companies
A company is defined as a contract under which two or more persons undertake that each of them will contribute to a profit-making project by providing a share of money or work, in order to divide any profit or loss that may arise from the project. Companies are divided according to the nature of the work they perform into civil companies and commercial companies. Commercial companies, in turn, are divided according to whether they are based on personal consideration or capital consideration into partnerships, capital companies, and companies of a mixed nature.
Only a commercial company acquires the status of a merchant, bears the obligations resulting from that status, and becomes subject to bankruptcy rules when it stops paying its commercial debts. A civil company, however, may take one of the forms used for commercial companies, such as a general partnership, a simple limited partnership, a partnership limited by shares, a joint-stock company, or a limited liability company.
Classification of Commercial Companies:
- First: Partnerships, also called share/quota companies.
- Second: Capital companies, also called stock/share companies.
- Third: A third type exists alongside these two categories. It combines characteristics of both preceding types and is known as companies of a mixed nature, because it is based on personal consideration on one side and capital consideration on the other. One of these considerations may prevail over the other.
First: Partnerships
These companies are called partnerships because they are based primarily and essentially on personal consideration. They are usually established among a small number of persons who are connected by kinship or friendship, and each of them places trust in the other. Therefore, the personality of each partner is a matter of consideration for the other partners.
Because personal consideration is important in this type of company, the company is generally dissolved upon the death of one of the partners, the loss of a partner’s legal capacity, or a partner’s withdrawal from the company. In addition, no partner may transfer his share in the company except with the approval of all partners.
The ideal model of this type of company is the general partnership. It consists of jointly liable partners, meaning that all partners are personally and jointly liable for all of the company’s debts from their own personal assets. Their liability is not limited to the shares they have contributed to the company.
Simple limited partnerships also fall under this type. The third and final type of these companies is the joint venture or undisclosed partnership, which is a hidden company. It exists only in relation to the partners themselves and does not exist in relation to third parties. Accordingly, it does not enjoy legal personality, has no capital, and has no company name.
Therefore, partnerships are of three types: the general partnership, the simple limited partnership, and the joint venture or undisclosed partnership.
Second: Capital Companies
These companies are the opposite of the previous type. They do not rely on personal consideration, and such consideration has no role in them. Instead, they are based primarily on collecting capital in order to carry out the company’s activity. Therefore, capital consideration takes first place in these companies.
The clear model of these companies is the joint-stock company. In most cases, capital companies undertake large projects that require substantial capital which a limited number of partners, as in partnerships, cannot provide. Consequently, these companies rely mainly on the public body of subscribers.
The company’s capital is divided into shares of equal value. The value of each share is usually small so that a large number of persons with limited income can subscribe to them. The shareholder’s liability in this company is limited to the value of the shares to which he has subscribed.
Third: Companies of a Mixed Nature
In addition to the two previous types, there is a third type of company that is based on both personal consideration and capital consideration. These are companies of a mixed nature, standing between partnerships and capital companies.
In some of these companies, personal consideration may prevail, making them more similar to partnerships. In others, capital consideration may prevail, making them more similar to capital companies. These companies fall under two types:
- Limited liability companies.
- Partnerships limited by shares.
A. Limited Liability Companies
A limited liability company resembles partnerships in that the number of partners may not exceed fifty, and the partner’s share is not negotiable by commercial methods. Rather, the transfer of such share is subject to certain restrictions, the most important of which is the possibility for the partners to redeem that share.
It may not be established through public subscription, and it may not issue negotiable shares or bonds. At the same time, this company is close to capital companies in terms of its management and incorporation system, the limitation of the partners’ liability, and the transfer of each partner’s share to his heirs.
B. Partnerships Limited by Shares
These companies consist of two types of partners. The first type is limited partners, who are liable only up to the value of the shares they provide. These shares take the form of negotiable shares and do not differ from shares in joint-stock companies.
The second type is general partners, to whom the same rules applicable to general partners in general partnerships and simple limited partnerships apply. Accordingly, they acquire the status of merchants, their liability is unlimited and extends to all of their assets, and they are responsible for managing the company.