Lessons on; Commercial Law & Companies Professor Reda Abdelsalam

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1. Definition:

Commercial law is defined as "the legal rules and principles bearing on commercial transactions and business organizations". This area of the law is often times governed by the Uniform Commercial Code.

2. Commercial Litigation:

The area of law that provides assistance in the preparation and presentation of a lawsuit or other resort to the courts to determine a legal question or matter in "commercial" situations.

Commercial law involves the legal rules and principles bearing on commercial transactions and business organizations. This area of the law is often times governed by the Uniform Commercial Code.

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3. Commercial Arbitration: An alternative method of resolving commercial disputes

wherein both parties agree to abide by the decision of an arbitrator who attempts to facilitate a settlement. When the parties fail to reach an agreement, they are free to hammer each other with a lawsuit.

4. Corporate Law:

The area of law focusing on the legal methods of obtaining an official charter or articles of incorporation from the state for an organization, which may be a profit-making business, a professional business such as a law office or medical office or a non-profit entity which operates for charitable, social, religious, civic or other public service purposes and the legal ramifications of such an organization.

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5. Bankruptcy: The formal condition of an insolvent person being

declared bankrupt under law. The legal effect is to divert most of the debtor's assets and debts to the administration of a third person, sometimes called a "trustee in bankruptcy".

Bankruptcy forces the debtor into a statutory period

during which his or her commercial and financial affairs are administered under the strict supervision of the trustee. Bankruptcy usually involves the removal of several special legal rights such as the right to sit on a board of directors or, for some professions that form part of the justice system, to practice, such as lawyers or judges.

Commercial organizations usually add other non-legal

burdens upon bankrupts such as the refusal of credit. The duration of "bankruptcy" status varies from state to state but it does have the benefit of erasing most debts even if they were not satisfied by the sale of the debtor's assets.

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6. Persons recognized by The Commercial law:

Natural Persons - Corporations Sole, e.g. Corporations

Aggregate - Statutory Corporations - Limited Companies.

7. Bodies which are Not Legal Persons Unincorporated Associations: Club - Association –

Partnership.

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B. Company's Definition;

The commercial law code does not include a specific definition for the company, however, a definition had been mentioned in article 505 of the civil law code.

Accordingly, " A company is a contract according

to which two persons or more got obliged to participate in a financial project through a specific share of money or work and to share the project outcome whether it was profits or loses".

The Bahraini legislator has considered this article (505) " The company is a contract by which two persons or more undertake to participate in a profit-making economic project, with each of them offering a share in the form of money or work to divide the yield of this project, whether profit or loss".

According to this definition, the company is formed

through partners shares and in turns, a new person

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has been created " the company is going to be a legal person". The legal person (The company) is going to have it is own personality and liability.

Also, according to the definition, the company is

created through a contract between two persons or more. However, companies creating contract differ from other forms of contracts.

According to any other sort of contract, there are

conflicting interests, therefore, there should be an agreement to end this conflict of interest. In contrast, company contract is signed between two persons or more for one goal, they share the interest of making profits.

There is another difference between company's

contact and other form of contracts, whish is related the legislator intervention through authoritative rules, particularly in the incorporation companies.

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Companies' Partners are not fully free to put any conditions as there is a public interest that should be considered. However, the principle of dominion volition is more exist in personal companies.

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C. Civil and Commercial Companies;

It is meant by civil company "any collective

activities or project seeking profits through some civil activities".

For example Lawyer, accountants, and consultants

companies are samples of civil companies. They are companies based on civil free professions, as the company did not take a commercial company's form.

In contrast, commercial company is the collective

project aiming to gather profits, since it has taken one of the forms mentioned in the company law, whatever its goal. Companies law has mentioned many forms for commercial companies as solidarity company, limited liability and the incorporation companies.

According to the above distinction, if two lawyers

agreed to create a solidarity company, this company

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is going to be considered by law a commercial company according to the form criterion. Hence, all commercial rules are going to be applied on the two lawyers, as they are going to be traders although they are practicing a civil profession.

Therefore, there should be a discipline organizing

civil professions companies' activities.

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* how important is the distinction between civil and commercial companies?

1. According to the distinction between commercial

and civil companies, there should be a distinction between trader and non-trader. The commercial company has to be recorded or registered in the commercial enrolment and to hold a commercial copybook. Also, only the commercial companies are going to face the declaration of bankruptcy in case of inability of paying its commercial debts.

