Business Law - Partnerships (Prof. Veronese)
All the commercial entrepreneurs (except for the small ones), must document their activities on an ongoing
basis through the keeping of specific accounting records. 3
In particular commercial entrepreneurs have to keep two accounting books :
• The Daily Book, where daily operations must be registered in chronologic order.
• The Inventory Book, that must show and evaluate the enterprise’s assets and liabilities.
Rules on Representation:
These are the rules regarding Legal Agent, Nominee or Procurators.
They are subordinate auxiliaries or employees entitled to deal directly with third parties in the name and on
behalf of the entrepreneur.
Here we can find three important figures:
• Chief Executive Officer: he is at the top of the employees hierarchy and at the top of the business
unit; he has a general representative power; he may be placed at the head of the entire enterprise,
or of a secondary unit or of a particular branch; he has to refer directly to the entrepreneur
(meaning that he is directly subordinate to him). If while managing a certain business he did not
disclose his quality (meaning he did not make use of the entrepreneur’s name) he would be
personally liable for the concluded business.
• Nominee: he has a limited power of representation. In particular he has the power to carry out on
behalf of the entrepreneur the activities related to the enterprise, even if they are not at the top of
• Clerk: he has a limited power of representation too. He may carry out activities normally implied by
the operations they are in charge of, they may carry out activities which are within their
3 Note that other accounting books could be present such as the book store and the cash book.
Business as Going Concern:
The definition is given by the Art. 2555 of Italian Civil Code:
“Business as a going concern is a nexus of assets organized by the entrepreneur for the exercise of the firm”.
The complex of goods or instrumental system is composed by:
• Raw materials
They are organized by the entrepreneur in order to carry out the enterprise activity.
Note that Enterprise and Business are not the same thing:
➢ Enterprise means the activity carried out by the entrepreneur;
➢ Business means a set of goods and relationships;
➢ Company is the means by which the entrepreneurs carry out and conduct their business activities;
The business consists and is made of:
Tangible and intangible assets (necessary to conduct business)
Contracts (not a duty)
• Credits and debts
From one side, Business is made by the assets composing it; on the other side, Business is characterized by
the attitude of creation of new wealth through the organization – by the entrepreneur – on those same
The Business can have a greater value than that corresponding to the mere sum of the assets constituting
it. Such higher value is called goodwill: the ability of the business to realize profits.
We can distinguish between objective goodwill and subjective goodwill:
• Objective goodwill refers to the business’s material factors that do not change as a consequence of
change of ownership.
• Subjective goodwill refers to the personal qualities of the entrepreneur and his ability to maintain
and, possibly, increase his customers and therefore, the ability to generate “personal” profits.
4 E.g. tangible = lands, vehicles, machinery; intangible = patents etc…
5 E.g. leasing contract of machinery or the renting contract of the business.
Transfer of Business:
There is the possibility to transfer a business and now we are going to look at the regulations.
First of all, we must notarize that, and we must distinguish two effects of the form of the contract:
1. The form of the contract to the effect of the contract validity: the law does not set any particular
formal requirements, but it establishes that the contract shall be proved in writing. So, the written
form is required only for proof. The contract can also be orally drawn up and perfectly valid.
2. The form of the contract to the effect of its registration in the Business Register: it is necessary to
use the authenticated written form or a public deed.
There are two exceptions regarding the freeform:
a) The written form is required if the assets complex also includes fixed assets or registered assets;
b) The written form is necessary when required by the nature of the assets transfer contract (e.g.
Non Competition Clause – No Trade Competition Right:
The definition is given by the Art. 2557 ss:
“who sells the Business is not allowed – for a period of time of 5 years from the transfer – to start a new
enterprise which, because of its purpose, its location or other circumstances could subtract customers from
the original Business”
The object is the possibility to the seller to open a new business; the contract could also be extended to
additional areas, but such prohibitions should not limit any activity for the transferor.
The duration of this prohibition of competition may not exceed five years and if the contract provides a
longer duration or the duration is not precisely indicated, the prohibition of competition is effective only
for five years from the transfer.
Succession in Contracts:
Usually, all the contracts pertaining to the Business can be transferred together with the Business itself
(Art. 2558 c.c.)
