General Partnership (Collective Company – Kollektif Şirket) in Turkish Law

 

A. Definition and Characteristics

A general partnership is an advanced form of the ordinary partnership and it is regulated by the Commercial Code. Like an ordinary partnership, it is formed between two or more persons who undertake to contribute capital or labor to achieve a common purpose. But, unlike an ordinary partnership, a general partnership has legal personality under Turkish law. Transactions of a general partnership are Conducted in the name of the partnership (registered company title), not in the name of partners. The commercial title of general partnership must contain partners’ or at least one of the partner’s name and surname along with the term “Collective Company”. (TCC*[1] Art. 42) It is defined by Law as “Collective Company is a Company formed by real persons to operate a commercial enterprise under a common company title with unlimited liability of the partners towards the creditor of the company.” (TCC Art. 211) By definition, legal persons cannot become partners. Since it has legal personality, assets belong directly to the partnership and are not co-owned by the partners. Any immovable property should be registered in the Land Registry in the name of the partnership. Lawsuits can be brought against the partnership without including the names of the partners. General partnerships having a company title (trade name) are subject to bankruptcy laws separated from its partners. Even though a general partnership has separated legal personality and has its own separate assets, the partners remain liable for partnership debts. This liability is unlimited and joint among the partners. Any creditor of the partnership must demand collection from the partnership at first. They can apply to the partners where partnership assets are not sufficient to cover the collection demand from the partnership.

B. Formation

Real persons who will create a general partnership between will form a contract in writing with their notarized signatures. (TCC Art.212) Legal persons, such as another company or corporation, may not be founders or become partners in a general partnership. The law requires following in the partnership contract: The names and family names, domiciles (addresses) and nationalities of the founding partners; trade name, business center and subject matter of the partnership; names and family names of persons entitled to represent the partnership, whether they are authorized to sign individually or jointly; the amount of capital to be brought by each partner; the value of capital in kind and its method of evaluation; and, if the capital contributed is the personal work of a partner, the nature and scope of such work. (TCC Art.213) The partnership agreement must be registered in the commercial registry in the locality that is stated as the business center in the partnership agreement (Comm. C. Art. 157). On registration the partnership acquires legal personality (TCC Art.215)

C.      Administration and Representation

If there is no agreement on the contrary, all partners are treated equally, without regard to their capital contribution to the partnership. Each partner has the right and duty of separately administering the partnership. But the administrative rights of the partnership may be handed over to one or several partners. Yet, unanimous consent of all partners is required for some extra-ordinary transactions such as undertaking guarantee, buying or selling real properties or appointing a trade representative. If it wasn’t agreed otherwise, all partners must contribute equal amounts of capital and shall share equally in profits and losses. Each partner has the right to review the partnership affairs. A general partnership is represented by partners whose names are designated in the partnership agreement and registered in the commercial registry. If no designation is made, then each partner is individually entitled to represent the partnership for ordinary transactions which are within the scope of the partnership purpose as stated in the partnership agreement (TCC Art. 218).

D. Change of Partners

New partners may join a partnership only with unanimous approval of the other partners. Retirement of a partner is possible only with the unanimous approval of the remaining partners if the partnership is to continue. However, a retiring partner may demand the dissolution of the partnership. The partnership may also end  with following reasons: Death of a partner, Expel of a partner with cause, such as the partner being declared bankrupt, Demand of a partner for the dissolution of the partnership. In the latter case remaining partners may expel him and keep the partnership running. The retirement or expulsion of a partner does not necessarily affect the existence of the partnership, but if the name of the outgoing partner is part of the partnership name, the partnership name must be changed and the change must be registered. Otherwise, the liability of the outgoing partner to third persons continues. After the change is registered in the commercial registry, the outgoing partner’s liability for future transactions of the partnership ceases, but he remains liable for transactions which were started before his departure. He cannot demand the termination of such previous contracts. but he has the right to obtain information from the partnership regrading them.
[1] Turkish Commercial Code