2. The responsibility for debts; the partner in the

civil company is responsible to pay the companies debts from his own properties according to his share on the company's loses. In contrast, commercial companies' partner liability depend on his description or his position. For example, there is a collective responsibility for partners of the solidarity

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company, while there is a limited liability for a partner in the limited liability company.

3. Others' cases against partners of commercial

companies are not permitted after 5 years of company's termination, while it is 10 years for others' cases against partners of civil companies.

4. Commercial companies forms had been

restrictly mentioned in the commercial law code. Accordingly the company will not hold the commercial company's description if it is not taking one of the specified forms. While there is no specified form for civil companies.

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D. Commercial Companies Forms or

Classification;

Preface; The commercial Company has to take one of the forms that are strictly mentioned in the commercial law code, otherwise is going to be null or illegal Companies forms are;

1. Collective companies; 2. Shares incorporations' companies; 3. Limited liability companies; 4. A limited partnership by shares; 5. The Hidden Companies "Mohassa Companies".

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Companies General Rules

Preface; We are going to discuss the main pillars of a company's contract. As discussed earlier, we have said that a company is created through a contract, but what are the main pillars of that contract.

Since it is a contract like any other contract, it should be based on consent, capability, object and a legitimate cause or goal.

However, we have said that the company's

contact is distinct, so there should be more preconditions for a contract creating a company.

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But what is the impact of absence of any of the above condition or pillars?

Accordingly, we are going to start with the

contract general positive pillars starting with the consent.

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Contract General Positive Pillars

(1) The Consent;

For the establishment of a company, every

partner should agree and accept the joining of that company. This consent should cover all the conditions of the contract. These conditions could be in a form of the goal, capital, partner share, and the companies management…etc

The consent should not be defected. If it was

found that there is a defect, the contract is going to be invalided according to a request from the concerned partner.

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(2) The Capability; A person has to be capable to conduct a legal acts, as he is going to transfer his share to the company and he is going to get obliged by its debts. Therefore, the partner should be an adult, however, a person who is 18th or more could get a permission from the court to conduct a trade. (3) The Object or the Location; The contract object is the joint venture that partners are going to create. It should be there or possible and it should be legal, otherwise, the company is going to be invalid.

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(4) The Cause or the Goal; Any contract should have a cause, and the cause in the contract establishing company is the partners desire to make profits and share it.

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Special Positive Pillars

Preface;

As we have mentioned earlier, the contract establishing company is distinguished. Therefore, besides the general pillars the following specific conditions should exist to be able to talk about a company's contact; (1) There should be two partners or more; It is presumed that the companies contract is between two partners or more. Also, the legal or incorporeal person could be a partner in a company with other natural or legal persons.

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According to the Egyptian Commercial Law, the minimum partners number should not be lest than two whether it is going to be a commercial or civil company. In contrast, there is no ceiling for the number of partners, except for the company with limited liability as they should not be more than 50 partners. (2) Providing Shares; Any company should have a capital, and this capital is formed by partners contribution through shares. It is the mean for a company to achieve its goal. A company's capital is a guarantee for the company's creditors. Therefore it should not be distributed among company's partners, that is called " Principle of fixed capital". Shares could be in three forms; a sum of money, a piece of land or machine and finally a work. This

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share is a precondition for a person to be considered a partner sharing the profits. It is not required for the shares to be equal on its values.

(A) The Monetary Share;

Mostly, partner's share is in a monetary form to be paid on a specific date. (B) Share in a form of Land;

It is possible for a partner to have a share through a material contribution, as providing a land to be a base for the factory or machines , cars, trademarks…etc. However, this material contribution should be evaluated to be able to know his real contribution and in turns his share in the profits and the liability..etc.

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(C) A share in a form of Work;

Finally, a partner share cold be in a form of work to be done for the company. The partner here has no real or financial contribution, however he is going to be a partner by work, which should be useful as technical expertise on factories management. (3) Sharing Profits and Loses; If the company was created for gathering profits, loses is a possible thing and should be expected by partners. Here, The company's contract is distinguished and differ from any other form of contracts.