However, there are two different exceptions:
a) Contracts with a personal profile (for instance, the contract with the legal counselling);
b) Contracts specifically excluded by the Business transfer contract;
These two types of contracts are not transferred.
Moreover, it is forbidden to exclude from the transfer so many contracts that the productive potentiality of
the transferred business comes to be at risk: in this case it would be a transfer of individual goods rather
than a transfer of the entire Business.
It is not necessary to notify the transfer of the contract to the transferred contract party nor to obtain its
The transferred contract party may withdraw from the contract within three months from when he is not
informed of the transfer, but only if there is a legitimate reason.
Credits of the Transferred Business:
Credits of the Business are transferred together with the assets transfer:
• It takes effect, toward third parties, from the registration of the act in the Business Register;
• It does not require notification to the transferred debtor, nor his assent;
He is free if proceeds in good faith, to the payment of the transferor.
Debts of the Transferred Business:
• The law does not state whether debts of the transferred assets are transferred or not with the
• The transfer to the acquirer or if they’re kept upon the seller depends on the parties’ willingness, so
on what it is written in the contract.
But, we have to remind that:
➢ The legislator states that the seller is still liable for the debts of the Business;
➢ The buyer is liable as well, but only for the debts resulting from the mandatory book-keeping
➢ Nevertheless, the legislator foresees that the seller may be released from liability by the creditors.
Usufruct and Rent of Business:
In such cases the general rules relating to the sale of the Business apply, but with some adaptation (Art.
2561 and 2562).
See the second part of the Art. 2559 c.c., which provides that in case of usufruct of Business, the sale of the
receivables must be expressly agreed upon.
Between specific powers and duties for the usufructuary or lessee:
• Not to change the destination of the Business;
• To maintain the efficiency of the organization;
• The power to dispose the Business assets within their management needs.
Remember than merely renting a building is not an economic activity.
Identification marks of Entrepreneur:
Identification marks are intended to enable consumers to identify and distinguish among different
entrepreneurs, their companies and their products:
• Business Name or Firm Name (=ditta)
• Trade name or Sign (=insegna)
• Trademark or Brand (=marchio)
• Patent (=brevetto)
• Copyright (=diritto d’autore)
• Web domain (=dominio web)
The regulation of trademarks and patents are contained in a specific code (in Italy) called Intellectual
Propriety Code. About the business name and trade name is contained in the Italian Civil Code.
Trademarks have a life of 10 years from the registration, but they are renewable forever. Instead patent
have a duration of 20 years and it is no renewable, in order to avoid a monopoly of ideas.
Copyrights have a duration of 70 years after the death of author creator (e.g. the death of the writer of a
book); this is about economic aspect/profile; there are also moral aspect which cannot expire in general.
Features in common:
1. The businessman although enjoying great freedom in the choice and creation of identification
marks, must comply with the rules of novelty, distinctiveness and truth, in order to avoid possible
deception and confusion in the market.
2. The businessman has the right to the exclusive use of distinctive signs.
3. The businessman may transfer his own identification marks, provided that the movement of such
products does not mislead the public.
it is the name under which the entrepreneur carries on his activity;
• Principle of truth
• Principle of novelty: cannot be equal or similar to the one already used by another trader.
Who has registered a firm first, has the exclusive right to its use and may force those who have used the
same business name at a later time to amend or supplement it, in order to avoid confusion.
The priority of use depends on the date of its registration in the Business Register.
The right to the exclusive use of the company applies only when the two operators are in competition with
each other, because only in this case there can be confusion between the different companies.
It is the distinctive sign of the premises.
To have the right of use, it is necessary that it has a distinctive capacity so, it must be different from the
generic name of the object of the enterprise.
There are two different forms of trade name:
Nominative trade name
Emblematic trade name
6 E.g. Ferrero (so there is the name of the family/owner).
7 E.g. Apple (there is the emblema, the apple). 11
Joint Property – Partnership or Company: 8
Definition of Company Contract in general (both partnership and company) :
Art. 2247 c.c. “two or more persons give birth to a partnership”.
By a contract, where the members have to contribute goods or services.
The aim is:
• The joint exercise of an economic activity.
• With the purpose of dividing among themselves the profits.
However, there is an exception, because the one-man private company was introduced in 2003 in the
Italian Business law and ten years later, in 2013, one-man public company was introduced too.
