Liability of Participants for the Debts of a General Partnership

📘 Article 70 of the Civil Code of the Republic of Kazakhstan: Liability of Participants for the Debts of a General Partnership

🔷 General Characteristics

A general partnership is a form of business partnership in which the participants bear full property liability (subsidiary and joint and several liability) for the obligations of the partnership. This is one of the key features that distinguishes it from limited liability partnerships or partnerships with additional liability.

🔹 Paragraph 1. Joint and Several Liability

“…bear joint and several liability with all their property…”

• If, during liquidation, the property of the partnership is insufficient:

• The participants are liable with all their personal property;

• The liability is joint and several (see Article 287 of the Civil Code of the Republic of Kazakhstan – “Joint and Several Obligations”);

• The property subject to enforcement is determined in accordance with the Civil Procedure Code and the Law “On Enforcement Proceedings and the Status of Bailiffs.”

📌 Important: a creditor may demand performance from any participant, and the participant who paid the debt has the right to file a regress (recourse) claim against the other participants (paragraph 2).

🔹 Paragraph 2. Recourse Claims

“…has the right to bring a recourse claim…”

• A participant who has paid the debt may recover from the other participants:

• The amount exceeding his own share;

• Proportionally to their shares in the partnership’s property;

• Through a mechanism of internal compensation between participants.

📌 Example: three participants have equal shares. One participant paid 900,000 tenge of debt. He may claim 300,000 tenge from each of the other two participants.

🔹 Paragraph 3. Liability of a Withdrawn Participant

“…within two years…”

• A participant who has withdrawn or has been expelled, as well as an heir who refused to join the partnership:

• Remains liable for obligations that arose before his withdrawal;

• For two years from the approval of the report for the year of withdrawal (this rule is somewhat similar to the liability period in suretyship obligations).

📌 Purpose of the rule: protection of creditors in order to prevent a fictitious “withdrawal” from the partnership to avoid debts.

🔹 Paragraph 4. Exceptions to Liability

“…are not liable for the obligations of the partnership…”

• In the following cases:

• Transfer of a share to another person;

• Foreclosure on a share by creditors;

• Refusal of an heir to participate in the partnership.

👉 Such persons do not bear liability even for previous debts.

📌 This is an exception to the general principle of joint and several liability, applicable only in strictly limited cases directly specified by law.

🔹 Paragraph 5. Liability After Termination of the Partnership

“…within two years…”

• Even after the termination of a general partnership:

• Former participants continue to be liable for obligations that arose earlier;

• The liability period is two years from the date of liquidation.

📌 This ensures protection of the rights of creditors who were unable to submit their claims in time.

🔹 Paragraph 6. Invalidity of Agreements Limiting Liability

“…are void…”

• Any agreement among participants of a general partnership that limits or excludes their liability for the partnership’s debts has no legal force:

• Such agreements contradict public order and the principles of civil circulation(see Articles 9 and 150 of the Civil Code of the Republic of Kazakhstan).

⚖️ Judicial Practice

📚 Case No. 2-3419/2021 (Shymkent)

The court recovered the debt from a participant of a general partnership despite his statement that he had withdrawn from the partnership two months before the lawsuit. The court established that the debt had arisen before the withdrawal, and therefore applied the two-year liability period provided in paragraph 3 of Article 70 of the Civil Code of the Republic of Kazakhstan.

📌 Conclusions

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