General regulation of Partnerships and companies
Comparative approach to French and Lithuanian law.
General regulation of Partnerships and companies
Comparative approach to French and Lithuanian law.
* Partnership and company, in conducting a business activity, gains momentum.
* In France : 900.000 companies. 700.000 Limited liability companies.
170.000 Joint-stock companies.
* Advantage :
- A possible limited liability.
- The solution to improve firm growth.
* Regulation quite important :
- 72 provisions of civil code.
- 714 provisions of commercial code.
* Two series of provision :
* Main rules :
- Specific rules.
- General rules.
- Setting up of partnership and companies.
- Organization of partnerships and companies.
* Partnerships : - General partnerships, Limited partnerships and Partnerships
limited by shares.
* Companies :
- Limited liability company, limited or public company and
simplified joint-stock company.
* General partnership :
* Limited partnerships :
- Very close to a Lithuanian general partnership.
- Require a minimum of two individuals or legal persons.
- No initial capital.
- Each partner is liable without limitation.
- Each partner has the right to conduct their affairs.
- Most of the time represented by a manager, a proxy.
- Partners shall all be deemed to be merchants.
- Partners bear a subsidiary liability.
- Very close to a Lithuanian limited partnership.
- General partner liable without limitation.
- Limited partner liable to the limited amount of his
contribution
- Represented by a general partner or by a proxy.
* Limited company :
- Close to the Lithuanian Public limited liability company.
- Capital divided into shares.
- Members bear losses up to their contributions.
- 7 members in the limited company.
- Represented by a management Board under the
supervision of a supervisory Board, or by a board of
directors.
* Limited liability companies :
- Close to the Lithuanian private limited liability company.
- One or more individuals or legal persons.
- Not liable for the company’s obligations.
- Bear a risk up to the value of shares contributed.
- Administered by a manager.
* Partnerships and companies are legal entities.
- Legal personality with effect from their registration.
* Undisclosed partnership : - Not a juridical person.
- Partner remains the owner of property.
- Contracts in his own name.
- Sole one to be bound with regard to third parties.
Part I : Partnerships and companies setting up.
* Article 1832 of French civil code :
“A firm is established by two or several persons who agree by a
contract to appropriate property or their industry for a common venture
with a view to sharing the benefit or profiting from the saving which may
result there from.
It may be established, in the cases provided for by statute, through
an act of will of one person alone.
The members bind themselves to contribute to losses. »
Section 1 : Ground conditions.
* General rules of contract :
- The consent of the party that binds themselves;
- Its capacity to contract;
- A definite object which forms the subject-matter of the undertaking;
- And a lawful cause in the obligation.
* The consent :
- Must exist, be real, not simulated, and given without
error, duress or deception.
- If not, it gives rise to an action for annulment.
* The capacity : - Capacity of traders for partners and general partner.
- Civil capacity for shareholders and limited partners.
* The object : - Lawful and formed in the common interest of the members.
* The cause :
- Not contrary to public morals or to public policy.
* 4 main elements : - A number of partners or shareholders, contributions,
search of profit and Affectio societatis.
1°) A number of partners or shareholders.
* A partnership or a company requires a minimum of two persons.
French general partnerships and Lithuanian partnerships.
* One individual person :
French limited liability companies, and Lithuanian Private and public
companies.
* Seven members : French limited company.
* No more than 100 : French limited liability companies.
* No more than 20 : Lithuanian partnership.
* No more than 249 : Lithuanian Private Company.
2°) Contributions.
- If no contribution, no partnership or companies.
a°) Various forms of contribution.
* Cash contribution :
- Allowed in all partnerships and companies.
- Distinction between subscription and payment.
Capital must be fully subscribes.
Allowed to make only a part of due payments.
One fifth or fifty percent of the face value in French companies.
One quarter of the nominal value in Lithuanian companies
* Contribution in kind :
- Must be evaluated by shareholders.
- Carried out by an auditor of the formation proceedings.
- Must be fully paid before the registration.
* Contribution in industry :
- Not allowed in French limited companies.
- Always possible in general partnerships.
- Possible in French limited liability companies, if the memorandum
and articles of association specify the terms and conditions.
b°) Initial capital.
* Made up of contributions in cash and in kind.
* Lithuanian private limited liability companies : 10.000 Litas (2.900 €).
* Lithuanian public companies : 150.000 Litas (43.450 €).
* French limited companies : 37.000 Euros (127.750 Litas).
* French limited liability company :
Determined by the memorandum and articles of association.
* Law strictly defines rules of decreasing and increasing initial capital.
3°) Search of profit.
- Every partner and shareholder can claim profits.
- Share of each member in the profits is determined in proportion to their
share in the capital.
4°) Affectio societatis.
- Particular community of interests between partners or shareholders
Community of aim.
Will to unify for its realization.
Section 2 : Partnerships and companies coming into existence.
* Firms enjoy juridical personality only from their registration.
1°) Procedure of formation.