So, the article 2247 does not represent the appropriate definition for companies anymore but does for
They are performances with which the parties of the company’s contract oblige themselves.
The purpose is to give the “Società” what it needs to operate, to form the initial patrimony of “Società”.
In Italian it means “conferimenti”. They are what constitute the Capital of the firm, that is what is needed
What can be contributed?
Art. 2247 c.c. in general specify that any entity capable of economic assessment can be contributed, for
• Goods in kind
• Performances of work
• Credits toward third parties
Joint exercise of economic activity:
It is contained in the Object Clause of the deed.
It is the specific economic activity that members of “Società” desire to exercise. There should be the
productive purpose, not a mere enjoyment of the already existing activity.
Note that people who rent their properties are theoretically not to be considered “Società”, because they
do not produce anything. In Italy there is an appropriate kind of business which is: “Società Immobiliare di
8 Which is actually the definition of the Italian “società” and it is a contract.
Goal of the “Società”:
An activity is economic only if: it aims at covering costs with revenues; it is however not needed to aim at
A “Società” can, exceptionally, aim at only covering costs: it would be a social entrepreneur; not fall within
the general rule of Art. 2247 c.c., because it would not aim at distributing revenues.
If however there is a lucrative goal and an egoistic purpose, the Società aims at more than merely covering
its costs, we can distinguish between:
• Only an objective lucrative goal: aiming at making money (and not distributing it), so, social
• Also, a subjective lucrative goal: aiming at distinguishing that money (income) amongst
For example, run a clinic, you do not distribute the profit, but you can use it for medical research. So here
there is an objective lucrative goal, like a foundation/association.
Legal Entity – Legal Persons:
All the “Società” are Legal Entities: a new being is created in the juridical world, distinct from that of the
partners. It is a concept used as a screen for the members.
Companies are also something more, Legal Persons (so, not partnership!)
Only in the latter, the shareholders never respond for the company’s debts and vice versa.
The typical element of the company contract is represented, therefore, by the presence of two or more
people who provide goods or services for the joint exercise of an economic activity, in order to divide the
In this regard, the following should be specified:
The partnership agreement is usually a multilateral agreement where at least two persons have to
participate and whose services are intended to achieve a common goal.
The Italian Civil Code now allows the constitution with unilateral act (so not a contract, not an agreement)
of: • Limited liability company LLC (in Italian SRL)
• Company limited by shares CLS (in Italian SPA)
With a sole shareholder.
With the signing of the contract, Partners have the obligation to make contributions to the company. These
contributions can be in cash or in kind.
With the deed of incorporation all the members are committed to the exercise of an economic activity in
Their purpose is to realize profit and share it. 13
1. The interest in transforming the wealth of shareholders through contribution in an efficient
business organization in order to increase the volume if the production and trade entering new
markets, increasing economic power of the company.
2. The interest as a result of the maximization of incomes which means making the company earn
more net profit as possible.
3. The interest in maximizing dividends, to ensure earned profits, they are frequently and in the
highest measure redistributed among members.
Types of Companies:
• PARTNESHIP: unlimited liability companies, where the personal factor plays a key role:
o Informal partnership (società semplice – SS)
o General partnership (società in nome collettivo – SNC)
o Limited partnership (società in accomandita semplice – SAS)
• CAPITAL COMPANIES: limited liability companies.
o Limited-share company (società per azione – SPA)
o Limited-liability company (società a responsabilità limitata – SRL)
o Limited Partnership by shares or Stock-company limited
• CO-OPERATIVE COMPANIES
• MUTUAL ASSOCIATIONS
A company has legal personality when it is considered by law as a legal entity, which is formally distinct
from the partners: the most important feature of such companies is enjoying a full and perfect patrimonial
autonomy. The legal personality distinguishes capital companies only.
Partnerships have a certain autonomy degree: imperfect patrimonial autonomy, which aim to protect both
company’s creditor and assets of the individual shareholders.
COMPANIES LEGAL PERSONALITY PERFECT PATRIMONIAL AUTONOMY
PARTNERSHIP IMPERFECT PATRIMONIAL AUTONOMY
In particular, in partnerships:
• Personal creditors of the partners cannot attack the assets of the company in order to be satisfied;
• At the same time, partnership’s creditors cannot attack directly the personal assets of partners with
unlimited liability. First the creditor has the duty to attack the capital of the partnership, then, if not
satisfied they can get the money from the partner.
