Last Updated on June 28, 2021 by LawEuro
German Civil Code (BGB) German law
Title 16
Partnership
Section 705
Contents of partnership agreement
By a partnership agreement, the partners mutually put themselves under a duty to promote the achievement of a common purpose in the manner stipulated by the contract, in particular, without limitation, to make the agreed contributions.
Section 706
Contributions of the partners
(1) Unless otherwise agreed, the partners must make equal contributions.
(2) If fungible or consumable things are to be contributed, then in case of doubt it is to be assumed that they are to be the joint property of the partners. The same applies to non-fungible and non-consumable things if they are to be contributed according to an appraisal that is not merely intended for the profit distribution.
(3) The contribution of a partner may also consist in the performance of services.
Section 707
Increase of the agreed contribution
A partner is not obliged to increase the agreed contribution or to supplement a capital contribution reduced by losses.
Section 708
Liability of the partners
A partner is only liable, in discharging the duties incumbent upon him, for the care he customarily exercises in his own affairs.
Section 709
Joint management
(1) The partners are jointly entitled to manage the business of the partnership; for each transaction the approval of all partners is required.
(2) If, under the partnership agreement, the majority of votes decides, then in case of doubt a majority is calculated in relation to the number of partners.
Section 710
Transfer of management
If, in the partnership agreement, the conduct of business is transferred to one partner or more than one partner, then the remaining partners are excluded from management. Where management has been transferred to more than one partner, the provisions of section 709 apply with the necessary modifications.
Section 711
Right to object
If the partnership agreement entitles all partners or more than one partner to conduct business in such a way that each is authorised to act on his own, then each may object to the undertaking of a transaction by another partner. In the case of objection the business must be forgone.
Section 712
Revocation and dismissal of management
(1) The authority to manage that is conferred on a partner by the partnership agreement may be revoked from that partner by a unanimous resolution or, if under the partnership agreement a majority of votes decides, by a majority resolution of the remaining partners if there is a compelling reason; such a reason includes without limitation gross breach of duty or incapacity for proper management.
(2) The partner may also in turn dismiss the management if there is a compelling reason; the provisions of section 671 (2) and (3) applicable to mandates apply with the necessary modifications.
Section 713
Rights and duties of managing partners
The rights and duties of the managing partners are determined by the provisions in sections 664 to 670 applicable to mandates to the extent that the partnership relationship does not lead to a different conclusion.
Section 714
Power of agency
To the extent that, under the partnership agreement, a partner has the authority to manage, then in case of doubt he is also authorised to represent the other partners in relation to third parties.
Section 715
Revocation of the power of agency
If one partner is authorised in the partnership agreement to represent the other partners in relation to third parties, then the power of agency may only be revoked under the provisions of section 712 (1) and, if it has been granted in connection with the authority to manage, may only be revoked together with the latter.
Section 716
Right of control of the partners
(1) A partner may, even if excluded from management, inform himself personally of the affairs of the partnership, inspect the accounts and documents of the partnership and provide himself with a survey of the state of the assets of the partnership.
(2) An agreement that excludes or limits this right does not prevent its being asserted if there are grounds for assuming dishonest management.
Section 717
Non-transferability of partner rights
The claims to which the partners are entitled against each other under the partnership relationship are not transferable. Excepted are the claims to which a partner is entitled in his management to the extent that their satisfaction may be demanded prior to the winding-up of the partnership, and the claims to profit sharing or to what the partner is owed on the winding-up.
Section 718
Partnership assets
(1) The contributions of the partners and the items acquired for the partnership as a result of management are the joint assets of the partners (partnership assets).
(2) Partnership assets also include anything acquired due to a right belonging to the partnership assets or as compensation for destruction, damage or removal of an item belonging to the partnership assets.
Section 719
Joint property
(1) A partner may not dispose of his share in partnership assets and in the individual items that are part of partnership assets; he is not entitled to demand division.
(2) A debtor may not set off a claim he has against an individual partner against a claim that is part of the partnership assets.
