COMPANY LAW IN EYGPT

Dr
Hassan El Sayed Zahra
Faculty of Law,
Sadat City University
 The Companies of Persons
general Partnership and limited partnership
• Partnerships or personal companies include general
partnerships, limited partnerships and silent
partnerships.
• This type of companies is based on personal
consideration.
• The personal consideration is not only necessary for
the establishment of any of these companies. It is also
a condition for its continued existence.
• A personal company will, as a general rule, be
terminated by any cause that might affect or
eliminate this consideration, such as the bankruptcy
or death of a partner.
 The general Partnership
(The Joint-liability Company)
• General partnership companies are considered
to be one of the oldest types of companies.
• They are often created between friends and/or
members of the same family to undertake small
or medium economic projects.
• Their establishment does not require a large
number of partners.
• The partners are jointly and severally liable for
the company’s debts to third parties.
 Definition of the partnership
• A company formed by two or more persons with a view to
undertake commercial business under a name composed of
the names of the partners
• A general partnership company is formed by two or more
partners.
• These partners are jointly liable for the company debts vis-
à-vis third parties.
• The liability of a partner is not limited to his contribution
to the capital of the company, but extends to his own
property.
• It also has a name that distinguishes it from other
companies.
 The general Characteristics of a General
Partnership Company

• It is formed by two or more partners

• It has a special name.

• A partner is considered a merchant

• Partners have personal and joint liabilities

• Parts or contributions are non-negotiable

 Multiple Partners
• A general partnership company is formed
by two or more natural persons.

• This number is not only needed for its

establishment but also for its continuity
The Name of a General Partnership Company

• The name of a general partnership can consist

of the names of all partners.
• However, the name can be abbreviated by
adopting only the name of one or more partners
and add the term “and partners”.
• The name of the company should comply with
reality.
• All legal acts performed by a partnership
should be made under its name.
The Name of a General Partnership Company
• The name of the partnership cannot include the
name of a person who is not a partner (third
party).
• If name of the general partnership company
includes the name of a person who is not a
partner in the company, he will be jointly liable
for the company’s debts if this was done with his
knowledge.
 The Name of a General Partnership Company
• However, the company can retain the name of a
partner who has withdrawn from the partnership
or has died, if the person who withdrew or the
heirs of the deceased partner agree to this.

• If a partner died or withdrew from the company

his name must be taken out of the name of the
partnership, provided naturally that the partnership
is allowed to continue after the death or the
withdrawal of the partner.
A Partner is Considered a Merchant
• In general partnership companies, every partner
is considered a merchant.
• As a consequence, every partner is regarded as
a merchant and his liability is unlimited as well
as being jointly liable with other partners for all
the debts of the company vis-à-vis third parties.
• Based upon this, any partner in this type of
companies must have commercial capacity. He
must therefore be eighteen years of age and
must not be prevented from practicing
commercial activities.
A Partner is Considered a Merchant
• Hence he should have the commercial capacity.

• A minor cannot be admitted as a partner.

• As a merchant, a partner can be declared

bankrupt if he' stops paying his commercial debts.

• But such bankruptcy does not lead to the

bankruptcy of the partnership, but it may lead to
its dissolution.
 A Partner is Considered a Merchant
• But if the partnership is declared bankrupt, every
partner will be automatically declared bankrupt.

• A partner in general partnership companies is not bound

to keep commercial books or record himself in the
Commercial Register.

• partners in general partnership companies are

personally and jointly responsible for the company's
debts.
 The Personal and Joint Liabilities of Partners
• The unlimited liability of all partners:
• Partners are personally and jointly liable for the
debts of the company to the full extent of their
property.
• This means that the liability of a partner in
general partnership companies is not limited to
his contribution to the capital but extends to his
own personal property.
• In other words, the company's creditors have the
capital of the company as well as the personal
property of the partners as their guarantees.
 The Personal and Joint Liabilities of Partners
• First, every partner is personally liable for all debts
of the partnership, as if they were his own debts.
This liability is unlimited.
• This unlimited liability is of public policy.
• It cannot be excluded by a clause in the
partnership contract. Such clause, if existed, would
be null and void vis à vis third party.
• But in between the partners, the clause is valid and
effective.
 The Personal and Joint Liabilities of Partners
- Secondly, all the partners are jointly liable for all the debts of the
partnership.
- This joint liability cannot be excluded by a contractual clause.
Consequently, any creditor of the partnership can claim the
payment of the totality of his debt against any partner of his
choice.
- The joint liability of the partners means that every partner is
liable jointly with the partnership and with the other partners for
all the debts of the partnership incurred while he is a partner.
 The Personal and Joint Liabilities of Partners
• But the joint liability of the partners with the partnership does not
mean that the partners are co-debtor with the partnership. The partners
are joint guarantors of the partnership which is the only debtor.

• However, and as an exception to the rules of joint liability organized

by the civil code, there is an established commercial customary rule
according to which the creditor of the company cannot claim his debt
against a partner unless he has previously obtained a court judgment
establishing the liability of the partnership for the claimed debt, and
unless the partnership has been notified for payment of the debt.
 The Personal and Joint Liabilities of Partners

• If a new partner joins an existing partnership, he

should not logically become liable for any debt incurred
before he became a partner.

