for associative and economic cooperation, for which one or more subjects bring capital or property to another, to participate in the prosperous or adverse results from an act or activity which he develops entirely on his behalf and apparently for his sole account. It has a very useful application among those merchants who want or need to collaborate in carrying out an activity of great value without displaying their marriage or partnership. It is a subspecies of the partnership agreement because it does not give rise to a legal person. This contract is governed by Articles 239 et seq. BCC.
The parties to this contract (manager-entrepreneur and participant) acquire the following obligations:
The participant undertakes to:
- Deliver the agreed-upon capital to the entrepreneur-manager.
- Not meddle in business management.
The manager-entrepreneur undertakes to:
- Invest the capital diligently, doing everything that had been agreed upon.
- Account to the participant.
- Settle with the participant according to the results of their activity.
The manager acquires the status of merchant and is the only one who can take action against third parties and vice versa.
Characteristics of an SA (Public Limited Company)
The SA is characterized by:
- Being a capitalist society constituted without regard to the personal characteristics of members. What is important is their participation in social capital as it integrates precisely for their contributions.
- Being a stock company: capital is divided into shares, and ownership of a share gives them the status of partner.
- Having patrimonial autonomy: the SA has an equity capital initially formed with input from its partners and then with the benefits of doing business or possibly with additional input from members. The partners are not, however, holders of assets; the sole owner of the corporation’s assets is the corporation itself. Therefore, the partners do not respond with their own heritage to social debts.