Section 720
Protection of good faith debtor
A debtor need only allow it to be asserted against himself that a claim acquired under section 718 (1) is part of the partnership assets if he has obtained knowledge that it comprises such a part; the provisions of sections 406 to 408 apply with the necessary modifications.
Section 721
Distribution of profits and losses
(1) A partner may only demand the statement of accounts and distribution of profits and losses after dissolution of the partnership.
(2) If the partnership is intended to exist for a protracted period of time, then the statement of accounts and the distribution of profits must in case of doubt occur at the end of every business year.
Section 722
Shares in profit and loss
(1) If the shares in profits and losses of the partners are not specified, then each partner, without regard to the nature and size of his contribution, has an equal share in profit and loss.
(2) If only the share in profit or in loss has been determined, then in case of doubt the determination applies to profits and losses.
Section 723
Termination by partner
(1) If the partnership has not been set up for a definite period of time, then each partner may terminate it at any time. If a period of time has been determined, then notice of termination prior to the expiry of that period is admissible if there is a compelling reason. A compelling reason includes without limitation
1. if another partner has intentionally or with gross negligence violated a fundamental duty incumbent upon him under the partnership agreement or if the discharge of such a duty becomes impossible,
2. if the partner has reached the age of eighteen.
The partner who has reached the age of majority may only give notice of termination under no. 2 within three months from the time when he knew of or should have known of his position as a partner. There is no right to give notice if the partner was authorised in regard to the object of the partnership to independently operate a trade or business under section 112 or if the object of the partnership served solely to satisfy his personal needs. Under the same conditions, if a notice period has been specified, termination is admissible without complying with the notice period.
(2) Notice of termination may not be premature unless there is a compelling reason for the premature termination. If a partner gives premature notice of termination without such a reason, then he must compensate the remaining partners for the damage thus incurred.
(3) An agreement by which the right to give notice is excluded or is limited contrary to these provisions is void.
Section 724
Notice of termination in the case of a partnership for life or a continuing partnership
If a partnership has been entered into for the lifetime of a partner, then it may be terminated in the same way as a partnership set up for an indefinite period of time. The same applies if a partnership is tacitly carried on after expiry of a stipulated period of time.
Section 725
Termination by attachment creditors
(1) If the creditor of a partner has obtained attachment of the share of the partner in partnership assets, then he may terminate the partnership without complying with a notice period provided the instrument of indebtedness is not merely provisionally enforceable.
(2) As long as the partnership exists, the creditor may not assert the rights of the partner under the partnership relationship with the exception of the claim to a share in profits.
Section 726
Dissolution due to achievement or impossibility of its object
The partnership comes to an end when the agreed object is achieved or its achievement has become impossible.
Section 727
Dissolution due to the death of a partner
(1) The partnership is dissolved by the death of one of its partners unless its partnership agreement leads to a different conclusion.
(2) In the case of dissolution, the heir of the deceased partner must inform the remaining partners of the death without undue delay and, where postponement entails danger, must carry on the business transferred to the deceased by the partnership agreement until the remaining partners can reach another arrangement jointly with him. The remaining partners are in like manner obliged to continue temporarily the business transferred to them. The partnership is deemed to continue in existence in this respect.
Section 728
Dissolution due to insolvency of the partnership or one of its partners
(1) The partnership is dissolved by the commencement of insolvency proceedings relating to the assets of the partnership. If the proceedings are discontinued on the application of the debtor or cancelled after the confirmation of an insolvency plan that provides for the partnership to continue in existence, then the partners may resolve to carry on the partnership.
(2) The partnership is dissolved by the commencement of insolvency proceedings relating to the assets of a partner. The provisions of section 727 (2) sentences 2 and 3 apply.
Section 729
Continuation of authority to manage
If the partnership is dissolved, then the authority of a partner to manage is likewise deemed to continue in existence to his benefit until he obtains knowledge of the dissolution or should have knowledge of it. The same applies to the authority to manage of a partner leaving the partnership when the partnership is carried on or for the loss of the authority in another way.