Data in the Documents and Correspondence:
Italian C.C. provides that documents and correspondence shall disclose the following information:
• The company headquarters or seat
• The office of Business Register where the company is registered and the relative registration
• Cause of dissolution and stage of liquidation, for the company in liquidation
• In case of a sole trader company, indication of such status
• Whether it is subject to activities of management and coordination
Simple/Informal Partnership (SS):
Even if in UK the law does not contemplate this particular type of partnership, In Italy it has a systematic
importance: It is called Società Semplice (SS):
• Unlimited liability entity
• Personal factor plays a key role
• With a certain autonomy degree and Imperfect Patrimonial Autonomy
• Without legal personality and without full and perfect patrimonial autonomy
• Exclusively valid for agricultural activities
• No commercial purpose
It maintains a systematic importance because the Civil Code uses this simplified type as model for all other
partnerships. The Simple Company represent the prototype of Partnerships’ regulation, because the rules
laid down for the Simple Company are also applicable to the other types of Partnerships.
All other Partnerships and all companies can, instead, perform and be used both for commercial and non-
About the Business Name (=ragione sociale) of the Simple Company, it must meet several requirements:
• it must compulsory encompass the name of one or more partners
• it must compulsory encompass the indication of the Partnership relationship.
• It may contain the name of a withdraw or deceased partner (only if he or his heirs agree).
About the Formation of the Simple Company, the Italian Civil Code does not establish a specific form for the
agreement or Deed of Incorporation (=atto constitutivo) so, means that it is admissible for the parties to
finalize their agreement either in verbal or writing form. Oral deed is valid between the members but not
for third parties; for them it is necessary a written form authenticated or public deed (and so the
registration in the Business Register).
In any case, any failure of the Simple Partnership to enrol in the Business Register does not affect either the
existence or the regulation of the Simple Partnership itself: in this case we have an unregistered Simple
Company, which is an irregular partnership. The IRREGULAR partnership is born anyway, even if it is not
registered . Here we care about the declarative effect.
9 For company we have the constitutive effect, so once you register it in the business register, all the individuals
recognize at the same time the existence of the company. 15
The consequences of an unregistered partnership is that it is not possible to presume that third parties
know the discipline of that partnership.
In case of unregistered General Partnership (SNC) is treated as an Informal/Simple Partnership.
Exceptions to the principle of freedom of form:
1. The act of incorporation of an SS must be in written whenever the partners confer a real estate or
beneficial real estate rights on property for undefined period of time or for a period that goes over
2. In any other case the freedom of form is the principle to be followed.
Moreover, according to Italian case-law, a company similarly to any other contract is deemed to exist also if
there is evidence that the business is being run as corporation by its partners.
Società di Fatto:
If two or more individuals perform an economic activity in order to share the related profits, the Court
recognizes that a De Facto Partnership exists. But there is no agreement within them.
When two or more individuals who have never signed any agreement to form a Simple Partnership (nor
explicit or tacit) nor they consider themselves to be Partners (not even De Facto) behave in such a way to
make third parties believe, from their conduct, that they do constitute a company.
The partnership agreement can be amended – during the life of the partnership – only with the consent of
all shareholders, unless otherwise stated in the deed.
This is for the application of the Unanimity Principle that operates for the partnership, while as far as
concerned limited liability companies, the majority principle is generally applied.
Who can or cannot be a partner?
All persons and entities, physical and juridical now (after 2003 reform) can.
Contents of the agreement of Incorporation:
Art. 2295 c.c. about the General Partnership states that the deed must determine, mainly:
• Name of the partners
• Name of the partnership
• Partners with management and representation powers
• Seat of the partnership
• Object clause
• Consideration contributed by each partner
• Rules for profit-distribution and losses-bearing
• Duration of the partnership 16
Contributions – Consideration:
We know that by signing the partnership agreement, the partners commit to perform the Contribution or
Considerations determined by the contract itself.
They represent property or rights, originally brought into the partnership’s stock. They may be made:
• In cash
• In kind (including personal work and services)
Among the contributions in kind which may be transferred, there are also credits claimed by shareholders
toward third parties and for which a special rule applies: “the credit is not considered to be contributed for
its value, but for the value set in the partnership agreement”.
