A professional partnership is a partnership created by partners for the purpose of pursuing a profession. Only individuals qualified to pursue professions defined in legal acts may become partners in the professional partnership.
The articles of association of a professional partnership must be in writing.
The professional partnership is created upon its registration in the register of entrepreneurs held in the National Court Register.
Capital requirements of professional partnership
The contributions may be made by partners in cash or in kind; the in-kind contributions may include provision of services or work for the partnership. There are no requirements as to the minimum level of contributions. The capital share of the partner equals the value of the contribution effectively made. The partner has neither the right nor the obligation to increase the agreed contribution.
Management of professional partnership
The articles of association of a professional partnership may provide that the management of the affairs and the representation of the partnership are entrusted to the management board. In such a case the management board operates in accordance with the rules applicable to the operation of the management board of a limited liability company.
If there is no management board, as a rule, each partner has the right and obligation to manage the affairs of the partnership and the right to represent the partnership individually. The partner may not receive remuneration for managing the affairs of the partnership.
As a rule, each partner may, without a prior resolution of the partners, manage the affairs within the ordinary business of the partnership. However, where prior to conclusion of such a matter at least one of the remaining partners objects to the conclusion of the matter, a prior resolution of the partners is required.. Where in matters which fall within the ordinary course of business of the partnership a resolution of the partners is required, the unanimity of all partners who have the right to manage the affairs of the partnership is required. In matters which fall outside of the ordinary course of business of the partnership, the consent of all partners is required, including those who have been excluded from managing the affairs of the partnership.
Transfer of the rights and obligations of a partner in professional partnership
The rights and obligations of a partner in a partnership may be transferred to another person only where the articles of association so provide. As a rule, all rights and obligations of a partner in a partnership may be transferred to another person only upon the written consent of all of the remaining partners. In the case where all rights and obligations of a partner are transferred to another person, the withdrawing partner and the acceding partner are jointly and severally liable for the obligations of the withdrawing partner arising in connection with his membership of the partnership and for the obligations of the partnership.
Liability for the obligations of professional partnership
A partner is not be liable for the obligations of the partnership which arise in connection with the pursuit by the remaining partners of the profession in the partnership, or for the obligations of the partnership which arise as a result of acts or omissions of persons employed by the partnership under an employment contract or another legal relationship who have been guided by other partners in the provision of services connected with the objects of the partnership. For all other obligations of the partnership a partner is liable without limitation with all his assets. However, his liability is subsidiary to the liability of the partnership, i.e. a creditor of the partnership may conduct execution from the partner’s assets only where execution from the assets of the partnership has proved ineffective.
Share in profits and participation in losses of professional partnership
As a rule, irrespective of the type and value of his contribution, each partner is entitled to an equal share in the profits and participates in the losses in the same proportion, with reservation, however, that he does not participates in the losses which arise in connection with the pursuit by the remaining partners of the profession in the partnership. . If, as a result of a loss sustained by the partnership, the capital share of the partner has diminished, the profits are first of all used to supplement the share of the partner.
A partner may request that the entire profits be divided and distributed at the end of each financial year, except if the partnership sustained loss. Moreover, a partner may demand every year a 5% interest on that partner's capital share, even if the partnership has sustained a loss.
Each partner has a right to personally inquire about the state of the assets and business of the partnership and to personally review the books and documents of the partnership.
Liquidation of professional partnership
The liquidation of a professional partnership is conducted in the event of its dissolution, unless the partners agree on another mode of bringing the operations of the partnership to an end.
The reasons for dissolving the professional partnership are the following:1/ the reasons set out in the articles of association, 2/ a unanimous resolution of all partners to this effect, 3/ a declaration of bankruptcy of the partnership, 4/ the death of the partner or declaration of his bankruptcy, 5/ termination of the partnership by a partner or a creditor of a partner, 6/ a loss by all partners of the right to pursue the profession, 7/ a final court decision.
As a rule, if the partnership has been formed for an undefined time, a partner may terminate the partnership six months before the end of the financial year. The creditor may terminate the partnership six months before the end of the financial year, even if the partnership has been formed for a defined time, provided that during the previous six months ineffective execution of the movables of the partner has been conducted by the partner's creditor and the creditor under an execution title received an attachment order concerning the claims of the partner arising in the event of the partner's withdrawal or dissolution of the partnership.
The liquidators draw up a balance sheet as at the date of the opening and as at the date of closing liquidation. The assets of the partnership are used first of all to pay the obligations of the partnership the remaining assets are divided among the partners in accordance with the provisions of the articles of association and if the articles of association do not include appropriate provisions, the shares are repaid to the partners. Any surplus is divided among the partners in the proportion in which they participate in the profit.
If the assets of the partnership are not sufficient for repayment of the shares and debts, the shortfall is divided among the partners in accordance with the provisions of the articles of association, and if there are no such provisions, in the same proportion as that in which the partners participate in the loss. In the case of the insolvency of one of the partners, the share of that partner in the shortfall is divided among the remaining partners in the same proportion.
If bankruptcy of the partnership is declared, the partnership is dissolved following the bankruptcy procedure.