Running a general partnership or a partnership with joint liability (ANS/DA)
The partners' meeting is the supreme authority in a general partnership and consists of the partners. It is the partners who can collectively make decisions at partners' meetings concerning any matter. The partners can also opt to establish a board, which will be responsible for running the company between partners' meetings.
It is the partners' meeting who elects the board members. The partners' meeting has instruction and reversal authority. If the company has a board or a general manager who is not a partner, these are required to attend the partners' meeting.
There are no strict requirements regarding summonses to partners' meetings. There is for example no requirement for written documentation, so summonses can be issued in some other appropriate manner. The summons must state the agenda for the meeting. The partners must receive the summons in good time to enable them to familiarise themselves with the agenda. Individual partners, board members and the general manager/manager can issue summonses to partners' meetings.
Only partners can vote at a partners' meeting and decisions require unanimity; see the Partnerships Act regarding the requirements that apply to voting and minuting. If the partners wish to deviate from the general rules concerning who holds voting rights and the requirement for unanimity, this must be stipulated in the partnership agreement.
Digital meetings are now accepted like physical meetings. Normally, digital meetings are held by using different solutions for telephone, video conference or a digital meeting application. Simultaneous participations and dialogue between the participants should be enabled.
In the case of a general partnership or a partnership with joint liability without a board, each partner has signature right unless agreed otherwise. Signature right is an authority to act and sign on behalf of the company in any situation. It can be agreed that one or more partners should have signature right, either individually or jointly.
If the partnership has a board, it is the board jointly that holds the signature right, unless agreed otherwise. The partners' meeting may decide that one or more board members should have signature right, either individually or jointly. The Partnerships Act does not provide for other signature provisions.
Notification of changes to signatures is given via the Coordinated register notification. If it is the board that approves the change, board minutes must be enclosed. The minutes of the partners' meeting must be enclosed.
Power of procuration
The partners' meeting, or alternatively the board, may also assign power of procuration. This is a limited authority to act and sign on behalf of the partnership in the day-to-day running of the business. A person who is assigned power of procuration cannot mortgage or sell the partnership's real property. The partners' meeting, or alternatively the board, can assign power of procuration to one or more people, either individually or jointly.
Notification of the registration or alteration of a power of procuration is given via the Coordinated register notification.
Changes in partner composition
As a general rule, a share in a partnership cannot be transferred to a new owner unless the transfer is approved by the other partners. This rule can be deviated from in the partnership agreement.
Special agreement may also be reached for the other partners to have right of pre-emption. Anyone who exercises a right of pre-emption must pay what the share is worth.
If the other partners approve the transfer, the new partner will take over all the rights and obligations of the previous partner in relation to the other partners.
For the partnership's creditors, both the new and old partners will be jointly and severally liable for the partnership's obligations in the event of a change of owner. (Joint and several liability' means that a creditor can recover the debt from either the new or the old partner when collecting debt which arose before the change of ownership.) The new partner can ask the partnership's creditors in writing to be granted exemption from this liability.
Withdrawal of partners
A partner can terminate their participation as a partner by giving six months' notice directly to the other partners. The partner will then be entitled to receive the value of the share at the end of the period of notice. Either a shorter or a longer period of notice may be agreed.
In three specific situations, a partner can terminate their participation with immediate effect:
- In the event of a material breach of the partnership relationship.
- If a partner is voted down through a majority decision regarding a material issue.
- If there are reasonableness considerations which provide a basis for the partner to terminate their participation.
Whether there are grounds for immediate termination of the participation must be assessed specifically in each individual case. The partner will then be entitled to receive the value which the share was worth immediately before the basis for the withdrawal arose.
A partner who withdraws from a partnership will remain liable for obligations which arose before they withdrew from the partnership.
Exclusion of partners
A partner can submit a written request for the partners' meeting to approve the exclusion of another partner. Such a request must be submitted within a reasonable period of time after the reason for the request for exclusion arose. Whether there are grounds for excluding the partner must be assessed specifically in each individual case.
How should changes in partner composition be notified?
All changes in partner composition must be notified to the Register of Business Enterprises by submitting a new partnership agreement together with the Coordinated register notification. Confirmation from the withdrawing partner and the new partner must also be enclosed. Notification to the Register of Business Enterprises is a prerequisite in order to be granted exemption from liability with respect to the partnership's creditors.
If only one partner remains in the partnership, the partnership can no longer continue to operate. If you wish to continue the operation as a partnership, you must replace the partner or partners who have withdrawn. Alternatively, the partnership must be deleted and the operation continued as a sole proprietorship.
Switching to a private limited company
Subject to certain rules, you can establish and register a new private limited company and continue to run your business through the new limited company. The limited company will then continue to operate under a new organisation number. If you meet certain conditions, you will be able to carry out a tax conversion.