Contributions in kind:
In case of contributions in kind, they may be conferred:
• In Property:
o the ownership of the goods is transferred to the partnership.
• In Use:
o Partners preserves the ownership and the partnership only acquires the right to use them.
o The assets must be used exclusively within the company.
o For the achievement of the business goal.
o Partners may not exploit the contributed assets for purposes that fall outside the scope of
the Partnership, unless they have obtained the consent of all the other Partners.
This distinction is essential for the purpose of regulating losses or damages of the asset after the transfer:
✓ If the asset was transferred as a property, the risks of its deterioration is on the company and the
Partners will not suffer any consequence of the loss.
✓ If the asset was conferred in use, the risks associated to its deterioration will remain in the
shareholder, who will be liable for the loss or losses and could also be withdrawn from the
If the amount of the due contributions is not determined by the partnership contract, it is assumed that all
the partners are bound to contribute equally with their assets in order to achieve the aim and object of the
Simple Partnership, the specific economic activity that they agreed to carry out in common.
Participation to profit and losses:
In the Partnership, each member is entitled to collect the profits, in the degree established by the Deed of
Incorporation, after the approval of the financial statement, that is the one including the balance sheet and
income statements from which the profit of the year clearly emerge.
So, each member has the right to dividend (unless derogated), contrary to what happens in companies.
If nothing different is specified in the Deed of Incorporation, we have to apply the rule of equal proportion
for profits and losses participation: the percentage of participation in profits and losses is proportionate to
capital participation, so to the value of contributions.
And if the value of contributions is not specified in the contract, they are presumed to be an equal value for
However, the Deed of Incorporation may provide for a participation in profits and losses which is not
proportional to the contributions. 17
In the case of a member conferring services, his percentage of participation to profit and losses shall be
established in the Deed of Incorporation, if it is not, it must be set by the Judge.
When the Deed of Incorporation only determines the amount of the profit-sharing, it is assumed that the
Partner would participate in the losses within the same threshold.
Lastly, the Italian Law forbids – for all the companies – the “Leonine Pact” (=patto leonino) as specified in
Art. 2265 c.c. “the pact with which one or more partners are excluded from any participation to profits
and/or losses is void”.
In this regard, it must be pointed out that any other participation agreement conceived in such a way to
determine the substantial exclusion of one or more partners from the participation in profit or losses is to
be considered null and void, as well.
Liabilities in Simple Partnership:
In Simple Partnership, we have to distinguish between:
• Responsibility for company obligations toward Partnership’s creditors.
• Responsibility toward personal creditors of a Partner.
Here it’s of great importance to take into consideration the difference between legal personality/legal
Liability for company obligations and Partnership’s creditors:
• Partners are personally, jointly and severally responsible for the obligations of the Partnership,
without limitation with all their present and future assets (except for limited partners in Limited
Partnership – SAS).
• The new partners are considered as liable for all the partner’s obligations, even for those that arose
before their access into the partnership.
In Simple Partnership (SS) the rule is that: creditors can ask partners (even only one of them) for money
before they ask the partnership itself and creditors may satisfy themselves asking for payment either to
company or to a Partner.
There is an exception to this rule: The Partner to whom is asked the payment of the company’s debt is
allowed to invite the creditor to satisfy himself on the company’s assets, so he may obtain that the
partnership is sued before them, if he indicates liquid partnership’s assets upon which creditors may easily
satisfy their claims with the conversion into cash.
This is the general rule applicable to General partnership (if registered) where the partnership must be sued
before partners are asked for money. For this, we can say that General Partnership always enjoys a limited
benefit of excussion.
The Joint Liability of each Partner implies that third parties’ creditors may turn to one single member to
satisfy their entire credit, however the partner will subsequently have the right to recoup the paid amount
from the other partners.
The Personal Liability of each Partner does not end in case of death, resignation or transfer of his
participation, as far as all the obligations have arisen before the dissolution of the business relationship. On
the other hand, for the obligations undertaken after the termination of the contract, only the actual
Partners will be liable. In any case, in order to be enforceable against third parties, the dissolution of the
Simple Company relationship must be made public through any suitable means.