Since it is not expected to have a partner has no share in the capital, hence it is not expected to have a partner has no share in the loses. Any provision

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forgives a partner from sharing the loses is going to make the whole contract invalid. (A) Sharing Profits;

All partners should participate in sharing the

profits and it is not allowed to exclude any partner from sharing the profits. Partners are going to share the profits according to the shares mentioned in contract creating the company. If there is no mention to the distribution of profits, then it is going to be distributed equally. (B) Sharing the Loses;

As mentioned, no partner will be excluded from

sharing the loses. However it is allowed for a partner to guarantee another partner concerning his share in the loses.

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The burden of loses is going to be distributed among partners according the conditions mentioned the company's contract, otherwise, if there is no mention, loses are going to be distributed equally among partners. (4) Participation Intent; Participation Intent is one of the specific pillars

of a company establishing contract. In fact, there is no mention on article 505 (Civil

Law) to the issue of Intention, however, the intention is a presumed condition that encouraged the partners to sign the contract, to provide the shares and to participate in the expected loses.

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Section Three Conditions related to the Formality of Company's Contract Preface; The existence of the objective pillars is not enough for a valid contract. Besides these positive conditions there should be some formal conditions as prescribed by the old commercial law. One might ask, the commercial activities requires some kind of flexibility, so why there should be a formality as the written contract or a registration?!!

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We are going to answer this question after discussing the two main formal conditions as follows;

1. The contract should be

in a written form;

This condition was not required under the old

Civil Law, however both the new commercial law and the new civil law have indicated clearly that the contract establishing company should be in a written form.

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Hence, if the company's contract was not written, it going to be invalided even if the other conditions (Pillars exist).

The writing is essential whether it is a

commercial or a civil company, whatever the value of the contract.

Therefore, writing became a pillar of the

contract not mere a mean of proving it.

The legislator did not stipulate any specific data to be mentioned in the written contract, however, the contract should contains all the matters and conditions approved by the partners.

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However, according to article No. 15 ( Companies' law No. 159 / 1981), for the incorporated companies, companies of partnership by share and companies with limited liability, the contract creating it should include the data prescribed by the executive decree.

Accordingly, the writing is required for all forms

of companies except the Mohasa commercial Company (or the hidden Company), as it could be proved by all means of evidence.

But the contract creating civil Mohasa Company

should be written otherwise the contract is going to be invalided.

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It is the time now to answer our previous question;

why the contract

establishing company should be in a written form?

In fact, according to that contract (the contract

creating company) a new person is going to be borne (The Legal Person).

This legal person has an independent personality

from the personality of the partners.

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It is going to have relationships with others. In the absence of a written contract, how could the others new all the information about the company that they are going to deal with?

How could they protect their rights and sue the

company for its obligations if there is no written contract?

For all the above reasons, the existence of a

written contract will facilitate the transactions and will reduce the conflict as it is easy to be proved.

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2. Reporting or registering

the contract;

Basically, the company (whether it was a civil or a commercial) should gain the legal personality as soon as it is evolved, however this personality has no legitimacy on other except it was registered or reported in the reportation or registration body.

This condition is applied on all forms of

companies except the three mentioned earlier plus the public sector companies, as it should be registered in commercial record to gain the legal personality (Article No. 22/ companies law).

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Reportation should be considered for all the

changes or modification on the contract creating the company to be known for others who are dealing with that company.

Registration procedures differ from one

company to another according to the company's form as explained in details later.

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Section Four; The impact of the absence of

any of the company's contract pillars.

Preface; The following pages contains an attempt to answer the following questions;

what is the impact of the absence of one of the previously presented conditions (Pillars) on company's contract?

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Is it going to be invalided?

What are the cases of invalidation?

But what about others' rights, those who dealt with the company without knowing that it was an invalided contract?

What did the legislator or the judiciary do to

save others rights?

The judiciary has considered what is called " Actual Company's Theory" but what are the conditions for this theory? And does it has any limits or it could be applied on all invalidation sorts?

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1. The invalidation;

The contract establishing the company is going to be considered if all the general, objective and formal pillars were exist. The penalty for the absence of any of the

previously mentioned condition is the invalidation of contract.

2. Invalidation Sorts; Generally, and according to the general rules, the invalidation could be exclusive or relative. However, the legislator has added another sort of invalidation closely related to a company's contract, which is related to the legal form of the company.

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2/1. The exclusive invalidation;

A company's contract is going to exclusively invalided if the cause or the object was illegal.

