Commercial legal persons
26 April, 2012

(Continued)
Judge  Lasha  Kalandadze continues answering our questions on the facets, features, and specificities of legal persons in civil law.

NBR – The general term ‘Legal Person’ as such has become quite clear thanks to your comprehensive commentary on it. Would you please talk to us now about the Georgian commercial legal persons more specifically?
L.K. – According to our legislature in force, five types of commercial legal persons operate in Georgia. They are: Limited Liability Company, Joint Stock Company, General Partnership Company, Limited Partnership Company, and Cooperative. Let me emphasize here that the Georgian law on Entrepreneurship envisages functioning of a Sole Proprietorship as well, which is a business entity, but not a legal person, owned and run by one person who is held liable for the behavior and obligations of a company, but at the same time, is entitled to use and share the benefits of a company accordingly.
NBR – What could you say about the liabilities of partners in the Limited Liability Company and the Joint Stock Company? Would they be any different?
L.K. – In compliance with Georgian functioning law, the Limited Liability Company and the Joint Stock Company may be formed by one or more persons – natural or legal persons. And then the liability of both companies’ partners is determined only by the amount of contribution made to the company’s capital.
NBR – That explained, will you elucidate on the difference between the General Partnership Company and the Limited Partnership Company? All this terms and titles are so utterly confusing for a rank-and-file person!
L.K. – I can understand that! The General Partnership Company is established by at least two members who are known as general partners and hold full liability for the company’s obligations. Each general partner has the right to claim profit and to interfere in the company’s management. This means that every partner has authority to make decisions about the way the business is being run as well as the authority to make legally binding decisions. Unless the partners have a partnership agreement, each partner will have equal authority. Each partner in a general partnership is also ‘jointly and severably’ liable for debts of the business. Joint and severable liability means that each partner is equally liable for the debts of the business, but each is also totally liable. So if a creditor cannot get what one or more of the partners owe him/her, he/she can collect it from another partner, even if that partner has already paid his share of the total debt. As for the limited partnership company, it has both limited and general partners. A limited partner is one who does not have total responsibility for the debts of the partnership. The utmost a limited partner can lose is his investment in the business. The trade off for this limited liability is a lack of management control: A limited partner does not have the authority to run the business. A limited partnership must have at least one general partner. The general partner or partners are responsible for running the business and they are also subject to unlimited personal liability for the debts of the business.
NBR – What can you say about cooperative?
L.K. – A cooperative is a private business organization that is owned and controlled by the people who use its products, supplies or services. It is owned, controlled, and operated by a group of users for their own benefit. Each member contributes equity capital, and shares in the control of the firm on the basis of one-member, one-vote principle (and not in proportion to his or her equity contribution). Finely, it should be noted that entrepreneurs of any nationality have equal opportunity to chose from various forms of business entities in Georgia, even though the most common company types are the Georgian Limited Liability Company and Joint Stock Company. It is quite well known today that in Georgia there are appropriate enough and favorable conditions for initiating business endeavor, freely work on the improvement of  those conditions and let business activities flourish as much as one may think expeditious, reaching success in every possible way without any artificial obstacles to stumble over in the process.