Chamber of Commerce of Leipzic.

It follows then that no other decision harmonising with the principles of our law can be arrived at on this much discussed question, than that mentioned at the beginning of this inquiry, namely, that the commanditaire, in the event of the insolvency of the company, is not under the obligation of surrendering the trading profits awarded and paid over to him in conformity with the terms of the deed of partnership; and thus it is ruled by the Dutch and the Portuguese (the only judicial decisions on this point, as we mentioned above), and also in the "Projected Civil Code for the Kingdom of Saxony" in § 1305, a work which it is true is at present only known to the scientific world.

It is naturally always to be kept in view as granted that the profit has been already paid over to the commanditaire, and that he has received it bona fide, for if mala fides be shown, then the general principles of justice, in so far as they relate to matters in fraudem creditorum, would rescind the rights otherwise accorded to him. If the profit, however, had been ascertained, but (it matters not for what reason) not paid over to the commanditaire, he does not the less preserve his claim against the managing partner for the amount, but whether he would rank with the remaining creditors as any other simple claimant on the estate is not altogether unquestioned. Thöl (page 160) without due consideration replies in the affirmative, but yet, more especially according to the views of the superior courts of Saxony, by which the capital en commandite cannot be liquidated in cases of bankruptcy, an argument unfavourable to the payment of a dividend may be deduced.

In conclusion, let us consider yet another disputed point that here occurs to us, namely, the special instance in which the whole of the relations on which the company was established, or at any rate the amount of capital advanced by the commanditaire, have not been particularly announced. Some are in favour of the unlimited liability of the commanditaire with his whole fortune, including therefore the trading profits already drawn, in the event of failure; and we may here name Büsch, who yet in other respects would exempt the commanditaire from the necessity of refunding the profits realised by him for the benefit of the trade creditors. But even this, according to German law, cannot alter the position of circumstances, for if neither the name of, nor the capital advanced by the commanditaire is made known, the just expectations of the creditors are thereby, as above mentioned, more than fulfilled, since some person beyond the managing partner, namely, the commanditaire with his capital, is liable. Again, if only the name of the commanditaire but not the amount of capital advanced by him was known, those persons who entered into connexion with the commandite company were made aware, by the very fact of a partner being announced as commanditaire that he had only a limited liability, and have therefore only themselves to blame if they did not inform themselves, as they might have done, of the extent of the en commandite funds, and thereby of themselves attributed an amount of capital to the company for which there was no foundation, With good grounds, therefore, the older writers (as Casaregis Discursus de Commercii 1., No. 39,) make mention of a particeps who is only liable ad ratum capitalis, in contradistinction to the actual socius; and also the Portuguese Codigo Commercial, Art. 556 and 587, distinguishes expressly, and with justice, between comparte and socio, although at the same time the assertion of H. G. Kind, in his Responsum ad Qu. circa societatem en commandite, Leipzig, 1823, that as far as regards the internal relations of the company the commanditaire is really socius, may be unhesitatingly agreed to.

To Query No. 12.

"Should commanditaires be prohibited from taking any part in conducting the business, even by giving advice to the managing partners?

"How far, in your opinion, can such a prohibition be extended?

"How must such a prohibition be determined, and how can its results be rendered certain ?"

The honourable querists appear in the above, as seems also to be the case from the construction of the 11th question, to have had the French law chiefly in view. According to Art. 27 and 28 in the Code de Commerce, the commanditaire is undoubtedly prohibited from interfering in the slightest degree with the conducting of the business, and this under the penalty (also referred to in the 11th query) of losing his character as commanditaire, and of ceasing as such to be liable simply to the extent of the commandite funds. He therefore may neither individually nor through the medium of a representative for whom he might be responsible, take part in carrying on the business nor be employed about the affairs of the company, even under a power of attorney. Indeed, a finding of a court of justice in Paris on 16th May, 1808, quoted in Pailliet's edition of the French Code (page 653, note a), decides that a company announced as a company en commandite, is yet to be considered and to be treated as a company en nom collectif, so soon as the ostensible commanditaires stipulated for themselves the right of controlling the funds of the company, and the supervision of the books of the firm, and as a consequence on this train of reasoning the same code, in Art. 25, prohibits the names of the commanditaires from being mentioned in the style or title of the firm. Statutary enactments of this nature are found in the mercantile codes of Holland, Spain, and Portugal, the Papal States, and in Germany in those of Baden and the Rhine provinces. Yet the view taken of this question in the German common law is an almost entirely opposite one.