According to article No. 5 (Companies law) the contract will be invalided if the intention was to trade in drugs or prohibited goods or managing houses for prostitutions.

The contract is going to be exclusively invalided also if there was no consent, as the case of the incapable person.

The contract is going to be exclusively invalided also if any of the contract positive condition was absent or did not exist, as if there was a condition of the lion share or in the absence of participation intention. Here, the company's is going to totally invalided.

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What is the impact of the invalidation decision?

The contract is going to be considered as if it did not exist for the whole partners.

Accordingly, all shares should be returned to the partners.

If the company has had some activities and gained some profits or loses, in this case, we have to distinguish between two cases;

A. If these profits or loses were distributed before the invalidation decision, there will be no changes and partners do not have to return what they have got of profits.

B. If the profits or loses were not distributed until the invalidation decision , then, it will be

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distributed not according to the contract conditions as it is invalided, but it will be distributed according to the shares or according to the legal distribution.

According to this exclusive invalidation, partner

could depend on it to get red of his obligations. Also, others could do the same if they had no bad intention (He did not know that it is an exclusively invalided contract).

However, for the company itself, it can not get

red of its obligations towards others who did not know that it is an exclusively invalided contract.

If the other did know from the beginning that it

is an invalided contract, then the company could

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use this invalidation to get red of its obligation towards that other.

2/2. The Relative Invalidation; * The contract could get relatively invalided if the partner was partly capable or if his well or consent was mistaken or pressured or cheated. Why do we consider it a

relative invalidation?

It is considered a relative invalidation because (1) it is going to affect no partner's obligation except the partial capable partner or the partner

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whose consent was not full (As the pressurized one). (2) Also only the affected partner has the approval or the invalidation right. (3) The right is going to be terminated if the interested partner did not call for it within three years from being capable or from the day of discovering the mistake or cheating… (4) Generally, the right to invalidate the contract because of consent problems is terminated after 15 years of signing the contract. (5) However, the invalidation is extended to the entire company when it is a personal company as the solidarity company. But this invalidation is for the future not for the company's past. The company is considered exist since the establishment until the decision invalidating it.

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According the idea of the Withdrawal impact of

invalidation, the concerned partner gets back his shares, returns profits that he received and gets back the payments for loses. 3. The special Invalidation; (Invalidation for the unwritten or the unreported

contract) We have mentioned earlier that formality is a pillar for the company's contract. In the absence of this formality, the contract will be invalidated. However, what kind of invalidation will it be?

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In fact, this special invalidation is not an exclusive invalidation and it is not too a relative invalidation. It is a special invalidation for the absence of one of the two formal pillars (writing and reporting or registration). What will be the impact of this special sort of invalidation on partners and others?

1. According to this kind of invalidation, partners have no right to depend on it in the face of others.

2. The invalidation for not writing the contract is not an exclusive invalidation, as it could be corrected if it is done by the invalidation decree.

3. The impact of special invalidation depends on the one who request it, if it was the

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others, then the company is going to be as if it did not exist.

4. But if the invalidation request was from one of the partners, then it is going to be from the day of request. As the company for the past is going to be an actual company.

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The Actual Company's

theory. Definition; According to article 142 (Civil), the collapse of a contract will lead to the collapse of all the resulted legal effects. However, the application of these general rules on company's contract will affect on a fixed and stable situations and rights, as others dealt with that company with a believe that it is a right company.

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If we apply this general rule, there will be no confidence in the business sector and treat others' positions. According to the Actual company's theory, the company will be considered factually correct for a period between its establishment and the invalidation decision.

1. Theory Justifications;

There are two bases or two justifications for this theory;

A. The judiciary depends on the idea of apparent situations. Accordingly, there is no justice to shock the others who dealt

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with that company before the invalidation decision.

B. We could depend on article 507/ 2 (Civil) as it considered the protection of others and considered company's life before the invalidation decision.

However, does the judiciary

considers the actual company for all invalidation sorts?

And What are the effects of

the application of factual company's theory?

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3. Scope of application; To apply the actual company's theory there should be two conditions; 1. The company should have had started the

activity. Accordingly, we will not talk about an actual company if it did not start the activity before the invalidation decision.

2. Judiciary does not consider the actual company's theory if one of the special positive (Objective) pillars was not exist, as the absence of participation intention.