Personal Creditors of a Partner:
In Simple partnership, as long as the Partnership exists, the personal creditor of a Partner may exercise his
rights on the debtor’s profit, it means on the dividends destined to the partner. And if the personal debtor
assets are not sufficient to satisfy the Partner’s personal creditor credits, creditors may require the
partnership to realize the debtor’s share in the partnership, the liquidation of the Partners’ s quota.
This represents a case of exclusion of the Partner from the Partnership. In this case, the Partner’s quota
must be liquidated within three months from the request.
Partnership Administration and Management Powers:
First, we have to distinguish between:
• Management Power: who takes decisions inside the partnership (deals with deciding)
• Power to bind the partnership to third parties: who is able to put into force, with third parties,
what the partnership decided internally (deals with signing)
These powers are not the same, for instance it makes sense that first all managers have to agree in order to
take certain decision in the partnership’s name (e.g. contracts with suppliers) and secondly, after the
decision has been taken unanimously, only one managers actually signs the documents containing the said
As a general rule, unless otherwise specified in the Deed of Incorporation, all the Partners are also
considered directors of the company.
Nevertheless, it is possible to provide for the delegation of the management only to some of the Partners
or even to only one.
In any case, only the partners of the Partnership may carry the role of director.
If the administration of the Simple Company is held by two or more partners, two different types of
managerial structures can be endorsed:
• Disjunctive Administration
o Each manager can act alone;
o Each manager is authorized to administer the company by himself and to carry out any act
related to the company without previously consult the other stakeholders;
o However, the total freedom of action meets a mitigation called right of opposition where
managers can oppose an operation before another manager undertakes it: decision is than
left to partners (including those who are not directors), that decide with a majority voting,
determined by the percentage in profit-sharing;
• Conjunctive Administration
o Managers need to act together and the assent of all of them is required for the approval of
each management act (every decision is taken unanimously or with majority vote);
o This model is subject to mitigation as well: every single director can enact a disjoint
administrative action whenever there is an urgent need to operate in order to prevent any
sort of risks to the company;
It’s possible that the Partners may choose an administration organized according to a combination of the
two models: in effect, it’s admissible a clause in the contract of incorporation establishing that for act of
extraordinary administration the conjunctive model applies, while for those of ordinary administration the
disjunctive system applies. 19
Finally, the default rule is:
• If the deed says nothing: disjunctive;
• If the deed says conjunctive: unanimous, unless otherwise said;
• The deed can derogate in any possible way
Who can be manager in a partnership?
Only partners can be managers in the partnership: there is the un-splittable bond between:
• Unlimited liability
• Power to manage
So, the general default rule is that all partners are also managers, unless otherwise stated by the deed.
If a partner is not a manager, he has penetrating control powers, like:
• the right to ask and receive pertinent information from managers;
• the freedom to consult all books and records.
Usually directors may be appointed:
➢ in the shareholders agreement: in this first case, a director can be removed from his office before
his mandate expires only if a justified reason exists;
➢ in a separate document with the unanimous consent of all partners; it is possible to remove the
administrator “ad nutum”, that means at any time and without any valid justification;
But if there is a justified reason any shareholder has the right to go in front of the court asking for the
director’s dismissal, even if there not unanimous agreement of all partners in this regard.
Liability of Directors:
They are jointly and severally liable to the company for any breach of the obligations set by law and by the
contract of incorporation and also whenever they have caused a damage to the company itself.
The joint principle applies for the disjunctive administration, as well.
However, the liability does not encompass the administrators who demonstrate they are not guilty for
gross negligence or intentional wrongdoing.
Art. 2252 c.c.: “The partnership contract can be modified only with the consensus of all the partners, unless
The ratio is:
➢ unlimited liability;
➢ these are the rules that dictate how the game is played, it makes sense that they are not changed
➢ in partnerships there is not a good protection of the right to exit.
They are based on:
• reason of fairness (juridical)
• the investment risk would change (economical)
7 mesi fa
I contenuti di questa pagina costituiscono rielaborazioni personali del Publisher Friz28 di informazioni apprese con la frequenza delle lezioni di Diritto commerciale e studio autonomo di eventuali libri di riferimento in preparazione dell'esame finale o della tesi. Non devono intendersi come materiale ufficiale dell'università Torino - Unito o del prof Veronese Barbara.
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