GENERAL PARTNERSHIP General Characteristics Quintessential representative of personal companies Can be created only for business purposes or management of its assets by at least two founders Emphasis on personal involvement and abilities of members Designed for small businesses (restaurants, travel agencies, crafts)

GENERAL PARTNERSHIP Establishment Legal act necessary for establishment - founding agreement Incorporation - upon registration in the Commercial Register Contributions into company’s assets not mandatory, must be made only if required by the founding agreement Members (partners) - both individuals and legal entities Person whose property was subject to insolvency or member of statutory body of company declared insolvent within last 3 years cannot be a member in general partnership Members individuals must have impeachable character (clean criminal record)

GENERAL PARTNERSHIP Corporate organization If contributions agreed but obligation to invest not fulfilled by a member, any other member is authorized on behalf of company to sue defaulting member for performance If agreed in founding agreement contribution may be done by providing services or works for company Corporate organization No specific corporate bodies created Management of the company carried out by members (partners)

GENERAL PARTNERSHIP Rights and duties of members Right to participate in management Each member is authorized to manage the company and act on behalf of the company in all matters (statutory body) Founding agreement may grant the management right only to one or more members “Managing members” are liable to other members for proper management of the company “Non-managing” members have the right to be informed and to inspect the books and other documents of the company

GENERAL PARTNERSHIP Right of one or more members to manage the company can be terminated as agreed in founding agreement by court upon request of any other member if managing member grossly violates his duties “Managing member” may resign from his position

GENERAL PARTNERSHIP Matters pertaining to the existence of the company may be decided only by all members or majority of members stated in the founding agreement Examples of such decisions change of founding agreement termination of a company approval of financial statements disposition of major assets appointment of one or more “managing members” other matters stated in founding agreement Members decide unanimously unless founding agreement states otherwise

GENERAL PARTNERSHIP Property Rights Right to participate in profits of the company; each member participates equally in profits unless founding agreement states otherwise Member who provided contribution is entitled to profit equal to 25% of his contribution If the aggregate profit does not suffice, it is divided (up to 25% of contributions in the aggregate) among contributing members pro rata their contributions and the rest equally among other members Each member is authorized to be reimbursed for costs expended for arranging corporate matters In case of liquidation - right to participate in liquidation balance

GENERAL PARTNERSHIP Duties of members Reflect the personal nature of general partnership Obligation to participate in carrying out the business of the company Obligation to perform member’s tasks with due care Obligation to provide contribution in company’s assets – only if provided for in the founding agreement Obligation to share losses of the company Obligation to refrain from carrying out outside the company business activity identical or similar to that carried out by the company (ban on competition conduct)

GENERAL PARTNERSHIP Liability of members for obligations of a company All members are personally and fully liable for obligations of the company Liability is joint, several and unlimited General provisions on suretyship are applicable to liability of members for obligations of the company Member may be requested by the company’s creditor to pay only if company does not perform Member has a subrogation right towards the company Member has a right to be compensated by other members in proportion to their liability Any member may resign from company through change of founding agreement, in such case is liable for debts arisen before resignation

GENERAL PARTNERSHIP Specific remedies New member can accede through change of founding agreement, such member is liable for company´s debts even before his accession Specific remedies Each member is authorized to Claim on behalf of the company damage caused to the company by the other member Seek with the court decision on termination of the company for important reasons, in particular, if the other member materially violates his obligations Company may seek with the court expulsion of member who materially violates his obligations

GENERAL PARTNERSHIP Termination of general partnership For reasons applicable to all companies Decision of all members to terminate the company with liquidation Decision of all members on termination through a transformation Decision of a court For reasons specific only to general partnership Upon the death of a member (natural person) Upon termination of a member (legal entity) Upon declaration of bankruptcy over assets of a member Unless founding agreement and agreement of remaining members allow for continuation of company

LIMITED partnership General Characteristics Personal company with certain capital features Two types of partners unlimited partner limited partner Can be created only for business purposes by at least one limited and one unlimited founder Personal involvement of unlimited members reflected in company’s management

LIMITED partnership Establishment Legal act necessary for establishment - founding agreement Incorporation - upon registration in the Commercial Register. Limited members obligated to make capital contributions in the amount set forth in founding agreement, no minimal amount stated by law Members (partners) - both individuals and legal entities

LIMITED partnership Corporate organization No specific corporate bodies created Management of day to day business carried out by unlimited members (partners) Other matters decided by unlimited and limited members jointly – majority voting pursuant to founding agreement Founding agreement may be changed by agreement of all members unless founding agreement provides for majority of unlimited and limited members

LIMITED partnership Rights and duties of members Right to participate in management – unlimited members Each unlimited member is authorized to manage the company and act on behalf of the company in all matters Founding agreement may grant the management right only to one or more unlimited members Right of one or more unlimited members to manage the company can be terminated by decision of other unlimited members as agreed in founding agreement by court upon request of any unlimited member if managing member grossly violates his duties Managing member may resign from his position

LIMITED PARTNERSHIP Right to participate in management – limited members Rights and duties determined by size of capital contribution unless founding agreement states otherwise Right to be informed and to inspect the books and other documents of the company Vote on matters outside day to day business and change of founding agreement together with unlimited members Voting separate by unlimited and limited members unless founding agreement states otherwise

LIMITED partnership Property Rights Right to participate in profits of the company Profits divided into two parts - one for unlimited partners, one for limited partners Part for unlimited members divided equally Part for limited members divided in accordance with their capital contributions Both unless founding agreement states otherwise In case of liquidation - right to participate in liquidation balance Each member authorized to the amount adequate to its contribution In case of insufficient balance limited members take priority The rest divided pursuant to rules applicable to division of profits

LIMITED partnership Duties of members Reflect distinctions in nature of unlimited and limited members Unlimited members - the same position and duties as members of general partnership Limited members – duties similar to duties of members of limited liability company Obligation to provide contribution in company’s assets Limited members do not share losses of the company unless provided for this in founding agreement

LIMITED PARTNERSHIP Liability of members for obligations of a company Unlimited members are personally and fully liable for obligations of the company Liability of unlimited members is joint, several and unlimited Limited member is liable jointly and severally with other members (unlimited and limited) for obligations of company up to the amount of his unpaid contribution as registered in commercial register

Founding agreement may stipulate that limited partners are liable for obligations of the company up to the amount set forth in the founding agreement (liability amount) Liability amount is registered in Commercial Register Liability amount may not be lower than the aggregate of contributions of limited partners

LIMITED PARTNERSHIP Termination of limited partnership For reasons applicable to all companies Decision of all members to terminate the company with liquidation Decision of all members on termination through a transformation Decision of a court For reasons applicable to general partnership with regard to unlimited partners Upon the death of unlimited member (natural person) Upon termination of unlimited member (legal entity) Upon declaration of bankruptcy over assets of unlimited member Death, termination or bankruptcy of limited partner does not affect the existence of company