If the invalidation was based one the illegitimacy of purpose or activities, the judiciary here does not consider the actual company's theory.

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According to the above explanation, judiciary consider the actual company's theory in two sorts of invalidation ( Relative and Special invalidation) and does not consider it in cases of exclusive invalidation.

What are the effects of the application of factual company's theory?

The consideration of actual company will resulted in four effects;

1. For a period between the establishment and the invalidation decision, the company exists with all effects. The company's rights and obligations during that period are correct whether for partners or others.

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2. The actual company could be approved via all means of evidence, especially if the invalidation was due to the absence of writing.

3. The company keep its legal personality, hence, bankruptcy might be declared for the actual company if it could not settle its commercial debts.

4. For others, they are the main cause for the establishment of this theory. They will depend on the actual company to get back their debts and rights. Others might consider the withdrawal effect of the invalidation if they consider that.

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Chapter II Company's Incorporeal Personality A. The Scope of incorporeal company;

We have mentioned earlier that the contract creating a company is distinguished, as according to this contract, a new independent and responsible personality is created.

The Egyptian Civil Law accept the incorporeal

personality for civil and commercial companies.

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All companies' forms acquire the incorporeal personality (Civil or Commercial) except the Mohasa company, as it is not known for no body except its partners.

B. When could a company acquire the incorporeal personality? According to article 506 (Civil), a company

acquire the incorporeal personality from the day of signing the contact. However, this personality is not valid for other before the day of registration or reporting the contract.

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Others' knowledge is presumed from the day of registration. The registration is similar to the certificate of birth for any natural person.

If the company was not registered, partners can

not rely on it in the face of others, however, others might relay on the unregistered company to protect their rights.

Nevertheless, there is an exception on the

general rule concerning the acquiring of incorporeal personality.

This exception is for three forms of companies;

Partnership companies, Partnership by Shares and the Limited Liability companies. According to article 22 (Commercial), non of the above

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three forms plus the public sector companies acquire the incorporeal personality before the day of recording in the commercial record

C. When the Incorporeal Personality is terminated?

Generally, the incorporeal personality is ended from the day of solving or terminating the company.

However, termination the company does not

lead to an automatic end to the incorporeal personality. Why?

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The incorporeal personality continues for the protection of partners and others' interests (Creditor's rights).

There could be a question (Practical one),

- What if partners decided, during a company's

life, to change the company's form? - What is the impact of this change on a

company's incorporeal personality? - Will it lead to the death of the old personality

and a birth of a new personality? - Or the old incorporeal personality will continue

for the new form?

Defiantly, this is a highly important question and practical one, so what?

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The majority of Legal Jurisdiction distinguishes

between to cases; 1. If the changes were according to law or contract; 2. If there was no mention for changes in contract

or law. 1. If the changes were according to law or contract;

The organized changes does not resulted in a creation of a new personality, as the old one will continue. The old/ new personality will carry the old obligations.

However, these new changes should be recorded or reported for the protection of others.

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2. If there was no mention for changes in contract or law.

If the changes were not organized by law or

contract, then we are going to have a new company, a new incorporeal personality.

We have to distinguish between the changes and

the merger, as merger between two companies or more leads to a creation of one company (The merging company).

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D. The Impact of Acquiring the Incorporeal Personality When a company acquire the recognition of

incorporeal personality it will be like the natural person, as it is going to have rights and obligations, except issues connected to human being as marriage and divorce.

We can say that there are six things resulted

from the birth of the incorporeal person;

1. Name 2. Habitat. 3. Nationality. 4. Competence. 5. Company's Representation. 6. Company's ownership (Zemmh).

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1. A Company's Name; Since a company is a new person, then it should

have a specific name to distinguish it from other commercial institutions.

A company's name depends on a company's form;

- As Personal company's name is formed from a name of one partner or more plus the addition of the word " and Partners".

- While Treasury companies acquire names related to their purposes.

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2. Company's Habitat (Home); A habitat is the legal center for a person's

activities, where he is expected to be. The habitat for the incorporeal person is the

center of its management. The determination of habitat location is

important for many reasons; - According to the location, the concerned court

will be determined, as the judicial cases are directed to the court located in the company's habitat.

- Also, a company's legal system and nationality are mostly determined according to a company's home.

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3. A Company's Nationality;

The recognition of the incorporeal personality is resulted in a new nationality, as this company belongs to a specific country.

