Commercial Essay

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The partnership en nom collectif, the partnership en commandite and the company are the three kinds of commercial partnerships which may be established under the Companies Act. Explain the main features of each. Why do you think the company is the most widely used vehicle to do business with?

Introduction

Commercial partnerships in Malta are regulated by The Maltese Companies Act which came into effect on the 1st January 1995 in order “to regulate...limited liability companies and other commercial partnerships”. In fact, when one wants to set up a commercial partnership in Malta the Act provides a number of possible legal structures. The Act stipulates that, “A commercial partnership may be of the following kinds: a partnership en nom collectif; a partnership en commandite; and a company (limited liability company)”.

The purpose for which the commercial partnership may be formed is regulated by the Act which provides that a partnership en nom collectif and a partnership en commandite may be formed for the exercise of one or more acts of trade. Under the Commercial Partnerships Ordinance, this provision applied also to a limited liability company however under the provisions of the Act in force today, “a company may be formed for any lawful purpose and shall have the status of a public company; or a private company.” This means that a company may not necessarily be set up for the purposes of trading. Any lawful purpose is sufficient in order to set up a limited liability company.

The Partnership En Nom Collectif

Article 7 of the Companies Act defines the partnership en nom collectif as one which “...may be formed by two or more partners and operates under a partnership name and has its obligations guaranteed by the unlimited and joint and several liability of all the partners.” The formation of a partnership en nom collectif requires that every partner gives his contribution in money or in kind or in future personal services. The totality of the contributions constitutes the original capital of the partnership en nom collectif. In a partnership en nom collectif all the partners are unlimitedly liable.

The above definition highlights the fundamental elements of a partnership en nom collectif. It may be formed by two or more partners; it must operate under a partnership name; and the partners are unlimitedly, joint and severally liable for all the obligations of the partnership. The partnership-name is the name under which the business is carried on and the obligations are entered into. It is the name by which the partnership and the legal entity created by such name are known to the public and it represents the external manifestation of the juridical distinction between the legal personality of the partnership and the members composing it.

The unlimited liability of the partners for the obligations of the partnership is an essential characteristic of the partnership en nom collectif which distinguishes it from the other forms of commercial partnerships. In a partnership en nom collectif, each and every partner is liable for all the debts and obligations of the partnership with all his property present and future and not only up to the amount contributed by him to the partnership. Due to the unlimited liability of each and every partner, creditors of the partnership may enforce their claims against any of the partners and this even where such claims exceed the amount contributed or promised as contribution by the said partner. The joint and several liability of the partners for the obligations of the partnership means that the partner against whom an action is brought for the recovery of a sum due by the partnership may not plead the benefit of discussion of any of the other partners. However, one of the provisos to Article 7 states that, “no action shall lie against the individual partners unless the property of the partnership has first been discussed.” Therefore a creditor looking...
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