Comparative study: Limited liability company versus unlimited liability company

• Author: Silvia Cristea
• Position: Law Department, Bucharest University of Economic Studies, Romania
• Pages: 70-78

COMPARATIVE STUDY: LIMITED LIABILITY COMPANY VERSUS UNLIMITED

LIABILITY COMPANY

Professor Silvia CRISTEA

1, PhD.

Abstract

Our goal is to differentiate between the legal r egime of the limited partnership a nd that of the unlimited company,

by dr awing a comparison between civil and special settlement in terms of the following criteria : definition,

contributions, capital divisions, the Articles of Association, r egistration, man agement control, withdra wal/exclusion of

a par tner, dissolution/ liquidation. The opinions expressed in the chapter devoted to conclusions are relevant to

Romanian and F rench Law as well.

Keywords: limited par tnership, unlimited company, Romanian Civil Code, the Law no.31/1990 concerning commercial

comopanies.

JEL Classification: K22

1. Introductory considerations (notes)

A comparison of the texts that regulate the two forms of partnership would seemingly reveal

a perfect overlapping of the limited partnership and the unlimited company! It is not so in our

opinion, and this is the reasons underlying the present investigation. The analysis is grounded on the

rule introduced by the new Civil Code (art. 1887-1888), according to which a limited partnership is

common law in relation to companies and, therefore, commercial companies as well! Among

commercial companies, the one closest to a civil society, regulated by the previous Civil Code, was

the unlimited company, so I wanted to bring forth the differences between them, to better

understand what the lawmaker intended and, primarily, to analyse the theoretical and practical

consequences of these differences.

2. Definition

The limited partnership is a contract under which two or more persons pledge to cooperate

in carrying out an activity and to contribute to it through an input of capital, assets, specific

knowledge or services, with a view to sharing benefits or using the savings resulting from it.

The unlimited company is the company set up through the association, based on full

confidence, of two or more persons who pool together certain assets in order to carry on a

commercial activity with a view to sharing the benefits resulting from it, and in which the partners

have an unlimited, solidary and subsidiary liability for company shares.

We can notice that there are no significant differences in terms of definition, but only insofar

as the legal personality is concerned. When the limited partnership is a legal entity, the partners can

have a limited liability. When it is not a legal entity, there’s an unlimited liability. In case of an

unlimited company, there is always an unlimited liability and the company becomes a legal entity

from the moment of its very registration. The type of liability corresponds to the personal nature of

the company, is given by the confidence the partners have in one another, which makes it be

considered (in terms of doctrine) a closed company.

As far as the goals are concerned, the similarity consists in the the fact that they both have a

lucrative purpose. The limited partnership, however, provides the opportunity for the partners to

take advantage of the savings resulting, for example, from building a rest house for company

employees only, whereas the lucrative purpose of a commercial company always stems from

making and sharing profit among partners.

1 Silvia Cristea - Law Department, Bucharest University of Economic Studies, Romania, silvia_drept@yahoo.com