solution

spective creditors of each house must first be satisfied. After liquidation and division, in the want of any stipulation on the subject in deed of partnership, all books and papers are deposited with one of the partners nominated by a majority of votes, and by lot in case of difference of opinion, to be always within reach of the other partners or their heirs in case of need. They will remain with such partner for the whole time prescribed by law for the preservation of books (a).

Causes of disSpain.-Partnership is dissolved by the expiration of the time or the attainment of the object for which it was constituted. By the entire loss of the capital. By the death of one of the partners, unless the deed provides for its continuation with his representative. By the insolvency of the partnership or of one of its partners. By the will of one of the partners when no time or object was specified, and by lunacy or other causes incapacitating one of the partners. Partnerships by shares are only dissolved by the expiration of the term, the attainment of the object, or the loss of the entire capital. A partnership is not compelled to continue after the expiration of the term. If the partners wish to continue they must have a new deed with the same formalities as the first. In a partnership for an unlimited time a dissolution cannot take place at the request of one partner without the consent of the other. The act of dissolution must be registered in the commercial register of the province. Unless otherwise provided by the deed, the managers of the partnership must act as liquidators for the winding up of the concern. But, if the partners wish it, two or more extra liquidators may be nominated by the majority of votes. The managers must within fifteen days of the dissolution draw up an inventory and balance-sheet. The division of the partnership fund may be made either by the liquidators or at a meeting of partners. If the partners object to the division, they must notify the same within fifteen days. No partner can demand any share of the partnership fund till all the debts are paid. Partners who have lent money to the partnership must be paid first, the same as creditors. The private property of the partners not invested in the partnership can only be attached for joint obligations after the partnership funds are exhausted (b).

(a) Portuguese Code, $$ 693-747.

(b) Spanish Code, $$ 329-352.

CHAPTER IV.

COMMANDITE PARTNERSHIPS.

TORY

As already stated, the English law does not provide for the INTRODUCformation of partnerships consisting of partners, some with a OBSERVAlimited, and some with an unlimited liability, on the principle TIONS. of the commandite partnerships of France and other states. The English law allows limited liability to companies of seven members and upwards, but all the members have an equal liability whether limited or unlimited. Yet it is submitted that the combination of limited and unlimited liability is founded upon sound principles. It is just and reasonable that those who appear before the world as partners, who manage the affairs of the concern, and who, by their names or by their acts, either as directors or managers, whether of a private partnership or a public company, lead others to trust the firm, should be liable, to the full extent of their property, for any debts which that partnership or company may have contracted. But it seems also just and reasonable that a partner or shareholder who takes no part in the management, and whose name never appears, and who is not likely to deceive third parties in the belief that he is a partner in the concern, should be liable only for the amount he had invested in the concern. This union of limited and unlimited partners is the distinctive principle of commandite partnership, as contrasted with general partnerships called in French "Sociétés en nom collectif," and with companies with limited or unlimited liability in this country.

SECTION 1.

COMMANDITE IN PRIVATE PARTNERSHIPS.

FOREIGN LAWS.

commandite

France.-A partnership en commandite is contracted between What is a one or more partners called commandités responsible to the full partnership. extent of their property, and one or more partners called commanditaires or simple shareholders. Such a partnership is

Rights and

duties of the commanditaire.

carried on under a social firm which must necessarily consist of the names of one or more of the responsible partners. Where there are several responsible partners, whether one or more of them take part in the management, the partnership is a general one, or one in collective name as respects themselves, and en commandite as respects the shareholders. The name of the commanditaires partners cannot be included in the firm. The commanditaires cannot suffer losses beyond the fund which they have, or ought to have, invested in the partnership. They cannot assume any part in the management, nor be employed in the business of the partnership, even in virtue of a procuration. In case of infringement of this prohibition, the commanditaires become bound, to the full extent of their property, in the same manner as the general partners, for all the debts and engagements of the partnership. The deed of partnership en commandite must be published, and the extract must specify the number and amount of shares the partnership is to consist of; if such shares have been all taken up, or if they are still to be paid. But it is not necessary to publish the names of the commanditaires. The commanditaires are not simple lenders of money; they are partners, and they are subject to all the rights and duties which result from this contract. The principal condition of such partnerships is, that the commanditaires shall not, by their conduct or management, lead others to think that they are the general or responsible partners. But acts passed between the commanditaire and the commandité, such as any advice given, or counsel taken, among them on inspection of accounts, are not to be considered as unlawful. Although the name of the commanditaire cannot be included in the firm, it is not unlawful to use the name of the commandité, with the addition of " & Company." The firm "Jones & Company" indicates that Jones is not alone, but in partnership, but it does not exclude the possibility of its being a commandite partnership. Whilst the commandités have the right of dealing with third persons, without the consent of the commanditaires, they are still answerable to them for their acts. As regards their co-partners, they stand in the capacity of agents, as well as of partners. The restrictions imposed on the rights of the commanditaire secure to him the advantage of being only responsible for the loss of the funds which he has invested in the partnership. During the partner

