Key changes for partnerships

The new Commercial Companies Law (New CCL), promulgated by Sultani Decree 18/2019 repealing the old Commercial Companies Law (No 4/74) (Old CCL) has sought to bring more clarity and detail regarding the formation, management and dissolution of partnerships. Set out below are the key changes brought by the New CCL impacting general partnerships, limited partnerships and joint ventures.

Changes which affect both general partnerships and limited partnerships

  • Name of the partnership: A partnership must now contain the name of at least one partner in its title. If all the partners' names are not included in the title, then the title must include the addition of "and Partners". A partnership can have a tradename, provided it indicates that it is formed as a general partnership or a limited partnership, as the case may be. 
  • Liability of general partners: The liability of general partners in the New CCL is stated to be "joint", not "joint and several" as was the case in the Old CCL. However, the addition of a new provision allowing the partner who has paid the company's debt to claim from the company or other partners, each in proportion to his share of the debt, means that there is ultimately no material change.

General partnerships 

  • Removal of managers: A manager who is a partner assigned in the Articles of Association (Articles) may only be removed by unanimous decision of the partners or by court order based on the petition of the majority of the partners. Such removal shall cause the dissolution of the company, unless otherwise provided by the Articles. Partner managers, who are appointed in a separate agreement independent from the Articles, may be removed by a decision taken by the majority of partners and their removal shall not result in the dissolution of the company. Therefore, it may be preferable to appoint partners as managers by an agreement separate to the Articles.
  • Liability of a deceased partner: A deceased partner's liability is transferred to his heirs for any obligations yet to be fulfilled. The consent of the heirs is required for the deceased partner's name to be kept in the partnership title. If the heirs agree for the name to be kept, they shall be jointly liable to the full extent of their property.
  • Withdrawal of a partner: A partner withdrawing from a partnership will remain liable for the debts incurred by the partnership until his withdrawal is registered with the Commercial Registrar. A partner may agree to keep his name among the names of the partners. However, if he does so, he shall remain liable.
  • Transfer of shares:  The consent of all partners is needed to transfer shares in a general partnership, as was the case in the Old CCL. However, the New CCL clarifies that for a share transfer to be valid, the transfer must be registered with the Commercial Registrar.

Limited partnerships 

  • Liability of limited partners: The New CCL provides that a limited partner is jointly liable for the company's debts, to the full extent of his property, if: i) his name appears in the title of the partnership; or ii) he is involved in the management.

Joint ventures

  • Formation of a joint venture: Consistent with the Old CCL, joint ventures can be formed by an agreement between two or more natural or juristic persons.  There is no requirement for the joint venture to be registered with the Commercial Registrar. While it is not strictly necessary for the joint venture's agreement to be in writing, the New CCL does prescribe what must be provided for in a joint venture agreement. It must specify its objects, the rights and liabilities of the partners, the distribution of profits and losses and, new to the New CCL, the method of company management.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.