It is true there can be no doubt but that, even by the French and the other systems of Chamber of Comlegislation above referred to, the commanditaire cannot be denied the right of being merce of Leipzic. present at the consultations of the remaining partners, respecting the arrangement of the accounts, the division of the profits, the necessity of providing additional funds, &c., and especially by constant control securing the strict adhesion of the managing partners to the terms of their contract, as is pointedly stated by Pardessus (in the edition by Schiebe above-mentioned, page 558), as well as by Rogron (in his Code de Commerce Expliqué, § 27). (See also the decision of the court of justice in Paris on 13th November, 1821, referred to by Pardessus.)

But this privilege is to be interpreted by the German common law in a much broader sense for the commanditaire. For, considered in itself, no reason can be conceived that would justify the exclusion of the commanditaire from conducting the affairs of the company (although Eichhorn in his "German Jus privatum,"§ 387, does so), and a positive decision on this point as a general right is as little to be found. Therefore the commanditaire must not only be regarded as socius in the internal relations of the company, as respects the right of consulting with and controlling the other partners, but he may also, by conducting the business of the company in their external relations, participate in carrying on their affairs, and this, too, without thereby adding to his liability limited as a commanditaire. That he, however, when announced as originator of the company also becoines liable, as such, need hardly be added. Thus far the German common law. We have already observed above how the majority of foreign, and also many German special laws contain other decisions on this point. It would lead us, however, to too great a length were we here to enter upon an examination, from the position occupied by the political jurist, of whether the danger that might arise to the public of their being led to the conclusion that the company was one en nom collectif, and that consequently they believed all the partners to be liable to the full extent of their means from the commanditare participating in conducting the affairs of the company, or his name even appearing in the style or title of the firm, would justify the adoption of such a prohibition as the Code de Commerce contains, or of a similar one, with an equal penalty.

To Query No. 13.

"Is it necessary to cause the deeds of partnership of companies en commandite to be registered?

"What are the particulars to be mentioned and to be observed?

"Must the commanditaires by name and the capital advanced by them be therein mentioned?"

When framing this query also, it would appear that the formalities demanded by the French commercial law had been under consideration. At any rate such specified formal requirements in cases of companies en commandite, besides in the Code de Commerce, are only known to those other particular systems of law referred to under the former number, and which are chiefly modelled upon the French. According to Art. 42 and 43 of the Code de Commerce, in the case of companies en commandite, the deed of partnership (which, however, as in the case of all trading companies, may be drawn up either before a notary or privately, Art. 39), must be made public, in extract, with certain formalities therein mentioned, referring to the period within which it must be published, the competent authorities, the measures to be adopted by them, &c. It is necessary that this extract, besides the names of the managing partners, the commercial objects of the newly established company, the commencement and the termination of the period for which it is formed, should contain the number (not, however, the names) of the commanditaires, and the amount of the funds advanced or to be advanced by them. Other commercial codes require also the publication of the names of the individual commanditaires, and the variation of the several systems on this point is explained by the uncertainty existing on the subject of the experimental question as to whether the confidence of the public in the company is governed more by the knowledge of the capital advanced by the several commanditaires than by their names, or vice versá; since the principal aim of all such statutary enactments must be to afford the greatest possible guaranty for the confidence with which the establishment of a company en commandite, and the announcement of the particular relations of such company, are calculated to inspire the public. We shall not here enter upon this question, but content ourselves with referring to the views on this subject expressed by Schiebe in his work (page 556, note 5), and in the "Mercantile "Letters." All these formalities, which in a greater or less degree are connected with the several legal systems treating of companies en commandite, are altogether unknown to the German common law.