- Began with a declaration of will of approval of founding a partnership or
company.
- Memorandum and articles must be drawn up in writing.
- Articles determine :
The form, the duration, the name, the objects, the registered place of
business, the capital, the contributions of each member and rules of
functioning.
- Partners and shareholders may sign the statutes.
- Statutes have to be registered within the tax office.
- Constitution advert published in a local newspapers.
- Registration in the commercial and companies register.
- Publication of the registration in the Official Gazette of civil and commercial
advertisements.
2°) Partnerships and companies in organization.
* Period between formation and registration. * Generally a short period.
* In Lithuanian law, articles of association have to be registered within six months
from the day of the signing,
* In French law, partnerships or companies in organisation have no legal
existence, no status.
Not able to acquire right, incur obligation, or be a party in a civil case.
Acts made by promoters, in their own name and under their own liability.
Might be transferred to the partnership or the company after registration.
Acts made before status signatures must be annexed to the status.
After signature acts made by a proxy.
Decided by general meeting resolution.
Until this transfer, only acting promoters bear liability.
* In Lithuanian law, memorandum of association shall indicate :
Persons who have the right to represent the company being incorporated
Their rights and duties.
Procedure for concluding contracts in the name of the company.
Procedure for the approval.
Managing body have the right to approve.
If not, obligations have to be discharged by the person who has concluded.
Part II : Partnerships and Companies organization.
* Partnerships and companies act through their bodies :
- The managers. - The meeting of partners and shareholders.
Section 1 : Managers.
1°) Various forms of management.
* In French General partnership :
- All the partners shall be managers.
- Memorandum may appoint one or more managers, who may or
may not be partners.
* In French limited liability companies :
- One or more managers, who may or may not be shareholders.
* In French limited company :
- Two forms for management.
* A board of directors :
- Three members, who must be shareholders.
- Elect a chairman from among its members.
* A management board :
- 5 members who may or may not be shareholders.
- Supervision of a supervisory board.
3 members who must be shareholders.
* In Lithuanian private or public limited liability companies :
- Single person management organ.
- Supervisory board. 3 and no more than 15 members.
- Board composed at least of three members.
2°) Appointment and dismiss of
managers.
* First managers appointed by the memorandum.
* In French partnerships and companies :
Manager,supervisory board and director board appointed by the
routine shareholders’ meeting.
Chairman and general manager appointed by the director board.
Management board appointed by the supervisory board.
* In Lithuanian partnerships and companies :
Partnership agreement state persons authorised to represent and
manage the partnership.
Supervisory board elected by the general meeting.
Board elected by the supervisory board or the general meeting.
Manager elected by the board, the supervisory board, or the
general meeting.
* In French law managers may be chosen within or without partners or
shareholders.
- Members of limited companies board of director or supervisory
board must be shareholders.
* Manager’s term duration :
In French law :
* 6 years for members of the director board, manager
board or supervisory board.
* No limitation of duration for the others managers.
In Lithuanian law :
* 4 years for members of the board and supervisory
board.
* No limitation of duration for the manager.
* Manager office come to an end by resignation or dismissal.
In French law :
* Normally dismissed by the routine shareholders’
meeting.
* Also dismissed by the courts on good grounds.
- In French general partnerships :
* Decided by unanimous agreement of the other partners.
* Shall cause the dissolution of the partnership.
- In French limited liability company :
* Decision passed by one or more shareholders
representing more than half the company’s shares
- In French limited companies :
* An ordinary majority.
* Board of directors may dismiss the chairman or the general
manager at any time.
* Supervisory board may dismiss the management board.
- Dismissal within due cause :
* Partnerships and limited liability companies managers.
* Limited companies general manager or members of
management board.
* If not, gives rise to damage.
- Dismissal without due cause :
* Members of board of directors or supervisory board.
- In Lithuanian partnerships :
Partner expelled from the partnership by unanimous decision.
- In Lithuanian companies :
Supervisory board removed by the general meeting.
Members of the board removed by the supervisory board or
the general meeting.
Manager removed by the board, the supervisory board or
the general meeting
3°) Power and liability of the managers.
* Managers assume full partnerships or companies general management
under their own responsibility.
a°) Dealing between partners.
* Invested with the most extensive powers to perform all acts of
management.
* They assume general management.
* They represent the partnership or the company.
* Restrictions resulting from other bodies’ legal power.
- Not able to amend any provision of the articles of association.
* Restriction resulting from memorandum and articles of association.
- May prohibit special act or make performing such an act
dependent of the consent of the general meeting, the board of
directors, or the supervisory board
* In Lithuanian law :
- A partner may represent the partnership, perform all acts of
management.
- Manager of a company act on his own discretion.
- In accordance with law and articles of association.
b°) Dealing with third parties.
* Invested with the most extensive powers in all circumstances.
* In French general partnerships :
- Bind the partnership only by acts within the purpose of the
partnership.
* In French limited liability, limited companies :
- Bound by acts not covered by the purpose of the company.