• Nevertheless, the prevailing opinion of Egyptian

doctrine and courts is in favor of the liability of the
incoming partner for all the debts of the company, even
those which existed before he joined the company.
 The Personal and Joint Liabilities of Partners
• However, the incoming partner, at the time of joining the
partnership- may stipulate in the amended partnership contract that he
will not take over the existing liabilities of the partnership. Such
clause will not be effective vis à vis the . creditors of the partnership
unless it is publicized.

• A partner who retires from the partnership, cease to be liable for

the partnership debts or incurred after his retirement, provided that the
withdrawal of the outgoing partner is publicized. Needless to say, that
such an outgoing partner will continue to be liable for the partnership
debts incurred before his retirement.
 The Personal and Joint Liabilities of Partners

• A creditor of the company can claim the totality of

the debts owed to him not only against the
company as a juristic person, but also against one
or all of the partners personally.

• A clause or an agreement excluding the joint

liability of partners will be regarded as null and
void. This was enacted for the interest of third
parties.
 The Non–Negotiability of Parts or Contributions

• The capital contributions made by the partners are

represented by interests.
• Partners' shares in the company shall not be
represented by negotiable deeds.
• Furthermore, a partner in general partnership
companies is not permitted to transfer the ownership
of his shares to a third party except with the consent
of all partners or in compliance with any conditions
stipulated in the company's memorandum of
association.
 The Non–Negotiability of Parts or Contributions

• For instance, the contract may provide for the

transferability of the interests under certain conditions. But
transferability cannot be allowed without any restriction.

• partner may not alienate his interests freely and without

any condition.

• The rationale behind this rule is clear. Partnerships are

based upon the personal consideration - the mutual trust
between partners.
 The Non–Negotiability of Parts or Contributions
• Certainly, this rule is not related to public order.
• Hence it is possible for the partners to agree otherwise in the
company’s contract (through the consent of a majority of partners,
not all of them).
• It should be noted that the requirement for a unanimous decision by
all the partners concerning the transfer of the shares should not apply
in the case of transferring the shares to a partner of the company.
• A partner in a general partnership company is, however,
allowed to transfer to a third party the rights related to his
share (such as the returns or profits) in the partnership.
• This agreement is not to have any effect except between the
partner and the third party.
• Therefore, the third party cannot claim the returns or profits
from the company itself or its partners. He can only do so
with the partner with whom he concluded such an agreement
 Formation of the partnership
• The formation of the partnership is
submitted to the same rules which we have
already analyzed under the heading: the
company general theory.
• All the already mentioned requirements as
to the substance or the form of the contract
are applicable here.
 Publicity and registration of the partnership

• It is the manager of the partnership who has the

Responsibility to publicize the contract. The proceedings of
publicity are as follows:

• To file a summary of the company contract with the

competent clerk at the tribunal of the district of the company's
headquarters.

• The Clerk should record the summary in the register prepared

for that purpose.
 Publicity and registration of the partnership
• The summary should be displayed on a specific
board for legal notices at the same tribunal for a
period of three months.

• The summary should be displayed on a specific

board for legal notices at the same tribunal for a
period of three months.

• The same summary should be published in a

newspaper which usually publishes legal notices.
 Publicity and registration of the partnership
• These proceedings should be terminated within 15
days of the date of the signing of the contract by the
partners. If the partners signed the contract on
different days, it is the date of the last signature that
should be considered .
• The summary of the contract should include the
following names and addresses of the partners, name
of the partnership, name of the manager, and the term
of the partnership.
 Publicity and registration of the partnership

• If any of these items was modified, the

modification should be publicized in the same
way. The publicization should take place within
15 days of the date of the modification.

• The contract must also be registered in the

Register of Commerce.
 Publicity and registration of the partnership

• The legal sanction for not publicizing the

contract: The nullity of the partnership:
• If a partnership is not publicized, it will be
considered void. The same legal sanction applies
if the proceedings of publicity were not complete,
or if the publicity was defective.
• If the contract was modified and if the
modification was not publicized, the partnership
remains valid, but the modification will have no
effect vis-à vis third party.
 Publicity and registration of the partnership

• The nullity resulting from lack of publicity is very

specific.
• It has some of the characteristics of both the
absolute and the relative nullity.
• For instance, the nullity can be claimed for the
first time before the court of appeal. But the court
cannot on its own declare the partnership void for
lack of publicity.
 Publicity and registration of the partnership
- The partners can claim nullity vis-à-vis each other,
but they cannot claim nullity vis-à-vis third party (a
creditor of the company for example).

- On the other hand, a third party can claim nullity

for lack of or defective publicity vis-à-vis the
partners.

- The nullity for lack of publicity can be avoided if the

publicity is completed before the court issues its
judgment.
 Publicity and registration of the partnership

• If a partnership was declared void for lack of publicity,

it would be considered a de facto company, with all the
legal effects that result thereof.

• The third party who may claim nullity for lack of

publicity, could be a creditor, or a debtor of the
partnership.

• The personal creditor of a partner may also claim

nullity of partnership.