Section 730
Winding-up of the partnership; management
(1) After the dissolution of the partnership, winding-up takes place between the partners with regard to the assets of the partnership unless insolvency proceedings have been opened in relation to the assets of the partnership.
(2) For the termination of transactions in progress, for the entering into of new business required for this purpose and for the maintenance and administration of the assets of the partnership, the partnership is deemed to be carried on to the extent the purpose of the winding-up so requires. However, the authority to manage to which a partner is entitled under the partnership agreement is extinguished, unless the contract leads to a different conclusion, upon dissolution of the partnership; from dissolution onwards all partners are entitled to jointly manage its business.
Section 731
Procedure for winding-up of the partnership
In the absence of an agreement to the contrary, winding-up is carried out in accordance with sections 732 to 735. In other respects, the provisions on co-ownership apply to division.
Section 732
Return of objects
Objects that a partner has handed over to the partnership for use must be returned to him. He may not demand compensation for an object that is accidentally lost or has accidentally deteriorated.
Section 733
Discharge of partnership debts; reimbursement of capital contributions
(1) From the assets of the partnership, the first debts to be discharged are the joint debts, including those divided among the partners in relation to the creditors or for which the remaining partners are liable as debtors to one partner. If a debt is not yet due for repayment or is contested, then the amount required for discharge must be retained.
(2) From the assets of the partnership remaining after discharge of debts, the capital contributions are to be repaid. For capital contributions that did not consist of money, the value that they had at the time when they were contributed must be reimbursed. Compensation may not be demanded for capital contributions consisting in the performance of services or in permission of the use of an object.
(3) For discharge of debts and repayment of capital contributions, the assets of the partnership must be converted into money to the extent necessary.
Section 734
Distribution of the surplus
If a surplus remains after discharge of the joint debts and repayment of the capital contributions, then it is owed to the partners in the ratio of their shares in profit.
Section 735
Duty to make subsequent contributions in case of loss
If the assets of the partnership do not suffice to discharge the joint debts and to reimburse the capital contributions, then the partners must make up the deficit in the ratio in which they must bear losses. If an amount attributable to a partner cannot be obtained from him, then the remaining partners must bear the deficit in the same ratio.
Section 736
Retirement of a partner; continuing liability
(1) If the partnership agreement stipulates that if a partner gives notice or dies or if insolvency proceedings are opened in relation to his assets, the partnership will be carried on by the remaining partners, then upon the occurrence of such an event the partner personally so affected retires from the partnership.
(2) The provisions on the limitation of continuing liability relating to commercial partnerships apply with the necessary modifications.
Section 737
Exclusion of a partner
If the partnership agreement stipulates that if a partner gives notice, the partnership will be carried on by the remaining partners, then a partner in whose person a circumstance occurs which entitles the remaining partners to give notice under section 723 (1) sentence 2 may be excluded from the partnership. The remaining partners are jointly entitled to the right of exclusion. Exclusion occurs by declaration to the partner to be excluded.
Section 738
Winding-up of the partnership on retirement
(1) If a partner retires from the partnership, then his share in the assets of the partnership accrues to the remaining partners. The latter are obliged to return to the retiring partner under the provisions of section 732 the items he transferred to the partnership for use and to exempt him from joint debts and to pay him what he would receive in case of winding-up if the partnership had been dissolved at the time of his retirement. If joint debts are not yet due for repayment, then the remaining partners may provide the retiring partner with security instead of exempting him.
(2) The value of the assets of the partnership is, to the extent necessary, to be determined by means of an appraisal.
Section 739
Liability for deficit
If the assets of the partnership do not suffice to cover the joint debts and the capital contributions, then the retiring partner is liable to the remaining partners for deficit in the ratio of his share in the loss.
Section 740
Sharing in the financial results of transactions in progress
(1) The retiring partner shares in profits and losses resulting from transactions in progress at the time of his retirement. The remaining partners are entitled to terminate such transactions in the way that appears most advantageous to them.
(2) The retiring partner may at the end of each business year demand accounting for transactions terminated in the meanwhile, disbursement of the amount due to him and information on the status of transactions still in progress.
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