By Dr AbdelGadir Warsama, Legal Counsel
There are different types of commercial companies. In this article, I will emphasize on the characteristics and main features of the Simple Limited Partnership. In Arabic, it is called “AlTawsiaya Al-Basita”. The Simple Limited Partnership Company is formed by one or more general partner, and one or more limited partner, with the aim of working together in a certain project / venture for making profit.
In this type of companies, as we can see, there are two (2) categories of partners. Namely, general partners and limited partners. This categorization of partners is the cornerstone and main feature in this type of companies. The two categories of partners mentioned above are very different from each other. They are, if we could say, the two sides of the same coin, each side represents different and / or special features. However, the two sides together represent one unit.
Legally speaking, the general partner is liable and responsible towards the liabilities of the company in all his assets. On the other hand, the limited partner is liable and responsible only to the extent of his equity stake. The other personal assets of the limited partner are not at stake because they are severed from his equity shareholding.
This classification means that the general partner is more exposed and he should, throughout, the tenure of the company, shoulder more responsibility in case the company fails for any reason in meeting its obligations.
Does this type of liability have any cost? In other words, does the general partner benefit more than the limited partner, even though they are partners in the same company?
The answer is definitely yes, and this appears from the point that, the limited partner cannot and has no right to manage the company. Any act by the limited partner to give third parties, dealing with company, the impression that he assumes managerial powers is deemed Ultra Vires and outside his 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 general partner and not a limited partner. If he is taken as general partner then the law requires that he should be dealt with accordingly. The limited partner should always 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. The differences regarding the different type of partners include that, both partners are free to choose the business name they wanted for their company. However, in case they decide to use their names, the name of the partnership shall be composed of and or include the name(s) of general partners only. This means that the name of a limited partner shall not be given to the company. If the limited partner gives his name, the same rule mentioned above shall be applied and this partner will be regarded as a general partner.
The general partners shall always be nationals. However, this requirement is not mandatory in the case of limited partners. This means this type of companies we could say leads to inter-relations and inter-marriage between the local and the foreign partnership. This mixture could be beneficial and advantageous to the company in particular and to national economy of the country in general. The above distinction explains that the general partner has a better position in the company and that is due to his unlimited exposure in all his assets in case there is any problem.
Other characteristics of this type of companies is that the name of the company shall always be followed by the words” Simple Limited Partnership” or “AlTawsieya AlBasieta” in Arabic, so as to give third parties dealing with the company the necessary transparency regarding the formation of the company and the partners. Decisions or resolutions of this type of companies shall always be unanimous. Here all partners, general or limited, are equal. The articles of association may provide certain issues to be adopted by majority of votes. Majority here is by numbers unless the articles of association provides otherwise. Above points constitute the main features of this type of companies.