Commentary to article 58. The main provisions on the business partnership of the Civil Code of the Republic of Kazakhstan  

34 of the Civil Code provides for only three organizational and legal forms for legal entities engaged in commercial (entrepreneurial) activities for the purpose of making a profit: state-owned enterprises, production cooperatives and business partnerships. Since state-owned enterprises belong to the public sector of the economy, and the basis of the activity of production cooperatives is the personal labor participation of its members, therefore, business partnerships are the main form of entrepreneurial activity in Kazakhstan.

Business partnerships are commercial organizations (for the concept of a commercial organization, see the commentary to Article 34 of the Civil Code), which set the main task of making a profit and distributing it among the participants. According to the provisions of the Civil Code, they have a common legal capacity that allows them to carry out any type of activity that is not prohibited by law.  

Individuals and legal entities that create (establish) an economic partnership, called the founders. After the state registration of the partnership, the founders are participants in the partnership (paragraph 11 of Article 4 of the Decree on Business Partnerships) with the scope of rights defined in the Civil Code and the Decree.  

The most important property right of a business partnership is the ownership of the property represented at the time of the creation of the authorized capital. Monetary amounts and other property values contributed by the founders as contributions to the authorized capital, as well as property produced and acquired by the partnership itself, belong to it by right of ownership. The right of ownership is an absolute right, which, in accordance with paragraph 2 of Article 188 of the Civil Code, allows a business partnership to own, use and dispose of its property at its discretion. Consequently, the property of the partnership is completely separate from the property of its participants. (ed. Laws of the Republic of Kazakhstan dated July 15, 1996, July 11, 1997 and March 2, 1998)  

As for the participants, they do not own the property of the business partnership, but only shares in its property, through which the rights strictly stipulated in the Civil Code and other legislative acts are implemented. At the same time, the concepts of "share in property" and "share in the authorized capital" are dependent concepts. In this regard, the participants of the partnership, in accordance with paragraph 2 of Article 36 of the Civil Code, retain their binding rights to its property.  

By its legal nature, an economic partnership is a collective form of entrepreneurship. The essence of his activity is to combine the actions of various individuals (both individuals and legal entities) and their money into a single whole to solve common tasks that cannot be achieved by the efforts of each of these individuals individually. On the other hand, an economic partnership is created for the purpose of separating the property intended for entrepreneurial activity from the founders (founder) and transferring it to the ownership of the partnership. In this regard, an economic partnership may be established by one person.  

In paragraph 2 of the commented article of the Civil Code, five types of business partnerships are named: general partnership, limited partnership, LLP, TDO and JSC. Economic partnerships can be divided into two groups according to the degree of responsibility of their participants for the debts of the partnership. The first category includes general and limited partnerships, the second category includes LLP, TDO and JSC.

General and limited partnerships are, given the nature of the responsibility of general partners, associations primarily of individuals that are created to carry out entrepreneurial activities based on personal participation and, as a rule, not related to attracting large amounts of capital. LLP, TDO and JSC can be defined as organizations created by one or more persons by combining (as well as separating) capital for business activities.  

Further articles of the Civil Code provide definitions and distinguishing features of a particular type of partnership.  

Business partnerships as legal entities and subjects of civil law relations are organizations created by individuals both directly and through the legal entities established by them. A legal entity, on the one hand, in the case of its creation by several persons, acts as an association or an organized collective of its creators, on the other hand, it is an organization established for independent management with certain property.

Considering that the main factor for the formation and operation of a general partnership is not the presence of a certain set of property, but the personal participation of its participants in the business activities carried out by the partnership, this type of business partnership, by its legal nature, acts more as an association of its participants for joint business activities than an organization established for property-based management, transferred to its ownership by the founders. That is, a general partnership is by its nature a personal association and does not require large investments from its founders. Therefore, a full (as well as a limited partnership close to it in legal status) in accordance with the Civil Code and the Decree on Business Partnerships does not require the formation of a large authorized capital. The basis of the activity of such partnerships is not the property contributions of its founders, but their professional experience, organizational skills, business connections, etc.  

Legal entities cannot be members of a general partnership. Since personal participation is the main element for the activities of general partnerships, it is difficult to imagine how a legal entity will "personally" participate in the activities of a general partnership. In the end, everything will come down to the participation of the first head on behalf of a legal entity, and it is easy to assume what consequences this will lead to in practice. However, legal entities have the right to participate in the activities of a business partnership by making property contributions. In this case, a limited partnership may be formed in which only citizens are general partners who bear full responsibility for the partnership's debts and manage its activities. Investors who bear limited liability within the limits of their contributions to the authorized capital and who do not participate in the partnership's business activities can be both citizens and legal entities.  

Full and limited partnerships are personal partnerships. A citizen has the right to participate in the activities of only one general partnership or to be a general partner in one limited partnership. The founding documents of a general partnership must specify its corporate name, which must contain the names of all its participants, as well as the words "general partnership" or the name of one or more participants with the addition of the words "and the company", as well as the words "general partnership", and in the founding documents of a limited partnership - the names of all general partners, as well as the words "limited partnership" or the name of at least one full partner with the addition of the words "and the company", as well as the words "limited partnership" (clauses 1 of art. 12 and 1 of art. 29 of the Decree on Business Partnerships). The term "name" in this case means a civil name, that is, a surname by which one citizen differs from another (in this regard, see art. 15 of the Civil Code and the commentary to it). The indication of the surname(s) in the constituent documents should indicate specific citizens who are members of a full or limited partnership.  