As in the case of contracts in general, so also in the case of those for the establishment of trading companies, whether public or not, our common law does not regard any particular form, which Fremery confirms in his Droit Commercial, chap. vii.

It is true this position is somewhat altered by the special legislation of the majority of the German States, which require by statute of all trading companies without distinction a written contract and public announcement of the heads of this deed, namely, of the

Chamber of Commerce of Leipzic.

names or the partners of the firm, of those authorized to conduct its business, the commencement and duration of the partnership, and the specification of the liability of each partner in particular. Besides in the Rhine provinces (which are more under the French system, this obtains also in Austria, Prussia, Bavaria, Hungary, Saxony, Frankfort, and Baden. As regards the Kingdom of Saxony, in particular, the first traces of such a deviation from the common law system is found in the Edict of the Elector of Saxony of 8th December 1773 (copied in the C. A. C. II., Tom. II. page 1443.

In this a decision is given, chiefly in a disputed point on the subject of bills of exchange granted, endorsed, or accepted by a firm; but at the same time this afforded the opportunity of stating judicially the law (which undoubtedly had been long previously settled by usage), that a newly formed trading firm must be publicly announced by being openly posted in the Exchange. The mode of founding a business, and particularly a business carried on by partners, was however first established by a local statute, the "Leipzig "Firm and Procuration Edict," of 10th June 1818, and later by the "General Ordinance "for the Kingdom of Saxony," issued on the 28th July 1846, the necessity for regulating these conditions having made itself more extensively felt. In this ordinance, however, we do not find any distinction drawn between companies "en nom collectif," and those "en commandite," so that it follows no special mention is made of the formalities to be observed in the establishment of partnerships en commandite. It is decreed, however, that in the case of all newly founded mercantile, exchange, goods, forwarding commission or manufacturing businesses, the parties by whom and for whose account the business is to be conducted, as well as the style or title of their firm, shall be notified to the competent industrial authorities connected with the police; besides this, also public announcement of the new firm and of its members must be made by information on these points being posted for two months in the Leipzig Exchange, and by being published in the lists for this purpose inserted at fixed intervals in the official Gazette. Similar announcements must also be made in the event of alterations in the proprietary of the firms, or of those holding procurations in the above-mentioned businesses; so that in the Kingdom of Saxony all newly constituted firms, or firms altered in the degree referred to, must be entered in a register kept for that purpose in Leipzig by the authorities appointed by government. It will thus be seen that it is here certainly left to custom, in the case of en cominandite companies, to decide whether, besides the managing partners, mention should also be made of the commanditaires either by giving the numbers of such dormant partners in a firm, or their names, in the official notice and public announcements. the law alluded to does not touch this class of trading companies in particular, we may justly conclude that it cannot refer to them, from the fact of its speaking throughout, and especially in § 3, of the proprietors "named." One thing however is clear from this, namely, that as it is not necessary to mention the sum advanced or to be advanced generally, it cannot be necessary for the commanditaire to acquaint the commercial world with the special amount of his liability, for, to compel the proprietors to make this announcement it would be requisite that it should be expressly stated in the enactment, as such an arrangement forms an exception to the spirit of the common law. It can scarcely have been the intention of the legislator to have imposed on companies en commandite formalities differing in the slightest degree from those required in the case of trading companies generally, for although, when contemplating a code for Saxony, these portions of the commercial law so largely provided for in the common law must in particular have given rise to discussion, the Saxon legislature does not appear to have deemed the subject of these relations sufficiently important, and the provisionally projected Saxon civil code, as it passes by in four brief paragraphs (§ 1303-1306) the science of com mandite partnerships, omits also to allude to the special question under investigation, being altogether silent on the subject of the formalities to be observed on their establishment.

To Query No. 14.

As

"Is the position of anonymous companies, and companies in shares, regularly published at stated intervals ?

"If so, how are such statements drawn up and certified?

