Basic Provisions on a Partnership with Additional Liability
📘 I. General Characteristics of a Partnership with Additional Liability (PAL)
A Partnership with Additional Liability (PAL) is a corporate-type legal entity that combines features of:
a Limited Liability Partnership (LLP) (in terms of management, capital, and organizational structure);
a general partnership (in terms of the increased property liability of participants).
🔍 This form is less common than an LLP, but it:
is used in cases where enhanced joint liability is required (for example, in trust-based investment associations or family businesses);
involves higher risks for participants.
📑 II. Commentary on the Paragraphs of the Article
🔹 Paragraph 1. Definition and Basis of Liability
"Participants are liable for obligations with their contributions… and with their property in an amount proportional to multiples of their contributions."
🔍 The main feature of a PAL is a two-level liability system:
Within the limits of the contribution — similar to an LLP;
Beyond the contribution, but only within a multiple of the contribution — using the participant’s personal property.
📘 Example:
the participant’s contribution — 5 million tenge;
the charter establishes a liability limit — three times the contribution.
→ The participant’s maximum liability is 15 million tenge (including the contribution).
⚠️ Participants in a PAL bear personal property liability, but it is limited and predetermined.
📎 Related legal provisions:
Article 77 of the Civil Code of the Republic of Kazakhstan — general provisions on LLPs;
Law of the Republic of Kazakhstan “On LLPs and Partnerships with Additional Liability”, Articles 3 and 36 — differences between PAL and LLP.
🔹 Paragraph 2. Maximum Liability and Its Redistribution
"The maximum amount of liability… is provided for in the charter."
🔍 The charter of the PAL must specify:
how many times the participant is liable beyond the contribution;
the mechanism of additional liability.
📘 Example from practice:
The charter states:"The liability of participants is limited to twice the amount of their contribution."
"In the event of bankruptcy of one of the participants, their liability is redistributed among the remaining participants…"
🔍 If one of the participants becomes bankrupt, their share of additional liability:
is distributed among the remaining participants;
proportionally to their contributions, unless the charter provides otherwise.
📘 This prevents part of the liability from disappearing and ensures protection of creditors' interests.
📘 Judicial practice:In case No. 2-2319/2022, the court recognized as lawful the redistribution of the two-fold additional liability share of the bankrupt participant between the remaining two participants in proportion to their shares in the authorized capital.
🔹 Paragraph 3. Subsidiary Application of LLP Rules
"Rules applicable to LLPs shall apply unless otherwise provided…"
🔍 A PAL is managed similarly to an LLP, including matters related to:
management bodies (general meeting, director);
registration, charter, and authorized capital;
profit distribution, withdrawal of participants, transfer of shares;
conducting business activities.
📎 Applicable provisions:
Articles 77–83 of the Civil Code of the Republic of Kazakhstan;
Law “On LLPs and Partnerships with Additional Liability”, applied with consideration of additional liability.
📘 Exceptions concern:
liability issues;
bankruptcy of a participant;
special provisions of the charter regarding redistribution of shares and obligations.
⚖️ III. Comparison with LLP and Other Forms
| Parameter | LLP | PAL | General Partnership |
|---|---|---|---|
| Liability of participants | Only within contribution | Within contribution + beyond it | Full and unlimited |
| Mechanism of additional liability | None | Directly established by charter | Established by law |
| Possibility of redistribution | No | Yes, in case of participant bankruptcy | Yes |
| Risk to personal property | No | Yes, but limited | Fully present |
📚 IV. Related Legal Norms and Laws
| Norm | Content |
|---|---|
| Civil Code of the RK, Articles 77–83 | General rules on LLP |
| Law of the RK “On LLPs and PALs”, Article 36 | Specific features of PAL |
| Civil Code of the RK, Articles 45–50 | Reorganization and liquidation |
| Law “On Bankruptcy” | Consequences of insolvency of a PAL participant |
| Resolutions of the Supreme Court of the RK | Distribution of liability among participants |
📝 V. Conclusions and Recommendations
A Partnership with Additional Liability is a risky organizational form for participants, since they may be liable with their personal property beyond their contributions.
It is essential to:
clearly define the maximum multiple of liability in the charter;
specify the procedure for redistribution of obligations if one participant becomes bankrupt.
Before joining a PAL, participants should:
assess their property risks;
insure personal property if necessary.
In judicial disputes, the court will:
rely primarily on the charter provisions;
protect the interests of creditors within the established limits of liability.
Attention!
Law and Law Law Law draws your attention to the fact that this document is basic and does not always meet the requirements of a particular situation. Our lawyers are ready to assist you in legal advice, drawing up any legal document suitable for your situation.
For more information, please contact a Lawyer / Attorney by phone: +7 (708) 971-78-58; +7 (700) 978 5755, +7 (700) 978 5085.
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