The Charter and the founding agreement are the founding documents of the business partnership.

The Charter is a document confirming the legal capacity of a business partnership as a legal entity. The founding agreement is an agreement between the founders on the establishment of a partnership.  

In cases where a business partnership is established by one person, the founding agreement becomes unnecessary, since the agreement on the establishment of the partnership is a two- or multilateral transaction. In this regard, the founding document of an economic partnership, which is established by one person, is only the charter.  

In accordance with the Law of the Republic of Kazakhstan "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan" dated June 19, 1997, small business entities established in the organizational and legal form of a business partnership, with the exception of JSC, may operate on the basis of a standard charter, the content of which is determined by the Government of the Republic of Kazakhstan.  

The founding documents of a business partnership (the charter and the founding agreement) are subject to notarization.

The founding agreement of a business partnership is signed by all its participants (founders) (clause 4, Article 4 of the Decree on Business Partnerships).  

The articles of association of a partnership are signed by the founder, appointed in accordance with the founding agreement as the manager of this partnership, or by the person appointed by the participants of the business partnership as its first head (senior official). The Charter of the LLP is signed by all the founders or their authorized representatives (clause 3, Article 17 of the Law on LLP). The charter of a partnership, the founder of which is one person, is signed by this founder (clause 5, Article 4 of the Decree on Business Partnerships).  

The constituent documents of a business partnership must contain, in addition to the information specified in clauses 4 and 5 of Article 41 of the Civil Code, conditions on the amount of shares of each participant; on the amount, composition, timing and procedure for making contributions to the authorized capital of the partnership; on the responsibility of participants for violating obligations to make contributions to the authorized capital of the partnership, as well as other information provided by legislative acts.

The charter of a business partnership defines: the type of partnership, its name, location, duration of activity (if established at its establishment), the powers of the head, management and control bodies, their competence, the procedure for the formation of property, the procedure for profit distribution and compensation for losses, the conditions for termination (reorganization or liquidation) of the partnership, as well as the relationship between the partnership and the founders (participants). The charter may contain other provisions stipulated by the legislation or the founders (clause 8 of art. 4 Decrees on business partnerships).  

In the founding agreement, the founders undertake to establish a business partnership, establish the procedure for its establishment and determine the conditions for the transfer of their property to the ownership of the partnership; participation in its activities; distribution of net income among the founders; management of its activities; withdrawal from its membership; as well as the amount of shares of each of the founders; the size, composition, timing and the procedure for making contributions; the responsibility of the founders for violating the obligations to make contributions; the amount and composition of the authorized capital. The founding agreement may contain other information provided by the legislation or the founders. The charter of a business partnership is approved by the founders, which is reflected in the founding agreement (clause 8, Article 4 of the Decree on Business Partnerships).  

In addition to the conditions specified above, the constituent documents must also contain the conditions stipulated by the Civil Code and other legislative acts. Thus, Articles 14 and 17 of the Law on LLP provide additional information, which must be reflected in the founding agreement and the charter of the LLP, respectively.  

If these conditions are not reflected in the articles of association and the founding agreement of the partnership, the founding documents will be declared invalid at the request of state bodies to which such a right has been granted by legislative acts, as well as at the request of other interested parties in court (paragraph 10 of the Decree on Business Partnerships).  

The provisions of the founding agreement relate exclusively to the participants of the business partnership. In this regard, the content of the founding agreement of the partnership may constitute a commercial secret. The founding agreement is subject to presentation to state or other official bodies, as well as to third parties only by decision of the participants of the partnership or in cases established by legislative acts (paragraph 3 of Article 4 of the Decree on Business Partnerships). As for the charter of the business partnership, it is a public document. The provisions of the charter apply not only to the members of the partnership, but also to the persons with whom it enters into legal relations. Therefore, all interested persons have the right to familiarize themselves with the charter of the business partnership (paragraph 3, Article 4 of the Decree on Business Partnerships).

The Civil Code allows business partnerships to establish other partnerships. At the same time, the Civil Code and other legislative acts establish some restrictions on this issue. So, an LLP, and therefore a TDO, cannot be established by another business partnership consisting of one person (paragraph 2 of Article 77 of the Civil Code).

Paragraph 7 is excluded from the commented article, since a similar norm is established by the new edition of Article 41 of the Civil Code.

Comments on The Civil Code The Code of Criminal Procedure The Criminal Code The Normative resolution of the Supreme Court The criminal legislation The normative legal acts of the Republic of Kazakhstan  

The commentary was prepared within the framework of the scientific and practical research program of the Scientific Research Center of Private Law of the Kazakh State Law University.  

Head of the working group on the preparation of the draft Civil Code of the Republic of Kazakhstan, Corresponding Member of the Academy of Sciences of the Republic of Kazakhstan, Professor Suleimenov M.K.

Deputy head Professor Basin Yu.G.

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