Dr. AbdelGadir Warsama – Legal Counsel
Asia 728x90

The Commercial Companies Law in many countries including Bahrain, provides for different types of companies to be incorporated therein. The main reason for this variety, I guess, is to give an opportunity to potential interested parties to choose that type of company they are interested to incorporate according to their interest, requirements and needs. The Simple Limited Partnership (SLP) is one of the types of companies enumerated in the law. In Arabic, this type is Called Al-Tawsieya Al-Basieta. The Simple Limited partnership (SLP) is a company to be formed by one or more general partner(s), and one or more limited partner(s) with the view of working together on a certain project venture with the aim of making profit.

One of the main features of this type relates to the different type of partners. There are two categories of partners. The “general partners on one hand and the “limited partners on the other. This categorization of partners is the main feature of this type of companies. The two categories of partners mentioned above are very different from each other. They are like two sides of the same coin, in other word, each side represents very different or special features. However, the two sides together represent one unit and represent one coin.

Legally speaking, the general partner is responsible towards the liabilities (debts) of the company in all his assets. Whereas, the limited Partner is only responsible to the extent of his equity shareholding. This means that, the other personal assets of the limited partner are not at stake because they are severed from his equity shareholding. This classification means the general partner is more exposed and should shoulder more responsibility if the company fails.

A valid question arises, does the general partner benefit more than the limited partner even though they are partners in the company? As per the provisions of the law, the answer is yes, and this is clear from certain points as, the general partner has the right to manage the company. Whereas the limited partner cannot manage the company. Any act by the limited partner to give third parties, the impression that he assumes managerial power is deemed ultra-vires and out-side the scope of work because he lacks the jurisdiction to manage the company. However, in case the limited partner is doing that persistently, then he will be regarded as a general partner and not a limited partner. If he is taken as general partner, the law requires that he should be dealt with accordingly and should bear the consequences of his acts in case he assumes the burden of the general partner. The law is very strict in this legal concept and there seems to be no grey area.

Moreover, if the partners decide to use their names, the name of the partnership should include the name(s) of the general partners only. The name(s) of the limited partners cannot

be given as they lack such right. Also, the general partners shall be nationals.

Above distinctions indicate that the general partner has a better position in the partnership due to his full & unlimited exposure in all his assets. The name of the partnership shall always be followed by the words “Simple Limited Partnership – SLP” or “Al-Tawsieya Al-Basieta, in Arabic, so as to give third parties and the partners the necessary transparency regarding the formation of the company and the partners.

This indicates the main features of this partnership, potential investors are obliged to comprehend the differences provided for by the law. This is required, as the liability varies and based on your choice you are determining your liability.

Source: Dr. AbdelGadir Warsama / Legal Counsel /