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Partnership Contract: Essential Elements for its execution

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A contract, in general terms, is a phenomenon involving the conjunction of two or more wills (as a rule).

They come from capable subjects of law, who decide on the realization of a common interest, of a concrete legal operation.

Partnership agreement

What is a partnership contract? In the specific case of study, the partnership contract is an agreement, according to which one or more persons are obliged to make a contribution in money, work or other goods appreciable in money, in order to share among themselves the profits obtained in the company or social activity, the latter paraphrasing the definition used by the Code of Commerce in conjunction with Law 1258 of 2008.

Partnership agreement in Colombia

This contract has far-reaching legal effects, since it is an instrument that makes it possible to create an additional and new legal entity, a legal person capable of exercising rights and obligations on its own account. Thus, the partnership contract is the key that creates the legal fiction, which is extremely useful for the exercise of the market economy that we have been witnessing in Colombia since the political constitution of 1991.

Elements of the partnership contract

The corporate contract is materialized through a document known as the “articles of incorporation” or “corporate bylaws”. In this document, all aspects relevant to the company are decided, among which the following are highlighted:

Company name

 It can be a name or a corporate name, which serve to give identity to the new legal entity that will be created.

The domicile

Place where the principal place of business of the legal entity is to be established.

The corporate purpose

This will be the mission for which the company is created, it is the business niche to which the new company will be dedicated, this description will be the field of action of this one, legally it marks the limits of the capacity of this legal fiction.

Capital stock

The shareholders’ investment promise is the amount that they decide to put at risk in the business venture; this is usually classified as authorized, subscribed and paid-in capital, which in turn can be divided into interests, quotas or shares (the latter are the most common and can be of various types, namely, common, preferred and other types).

Corporate bodies and their functioning

 All the corporate bodies that will carry out the administration of the company’s corporate purposes must be defined, among which are the shareholders’ meetings, boards of directors, legal representatives and others.

Others

Finally, there are a great variety of additional natural and accidental clauses, such as: the right of preference, the legal reserve, the form of conflict resolution, among others, this depends to a great extent on the type of company chosen, in any case, these rules are valuable and important, so it will be relevant that a lawyer assists in the selection of these and other possibilities.

Types of companies in Colombia

In our legislation there are several types of companies, being today, two types the most important, the simplified joint stock companies and the corporations, being the first the newest and at the same time the most used and important in the Colombian market.

These two types of companies are limited liability companies and serve to carry out a wide variety of businesses. However, it is important to point out that simplified joint stock companies are much more flexible and lighter, optimal for start-up companies. Corporations are the only ones currently authorized to participate in the Colombian stock exchange, hence they are suitable for larger and consolidated companies.

The partnership contract is a complex contract, extremely important socially and economically speaking, for this reason, it is transcendental that it is drafted by expert lawyers in corporate matters, to ensure that the rules of the game established between the partners, allow them to maintain lasting and successful relationships.

Cuadro Legal, your trustworthy lawyers in Medellín

Author: Santiago Pinzon Sosa

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