ship, the creditors of the firm cannot proceed against them direct for the debts of the partnership. They can only act against the commandités. If they do not pay, they may seize the partnership funds; and if these be not sufficient, they may then cause the bankruptcy of the firm. And as soon as the bankruptcy has been declared, the creditors acquire the right against the commanditaires for any portion of their shares which they may not have yet paid up, the amount subscribed by the commanditaire forming part of the partnership estate liable to the partnership debts.

SECTION II.

COMMANDITE IN PUBLIC PARTNERSHIPS (a).

Partnerships en commandite cannot be divided into shares of less amount than 100 frs. (£4) when the capital does not exceed 100,000 frs. (£4000), and of less than 500 frs. (£20) when the capital exceeds that amount. Such partnerships cannot be definitively constituted until the whole of the partnership capital has been subscribed, and a fourth at least of the amount of the shares subscribed has been paid up by each shareholder. The shares of partnerships en commandite are not transferable till they are all taken up. The shareholders are, notwithstanding any stipulation to the contrary, responsible for the payment of the total amount of the shares subscribed by them. The shares are not negotiable till twofifths of the amount have been paid up. Should a partner pay the amount of his share otherwise than in cash, or stipulate to his own benefit any special advantages, the body of shareholders must cause such investment or such benefit to be ascertained and valued.

The partnership is not definitively constituted till after all the conditions have been agreed on at a general meeting. The votes are taken by the majority of shareholders present. The majority must consist of at least a fourth of the shareholders, representing a fourth of the partnership fund in cash. Those partners who have paid otherwise than in cash, or who have stipulated for themselves special advantages subject to the consent of the body of shareholders, have no deliberative voice. A council of inspec- Council of in

(a) Law of Partnerships by shares, 17 July, 1856.

spection.

Criminal Acts.

tion, composed of five shareholders at least, is established in each partnership en commandite by shares. This council is nominated by the general meeting of shareholders immediately after the definitive constitution of the partnership, and before any social operation is begun. It may be re-elected every five years at least but the first council can only be nominated for one year. All partnerships en commandite by shares constituted contrary to any one of the above regulations are null and void with regard to third persons; but this nullity cannot be pleaded by the partners against third persons. When the partnership is void, according to the preceding article, the members of the council of inspection, together with the managers, may be declared personally responsible for all the operations made after their nomination. The same personal responsibility may be pronounced against those partners who have paid their shares otherwise than in cash, or who have secured special advantages.

The members of the council of inspection must examine the books, money, effects, and capital of the firm, and make each year a report to the general meeting on the accounts and on the distribution of dividends made by the managers. The council of inspection may call a general meeting; and may also promote the dissolution of the partnership. Every member of the council of inspection is personally responsible with the managers in his person and property. 1st. When, knowingly, he has allowed great irregularities to be committed in the accounts, injurious to the partnership and to third persons. 2nd. When he has, with knowledge of facts, consented to the distribution of dividends not justified by true and regular accounts.

The issue of shares of a partnership constituted contrary to Arts. 1 and 2 of the present law is punished with imprisonment of eight days to six months, and with a fine of from 500 frs. to 10,000 frs., or with either of these penalties only. The same penalty will be awarded to the managers who should commence social operations before the council of inspection has entered into its functions.

The negotiation of shares or of coupons of shares of the value or form, contrary to the disposition of Arts. 1 and 2 of the present law, or for which the payment of two-fifths has not been made according to Art. 3, is punished with a fine of 500 frs. to 10,000 frs.