Protection of a Partner in a General Partnership

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The general partnership is an arrangement among natural and/or legal persons to pursue a common business objective. When traders take part in the arrangement, the group is called a consortium and it is subject to the provisions of Article 357 et seq. of the Obligations and Contracts Act concerning general partnerships or the relevant company, depending on its legal form.

Guided by the willingness to achieve the common business objective, the partners put their efforts into identifying the ways in which the objective can be attained and make an agreement in writing to avoid possible future disputes about the actual contents of the general partnership agreement. The identification of the risks related to the participation in the partnership in advance and the setting out of explicit provisions in writing on the rights and obligations, the distribution of the shares, the allocation of profits and costs, and the fixing of the period for which the partnership is established are all guarantees for the protection of any partner and his or her property rights in particular. Further safeguards are laid down in the Obligations and Contracts Act but those provisions and rather general and they cannot reflect the specific circumstances and actual relationships among the partners in each individual case. The property rights of a partner in a general partnership can be fully protected by making an agreement in writing to set out not only the essential characteristics of the general partnership, i.e. the common business objective, the common operations and the intention to enter into the partnership, but also the additional specific characteristics.

It is possible for the common operations to be carried out without common property, while the efforts of the partners can take various forms, including non-pecuniary contribution to the attainment of the common objective. The law does not require equal contribution by all partners, but it is necessary to agree on the share of the property and the profits in relation to the contribution. General partnership agreements are informal. The common business objective and the intention to enter into a partnership may be expressed in exchanged correspondence, and the rights and obligations could be set out subsequently through the participation in the attainment of the common business objective.

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