But how important is the consideration of a nationality for the company?

- It is extremely important as sometimes, countries limit some benefits on its nationals, and one of these benefits or rights is the right to trade.

- Nationality is important on determining the country who is going to defend for this company internationally.

- Which law will be applied concerning company's competence and management…etc, it is the law of nationality.

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But how could we determine a company's nationality?

Is it according to the management center or activity center or partners nationality?

The majority of doctrine in Egypt considers the

main and the actual administration center, but what is the legal base for this majority?

Some relies on article 41(commercial) that

organizes the incorporated partnership companies,

Some others rely one article 11/2 (Civil) which

organizes the legal system of foreign incorporeal personalities.

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In fact there is no specific system determining

clearly the criterion of nationality. Under these circumstances, it is up to the judge to chose the suitable criterion.

4. A company's competence;

The acquiring of incorporeal personality leads to the holding of performance competence.

The company has the right to acquire new

money, to deal with others, to become debtor and creditor, to sue and to be sued and to participate in another company..

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However, a company has to deal in accordance with the establishment purpose (Article 53/2 B Civil).

For example, if it is a commercial company in a

specific activity according to the contract, then it has to make transaction within this kind of activity, otherwise, the contract has to be modified and rerecorded.

A company is responsible for harmful activities

committed by its workers because of work. It is also responsible for damages happened by animals that it holds.

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5. A company's Representation; The company is an incorporeal person has no

real existence, therefore, there should be a natural person to manage it and to express its well.

Partners have to agree to appoint a manager for

the task of managing the company under partners' supervision ( as explained later).

But what is the legal situation of the manager?

Traditionally, he used to be considered as an agent for the company, but the majority now criticizes this old view as the proxy is appointed

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by a decision of the majority, then how could he be an agent for the minority who rejected him.

Therefore, there is a new theory consider the

manager as an integral part of the company and a company can not work on his absence.

The general rules are applied on the manager

and the rest of company's workers concerning civil and criminal responsibility.

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6. A company's wealth (Zemmh)

As a result of the recognition of the incorporeal personality, the company is going to have its own financial capability as it is going to absorb its rights and obligations resulting from its activities.

This Financial capability (Zemmh) includes partners shares and reserved assets and profits. All these properties are owned by the incorporeal person.

What is the impact of having an independent financial wealth (Zemmh)?

1. The transfer of shares' ownership to that legal person.

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2. Company's wealth (Zemmh) is a guarantee only to a company's creditors not a partner's creditors.

3. It is not allowed to make clearance between a company's rights and partner's debts and between company's debts and partner's rights.

4. Partner's bankruptcy declaration does not extended to the company if it was able to pay its debts and vica – versa. However, this is not applied on personal companies like solidarity companies.

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Collective Companies' Formation

Preface;

All general rules that had been discussed earlier are applied on collective companies' formation.

As, the general positive pillars, the specific

positive pillars, and the formality should be exist.

However, the Egyptian Commercial Law gave more consideration for rules related to collective companies reportation and the retribution in the case of absence of reportation.

We are going to discuss this issue in two main

points;

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1. Procedures for the reportation of collective companies' contracts.

2. The retribution of the absence of reportation.

1. Procedures for the reportation of collective

companies' contracts.

Reportation procedures differ from one company to another, however the collective companies' reportation procedures are applied on the other personal companies forms.

The right reportation for a collective company

requires two main conditions;

A. The Legal Reportation. B. And the reportation in the commercial Record.

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A. The Legal Reportation. * Articles 48 and 49 (commercial) has organized the legal reportation procedures. These procedures are;

1. Leaving the contract abstract in the elementary court. The court officials have to record it, so every concerned person can check it and get a copy.

2. This abstract should be published in the

court for three months. 3. This abstract should be published in a

journal published within the collective company's headquarter.

* Data to be reported;

Article 50 ( commercial) has mentioned a specific data to be reported, that are;

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1. Partners' names, their titles, and their home addresses.

2. A company's symbol or title. 3. Names of partners who are allowed to manage or

to sign under the company's name. 4. Dates of the start and the termination of

company's activities.

The above are the main data to be reported and the absence of any of the above specified data will resulted in a company's invalidation.

Usually, a company's manager do this job,

however, any partner could do it.

