Management of a General Partnership
📘 Article 65 of the Civil Code of the Republic of Kazakhstan: Management of a General Partnership
🔷 1. Supreme Governing Body — General Meeting of Participants
Clause 1:
“The supreme body of a general partnership is the general meeting of participants. Decisions on internal matters are made by the unanimous agreement of all participants…”
📌 Analysis:
- Unlike LLPs, general partnerships prioritize unanimous decision-making.
- However, the partnership agreement may stipulate majority voting as the decision-making rule.
- By default, each participant has one vote regardless of their contribution unless otherwise provided in the partnership agreement.
📎 Related Provision: Article 60 of the Civil Code of the RK — similarly establishes that the general meeting is the supreme body in business partnerships.
📍 Practice: In case No. 2-4563/2020, the court invalidated a decision of the general partnership meeting made without the opinion of one of the participants, since the right to make decisions by majority was not provided.
🔷 2. Executive Bodies of a General Partnership
Clause 2:
“Management of the partnership is carried out by executive bodies…”
📌 Analysis:
- Executive bodies may be:
- Sole (e.g., director),
- Collegial (e.g., board).
- Their authority and appointment procedures must be specified in the founding documents.
📎 Related Provisions:
- Article 60 of the Civil Code of the RK (general rules on business partnerships).
- Article 41 of the Civil Code of the RK — minimum requirements for founding documents.
🔷 3. Prohibition on Competition by a Participant
Clause 3:
“A participant may not, without the consent of the other participants, conduct transactions on their own behalf that are similar to the partnership's activities…”
📌 Analysis:
- This is a non-compete rule specific to general partnerships.
- Violation of this prohibition gives the partnership alternative remedies:
- A claim for damages;
- A claim to transfer the gained profit (e.g., income or property).
📍 Example: A participant engaged in supplying building materials concluded a contract with the same client via their sole proprietorship. The court required the transfer of the profit to the partnership (case No. 2-1133/2019).
🔷 4. Obligation to Provide Information
Clause 4:
“The bodies responsible for management must provide full information to participants upon request…”
📌 Analysis:
- This is a direct guarantee of management transparency, especially important in partnerships based on personal trust.
- Participants have unlimited access to information, including:
- Accounting records,
- Commercial contracts,
- Financial status data.
📍 Case Law: The court upheld a claim by a participant against the executive body that refused to provide information about the partnership's obligations, recognizing this as a violation of corporate rights (case No. 2-4488/2021, Astana).
🔷 5. Consequences of Actions Without Authority
Clause 5:
“If a participant acted without authority but in the partnership’s interest, they may claim compensation if they prove the benefit to the partnership…”
📌 Analysis:
- The principle of unjust enrichment is applied in the interest of fairness.
- A participant may be compensated if:
- Their actions resulted in a benefit to the partnership;
- The benefit exceeds the incurred expenses;
- The actions were done in the partnership’s interest, not for personal gain.
📍 Example from Practice: A participant paid for the office rent from personal funds without approval. The partnership was obliged to reimburse the amount as it allowed continued operation (case No. 2-893/2022).
📌 Conclusion:
Article 65 of the Civil Code of the RK establishes:
- A consensus-based management model in general partnerships;
- Strict non-compete obligations for participants;
- The duty of partnership bodies to ensure transparency and good faith;
- The right to reimbursement for expenses incurred in the partnership’s interest.
These provisions highlight the personal and trust-based nature of general partnerships and reinforce mutual responsibility among participants.
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