What is a General Partnership?

What is a General Partnership? | Izmir Commercial Lawyer | Mustafa Yolcu

What is a General Partnership?

A general partnership, unlike a limited liability or joint-stock company, can be defined as a type of company that does not have an independent legal personality or assets separate from its partners. The establishment of a general partnership requires the coming together of several individuals with the intention of forming a company. Since general partnerships are not considered commercial companies under the Turkish Commercial Code, they are regulated according to the relevant provisions of the Turkish Code of Obligations.

Turkish Code of Obligations – Article 620

“A general partnership agreement is a contract in which two or more persons undertake to combine their labor and assets to achieve a common purpose. If a partnership does not possess the distinguishing characteristics of partnerships regulated by law, it shall be considered a general partnership subject to the provisions of this section.”

Characteristics of a General Partnership

• Partnership Capital
  In a general partnership, each partner is obligated to contribute a share in the form of money, receivables, other goods, or labor.

• Land Joining
  All profits earned within the scope of a general partnership must be shared among them.

• Decision Making in Partnerships
  In a general partnership, decisions are made by unanimous vote of all partners, or, if the partnership agreement stipulates a majority vote, by a majority of the number of partners.

• Partnership Management
  Unless the management of the general partnership has been entrusted to one or more partners or to a third party by contract or agreement, all partners have the right to manage it.

• Non-compete clause
  Partners may not engage in any activities that hinder or harm the purpose of the partnership, either for their own benefit or the benefit of third parties.

• Expenses and Activities Performed by Partners
  Partners are responsible for the expenses and debts incurred by one partner for the general partnership. If a partner has contributed labor to the company even though they were not obligated to do so, they may demand compensation for this labor. A partner who lends money to the partnership as an advance may demand interest from the date the loan was given.

• Duty of Care
  Each partner is obligated to exercise the same level of effort and diligence in the partnership's affairs as they do in their own business.

• Removal or Limitation of Administrative Authority
  The management authority of a partner granted management authority through the partnership agreement cannot be restricted or revoked by the other partners without a justifiable reason.
  Even if the partnership agreement contains a clause stating that authority cannot be revoked, the management authority of each partner may be restricted if a justifiable reason exists.

• Review of General Partnership
  Even without management authority, each partner has the right to obtain information about the operation of the partnership, to examine its books and records, to take copies thereof, and to prepare a summary of its financial status.

Precedent Court Decisions

Court of Cassation, 3rd Civil Chamber, Case No. 2015/9468 E., Decision No. 2015/14079 K.

Article 620 of the Turkish Code of Obligations states:“A general partnership agreement is a contract in which two or more people undertake to combine their labor and assets to achieve a common goal.”The contractual element is clearly stated as follows:.
Partners unite around a contract to achieve a common goal. For a contract to be formed, the parties must express their mutual and congruent intentions. A general partnership is established to achieve a common purpose. For a common purpose to exist, the goal sought through the contract must be shared by all partners.
Article 620 of the Turkish Code of Obligations explicitly states that the element of "common purpose" is a fundamental element of the contract. It is not sufficient for the partners to simply come together to achieve a common purpose. Therefore, the partners must also commit to participating in the efforts to achieve this purpose and to cooperate and work together towards it, fulfilling their respective obligations in this regard. In other words, the partners are under an obligation to show equal effort and diligence in achieving the common purpose. The mere fact that the contract stipulates an obligation for partners to contribute capital does not automatically mean that the obligation to work together is also included. This element must be explicitly stated in the contract. (N. Barlas 38, OHŞ.117.sy)
In other words, For a relationship between the parties to be considered a partnership, it must include a contract, the parties involved in the contract, capital shares, common goals, and elements of cooperation.

Supreme Court 3rd Law Chamber E. 2016/2844 K. 2017/12266

A partner's request for their share of the capital in a general partnership also encompasses the dissolution and liquidation of the partnership. The partnership cannot be considered liquidated unless there is an agreement between the parties or a court decision. In other words, unless there is an agreement between the parties regarding their rights and obligations in the partnership, or this matter is determined by a court decision and liquidation is ordered, the general partnership should be considered to continue. The statute of limitations does not begin to apply to ordinary partnerships that have not been dissolved or liquidated.

Supreme Court 3rd Law Chamber E. 2011/10282 K. 2011/14972

The lawsuit concerns the dissolution of a general partnership, and applying the provisions of the Civil Code regarding the dissolution of partnerships to this case is incorrect. Considering the value of the lawsuit, the application of these provisions is not appropriate. To be heard in the Civil Court of First Instance The court should have dismissed the case on grounds of lack of jurisdiction, but instead, it incorrectly rendered a judgment on the merits of the case.

Supreme Court 12th Civil Chamber, Case No. 2013/8935, Decision No. 2013/17242

According to Articles 625 and 637 (Articles 525 and 533 of the old Code of Obligations) of the Turkish Code of Obligations No. 6098, a partner who is granted the right to manage the company has the authority to represent the company and the other partners. As stated in the justification for the article, the second paragraph of Article 637 of the Turkish Code of Obligations states that:, It has been stipulated that if one of the partners conducts a transaction with a third party on behalf of the partnership or all partners, the other partners shall only be creditors or debtors of that person in accordance with the provisions relating to representation.

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