Reportation procedures or the legal reportation should be accomplished within 15 days from the

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date of signing the contract, otherwise, the company will be invalidated.

The above procedures are applied two on any

modification, otherwise it is going to be invalidated.

If the above procedures had been fulfilled within

the time frame, their effects will get back to the contract signing date.

B. The reportation in the commercial Record.

The commercial record Law 34/ 1976 requires the registration of collective companies in the commercial record. The rule is applied on any modification or change on the company.

However, this reportation does not forgive the

company from the legal reportation.

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2. The retribution of the absence of reportation.

The absence of the reportation in the commercial

record does not led to the invalidation, it led only to the application of a criminal punishment mentioned in the commercial record law (Articles 18 & 19).

But the absence of the legal reportation leads to a

company's invalidation, however it is a special invalidation similar to the invalidation because of not writing the contract.

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* who has the right to cal for the invalidation; * The invalidation because of the absence of reportation is not an automatic invalidation (By Law force). * The court can not do it voluntarily, as it should be requested. It should be requested from the one who has a specific interest. There are to concerned parties; partners and the others. * Partners; * Partners has no right to depend on that invalidation in the face of others, however, partners may use it in the face of each others. The rule is " no body gets benefits from his negligence' * This is not a public order rule as a partner might forgives the others for the absence of reportation,

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their for the call for this invalidation has a time frame. * The others;

The others have the right to call for the invalidation because o the absence of reportation if they have a legitimate interests as creditors.

However, this is not a public order invalidation,

the others might prefer not to call for it if thy find an interest.

* The impact of invalidation decision;

For partners, and according to article 54 (commercial) this kind of invalidation has no withdrawal effects. The company is invalidated only for the future. For the past the actual company's theory is applied.

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For the others, if the company was invalidated,

then it will be considered as it was not existed, according to the withdrawal effects of invalidation.

We have mentioned earlier that this sort of

invalidation is similar to the invalidation for not writing the contract, so what?

This sort of invalidation could be corrected

before taking the invalidation decision even after the 15 days of signing the contract.

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Collective Company's management

There is no specific rules for the appointment of

the manager in the Egyptian old commercial law. Mostly partners agree on the contract about the way of how the company will be managed.

In the absence of this agreement, then we have to

rely on the civil law general rules regarding a company's management.

Fundamentally, all partners have the right to

manage the company, as all of them have interests.

* Manager appointment;

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The manager could be a partner and could be a stranger. The later assumption is rare in the collective companies.

If the manager was mot one of the partners, will

he get the attribute of a trader? Manager's deposition;

Rules regarding manager deposition differ

according to his legal position. The law distinguish between two kinds of managers; 1. The agreed on manager;

The manager here is a partner and got appointed in the contract creating the company to be its manager.

He will not be removed in the absence of

partners' consensus. Why consensus? Because he

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is a partner, and the call for deposition will lead to a company's modification, and this modification requires the consensus.

However, the partner's manager might got

removed without the consensus in two cases;

1. If the contract determined specific majority. 2. The judiciary might remove him if there is a

strong justification. 2. The deportation of the non- agreed partner manager; Here we are with a different case. The manager

here could be a partner got appointed later not mentioned in the contract or a manager who is not a partner.

Here the manager could be removed according

to the same majority that appointed him.

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The impact of manager deposition;

The deposition of the non- partner manager or

the non a greed partner will have no effect on the company's existence.

The problem if the removed manager was an a

greed partner!

There is a difference in the jurisdiction concerning this issue. Some says that the company will get invalidated , some others say that it will not lead to a company's invalidation.

However some others distinguish between two

cases according to the cause of disposition;

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1. if it was because of a bankruptcy decision, then the company will get invalidated because of the personal consideration.

2. If it was because of any other reason and he

continued to be a partner then the company will not get invalidated.

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Capital Companies

Joint- Stock Companies Preface;

Under this form of companies, there is no place for personal consideration. The main concern is the collection of money to achieve a company's purpose.

The joint Stock Companies (Incorporated

companies) are the ideal model for capital companies. This form of companies is the most important form of capital companies as it carry the responsibility of establishing the biggest economic projects.

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This form of companies are getting more consideration whether nationally or internationally (Multinational Corporations).

We are going to study the incorporated

companies according to the following sequence;

1. The Definition and the Importance of JSC; 2. The characteristics of JSC. 3. The Formation of JSC. 4. Instruments issued by JSC. 5. JSC Activities.

