Legal Validity of Partnership Incorporation and Liability

Legal Analysis of the Margarita SC Partnership

Assumption 1

Antonio and Maria have formed a partnership called "Margarita SC" for the purchase and sale of clothing. The social capital is 120,000 €, to be divided 30% for Antonio and 70% for Maria. They have attached the articles of incorporation of the SC before a notary and entered them into the Commercial Register, although in this script, the object is listed as the sale of used cars. It contains the head offices, and the 120,000 € has not yet been spent by the two partners.

Legal Questions and Analysis

1. Is the instrument of incorporation valid?

It is not valid.

• Attorney/Address: There is a missing address.
• Company Name: The name of a company to be a partnership must be formed by the names of all partners, or one of them followed by "and company" or an abbreviation of the partners. The current company name is not valid, nor would it be for a limited partnership.
• Social Capital: The social capital is valid regarding the contribution, since nothing is said about the quantity. In principle, the Commercial Code does not require a minimum or maximum capital to form a partnership. However, in capital partnerships, it must be paid in full. The registrar must have proof (documentary evidence) that the capital has been fully disbursed. If not, the trade register would reject it.

Note: If the name suggests that it is dedicated to a specific activity, it cannot work elsewhere.

2. Can this society function with these characteristics?

The society can function, but it would be an unlawful society and therefore has no legal personality. It must abide by the rules of irregular societies. The acts that the society performs will be held valid; it can act. However, an activity in fact that lacks a legal configuration equals such a society. In these operations, all partners are jointly and severally liable.

3. Who assumes economic management of the company?

The writing has to specify who manages the company. If nothing is said, all partners assume management. There always has to be at least one partner managing. You cannot entrust the management to a third party who is not a partner, although the partner responsible for managing may obtain the assistance of a third party (for example, a private agency for accounting) for such management.

4. Does the Registrar have liability for deed defects?

The Commercial Register must ensure that all required data is provided. If it has been registered and nothing happens, there is no liability (Note/Attention). Liability arises when such registration results in damage to third parties. This liability is not settled by the Code of Commerce but by law. A crime is committed by recklessness when the registrar has not checked the information they should have checked.