Liquidation of a General Partnership
📘 Article 71 of the Civil Code of the Republic of Kazakhstan: Liquidation of a General Partnership
🔷 General Overview
A general partnership, as an organizational and legal form, is characterized by a high degree of personal participation and liability of its participants. Therefore, its existence is closely linked to the number and legal status of the participants, rather than solely to the will of an owner, as is the case with LLPs or JSCs.
🔹 Clause 1. Sole Participant — Liquidation if Not Reorganized
“…in the event that only one participant remains in the partnership, if within six months he does not reorganize the partnership or admit new participants.”
· If only one participant remains in the partnership:o He is granted a six-month period to:§ Reorganize the general partnership into another organizational and legal form (for example, an LLP — see Article 62 of the Civil Code of the RK);§ Or admit new participants (in accordance with the constituent agreement).
· Otherwise, mandatory liquidation ensues.
📌 Legal purpose — to prevent the existence of a general partnership with a single participant, since it is based on personal trust, joint and several liability, and collegial management.
📌 Judicial practice:
· When considering disputes on compulsory liquidation in such cases, courts refer to Articles 49 and 71 of the Civil Code of the RK as grounds for termination of activity.
🔹 Clause 2. Legal Status upon Withdrawal of a Participant
“…withdrawal, death, declaration as missing or legally incapacitated, bankruptcy…”
· A general partnership may continue its activities despite the withdrawal of one participant, provided that:o This is stipulated in the constituent documents;o Or a new agreement is concluded among the remaining participants.
📌 This provision ensures flexibility in the partnership’s operation — for example, the death of one participant does not necessarily lead to liquidation if it does not impede the activities of the remaining participants.
🔹 Clause 3. Redistribution of Shares
“…the shares of the remaining participants increase proportionally to their contributions…”
· If one participant withdraws:o His share is redistributed among the remaining participants;o In proportion to their contributions;o Unless otherwise provided by the constituent documents.
📌 This provision is important for maintaining the balance of ownership and avoiding legal disputes among the remaining participants.
⚖️ Comparative Legal Aspect
| Issue | General Partnership | LLP |
|---|---|---|
| Minimum number of participants | 2 | 1 |
| If a single participant remains | Partnership must be liquidated or reorganized | No restrictions |
| Redistribution of shares | Proportionally, unless otherwise provided | By decision of participants |
| Grounds for termination | Fewer than two participants — liquidation | None |
📌 Practical Implications
· A general partnership cannot be maintained with a single participant for more than six months;· Upon the death or bankruptcy of a participant, it is necessary to promptly amend the composition of participants or liquidate the partnership;· Failure to redistribute shares leads to management conflicts and property disputes;· There is a need to timely amend the constituent documents when participants withdraw.
🧾 Regulatory References:
· Article 49 of the Civil Code of the RK — General grounds for liquidation;· Article 70 of the Civil Code of the RK — Liability of participants;· Article 62 of the Civil Code of the RK — Reorganization of organizational and legal forms;· Law of the Republic of Kazakhstan “On State Registration of Legal Entities” — for the liquidation procedure;· Regulatory Resolution of the Supreme Court of the RK No. 3 dated 19 June 1998 — on certain issues of application of corporate legislation (where interpretative guidance is available).
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.
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