1. The Definition and the Importance of JSC;

The JSC is the company that has its capital is divided to equal shares that could be exchanges.

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Every partner in the JSC has limited responsibility according to his share size.

The JSC name is taken from its purpose not

from partners names.

The JSC's are the main mechanism used by governments to achieve the economic growth.

In all sectors, biggest projects are

established by JSC's not small companies whether it was nationally or internationally.

Internationally, more that 80% of new

patents are produced in the MNCs. These MNCs control the International Trade and Foreign direct investment benefiting from the Economic of Scale.

In the JSC there is no connection between

shares ownership and a companies

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management or supervision or control, as shareholders could be hundreds of thousands as in a company like Coca Cola International.

Because of the importance of this form of

companies, and for the protection of others rights and shares holders rights, the legislator all over the world has organized and issued legislations for the ideal performance of this form of companies.

2. The characteristics of JSC.

1. It is a capital Company; 2. Partner's limited liability; 3. A company's name; 4. JSC capital; 5. The orderly rules governing the JSC.

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1. It is a capital Company; Mostly, this for of companies is formed

between a great number of partners as they might not know each others.

A company's shares are shown for sale and

to bought by the public. A person is going to be a partner when he buy shares

This company is established for financial

purposes, therefore, there is no importance for the personal consideration.

Since there is no importance for the

personal consideration, a partner's death…etc will have no effect on the company existence.

2. Partner's limited liability;

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Article (2) ( commercial) has indicated that JSC's partner has only a limited responsibility for company's debts according to his shares.

Because of this limited liability, a partner is

not going to acquire the attribute of trader. Accordingly, the bankruptcy of the partner

or the company will not lead to the bankruptcy of any of them

Because of these advantages these

companies are highly attractive and getting more consideration from the public.

3. A company's name;

We have mentioned earlier that, JSC's name has no connection with partners' names. The JSC's name is taken from its purpose plus something refer to it as a JSC

(شركة األسمنت ش. م. م.)

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4. JSC capital;

The JSC's capital is divided into equal

shares in their values. The share should not be less than 5 Egyptian

pounds and not more than 1000 Egyptian Pounds.

These shares are exchanged for buy and

sale.

5. The orderly rules governing the JSC.

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Because of the seriousness of interests related to JSC, the legislator got intervened through orderly rules.

Accordingly, the contributors role is very

limited in companies management…etc. The Partner has only the choice of joining the company or not. When he become a partner, he has to follow the specified and orderly rules.

3. JSC's Formation

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It is meant by a company's formation, the legal procedures required for the creation of legal structure of JSC.

This work is done by a group of people

called " Formatters" There are to ways of formations; 1. The formation through public subscription

in the supplied shares. In this case, the formation follows the subscription. Here the company is called "JSC through public subscription".

2. The formation through formatters

subscription in the entire company's capital. In this case the company is called " JSC through closed subscription".

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The Egyptian legislator has distinguished between the above two forms regarding the formation procedures.

Accordingly, The JSC through public

subscription is formed after very complicated procedures because of the public interests involved. In contrast, the JSC through closed subscription is formed instantly.

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4. Instruments issued by the JSC * JSC issues instruments have financial values called financial papers. These instruments are in three forms;

1. Shares; 2. Bonds; 3. And formation Dividends.

1. The Shares;

JSC's shares are in equal values. It means that partner has right in the JSC.

This share has many characteristics that

distinguish it from partners share in the personal companies;

- The shares are equal in their values. - Shares could be exchanged commercially. - Shares could not be divided. - Partner's liability is limited according to his

share.

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The shares could be in a financial form or physical form.

Also share could be normal and could be distinguished.

2. The bonds;

Every company working in the market might needs liquidity. What will it do? Mostly JSC issues bonds to get the money that it needs.

This bond differs from share as the share

holder is a partner, while the bond holder is a creditor to the company.

The bond holder get fixed interest rate every

year, while the shareholder shares the company's profits and loses.

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When the company is liquidated, bond holders have priority and share holders have to wait until the debts are paid.

Bond holder has no right to get intervened

in company's management…etc, while the share holder has these rights as a partner.

Bonds too has many forms;

- There is the normal Bond; - The bond with payment advantage - The bond that could be changed to a share.