- Except in cases where the other party acted in bad faith.
- Memorandum's provisions limiting the powers of the
management shall not be binding on third parties.
* In Lithuanian partnerships :
- Transaction concluded on behalf of the partnership create
obligations for the partnership where provided for in the
partnership agreement.
* In Lithuanian companies :
- Contract that is concluded in overstepping manager authority
impose obligations on the company.
- Except in cases where the other party acted in bad faith.
* In all French and Lithuanian partnerships and companies :
- Managers, directors and managing directors shall be
individually or jointly and severally liable.
Section 2 : Rights and duties of partners and shareholders.
1°) Partners’ and shareholders’ rights.
* Four categories : - Political rights, financial rights, patrimonial rights,
and right to conserve his status.
a°) Political
rights.
* Partner and shareholder shall be entitled to participate in the decisions.
* 2 categories of resolutions :
- Ordinary resolution which doesn’t amend any provision of the
articles of association.
- Extraordinary resolution which amend any provision of the
articles of association.
* Resolutions might be adopted in a general meeting.
* May also be taken via written consultation of the members.
* Annual general meeting within six months of the close of the financial
year in France or five months in Lithuania.
* In French and Lithuanian partnerships :
- Each partner has got one and only one vote.
* In French and Lithuanian companies :
- Number of votes equal to that of the company’s shares hold.
* Majority rules depend of partnerships’ or companies’ form.
* In French general partnerships :
- Unanimous agreement of the partners.
* In Lithuanian partnerships :
- Simple majority vote.
* In French limited liability companies :
- Ordinary resolution; more than half the company’s shares.
- Extraordinary resolution; two third of the votes with a quorum of at
least one quarter of the initial capital.
* In French limited companies :
- Ordinary general meeting :
Quorum one fifth of the voting shares.
Majority of the votes held by the shareholders present.
- Extraordinary general meeting :
Quorum one quarter or one fifth of the voting shares.
Majority of two thirds of the votes.
* In Lithuanian private and public companies :
- Quorum half of the voting shares.
- Ordinary general meeting :
Majority of the votes held by the shareholders present.
- Extraordinary general meeting :
Majority of two thirds of the votes.
* Resolutions adopted by majority have to be complied with by the minority.
- Have to respect the law, the articles of the association, the
companies’ interest and the shareholders rights.
- If not might be pronounced invalid by the court.
- In case of misuse of the voting right, resolution might be pronounced
invalid by the court.
* Partner and shareholder has the right to be informed on management
decision and business evolution.
- In French law
Disclosure of documents relating to the last three financial years.
Written questions concerning any matter.
- In Lithuanian companies
Possibility of limiting a shareholder’s right of supervision.
If documents contain a commercial-industrial secret.
Shareholder concerned can file an application with the court.
- In French law
In case of a lack of response within a month, may apply to the
court for one or more experts to be appointed.
b°) Financial rights.
* Partner and shareholder has right in the profit.
* In French law, share in the profits in proportion to the share in the capital.
* In Lithuanian Partnerships, agreement indicate the rules for distribution.
* In French limited companies and Lithuanian companies preference
dividend shares might be created.
* The distributable profit consists of the profit for the period.
* General meeting may decide to distribute sums taken from the reserves.
c°) Patrimonial right.
* Partner and shareholder may dispose of his share.
* Transfer of share might be restricted.
* In French general partnerships :
- Shares may be sold only with the consent of all the partners.
* In French limited liability companies :
- Shares freely assigned between members.
- Transferable to third parties with the consent of the majority of the
members representing at least one half of the shares.
- If the company refused to consent to the transfer; three months to
purchase or arrange the purchase of the shares.
* In French limited companies :
- Shares may be freely assigned.
- Restriction by requirement of obtaining permission from the management
or directory board can result from the articles of the companies
* In Lithuanian Partnerships :
- Agreement shall state conditions for admitting new partners.
* In Lithuanian companies :
- Shareholder shall be entitled to sell the share at his own discretion.
- Prohibited to introduce any restriction of the shareholders right to hand
over the shares to someone else.
* In French limited companies and Lithuanian companies :
- Articles may set a priority right to acquire shares.
D°) Right to conserve his status.
* In French law :
- Partner or shareholder may stay in the partnerships as long as they
want.
- Articles of the association might include exclusion clause in case of
misunderstanding or misuse attitude.
* In Lithuanian law :
- Partner may be expelled by unanimous decision for serious breach of his
duties.
2°) Partners’ and shareholders’ duties.
* Contribute to losses and they might be liable for the debts.
* Make due payment towards shares.
- In Lithuanian law :
Before full payment, cannot exercise his voting right, and
participate in profit in proportion to payments towards shares.
- In French law :
Might be excluded from the company.
* In French law :
- Might bear a non-competition obligation.
* In Lithuanian law :
- Partners have no right to engage in the same commercial-economic
activity on another enterprise.
Thank you for your attention.