"What particulars do they contain?

"How is their correctness guaranteed, and errors and fraud prevented?

In reply to this, we would beg reference to the remarks below No. 3 Query, since any official control over the situation of share companies, such as is here contemplated, is in Germany as foreign to our institutions as it would be in the case of the trading companies above mentioned; and we further conceive that the difficulties attending the attainment and continuance of such an official control-and any other would of course be of no service to the public-would be so much the more increased in the case of companies in shares than in all others, since these form, in a great measure, the foundation of mercantile operations, and in the ever fluctuating transactions of the exchange and varying course of stocks offer the public a standard, which possibly more than compensates them for any formal registration under the supervision of the authorities. The actual position of the undertaking, and the results of the operations during a given period, it is true are (in

accordance with the terms of the company's charter executed under the conditions imposed Chamber of Comby the statute) laid by the representatives of such companies before their fellow share- merce of Leipzic. holders at stated times, and (at a publicly announced meeting) proposed for their confirmation, and subsequently published; but we cannot by any means describe this as the result of an inquiry under public authority, for although such statements usually contain sufficiently explicit details, such as might be thought to be required, and are besides subjected to audit so as to afford evidence of their correctness and the absence of all error or fraud, the public authorities only take part so far in the affairs of the company as to watch over the due observance of the statutary enactments; but have nothing whatever to do with the circumstances connected with the accounts of the company, and therefore the published statements bear rather the character of a private communication made by the managers of the company to their fellow members.

In confirmation of these our views and opinions, we have hereunto set our hands and seal, as required by our act of constitution.

EXTRACTS

FROM THE

REVISED STATUTES OF MASSACHUSETTS.*

Limited partnerships

may be formed, except for banking and in

surance.

General and special partners, and their liabilities.

Certificates to be made

by the partners, specifying names, stock, &c.;

to be acknowledged and recorded;

if false, all shall be liable as general partners.

To be published for six weeks, otherwise partnership shall be deemed general.

Provision for renewal of partnerships.

Capital stock not to be withdrawn, &c.

CHAPTER 34.

OF LIMITED PARTNERSHIPS.

"Sect. 1. Limited partnerships, for the transaction of mercantile, mechanical, or manu"facturing business within this State, may be formed by two or more persons, upon the "terms, and subject to the conditions and liabilities prescribed in this chapter; but "nothing contained in this chapter shall authorize such partnerships for the purpose of banking or insurance.

"Sect. 2. The said partnerships may consist of one or more persons, who shall be called general partners, and shall be jointly and severally responsible, as general partners now are by law, and of one or more persons who shall contribute to the common stock a spe"cific sum, in actual cash payment as capital, and who shall be called special partners, " and shall not be personally liable for any debts of the partnership, except in the cases

"hereinafter mentioned.

"Sect. 3. The persons forming such partnerships, shall make and severally sign a certi"ficate, which shall contain the name or firm under which the said partnership is to be "conducted, the names and respective places of residence of all the general and special "partners, distinguishing who are general and who are special partners, the amount of capital, which each special partner has contributed to the common stock, the general "nature of the business to be transacted, and the time when the partnership is to com(6 mence and when it is to terminate.

"Sect. 4. No such partnership shall be deemed to have been formed until a certificate, "made as aforesaid, shall be acknowledged by all the partners, before some justice of the peace, and recorded in the registry of deeds of the county, in which the principal place "of the business of the partnership is situated, in a book to be kept for that purpose, open "to public inspection; and if the partnership shall have places of business situated in "different counties, a copy of the certificate certified by the register of deeds, in whose "office it shall be recorded, shall be filed and recorded in like manner in the office of the register of deeds in any such county, and if any false statement shall be made in any "such certificate, all the persons interested in the partnership shall be liable as general partners for all the engagements thereof.

"Sect. 5. The partners shall, for six successive weeks immediately after such registry, publish a copy of the certificate above mentioned, in a newspaper printed in the county "where their principal place of business is situated; and if no such paper be there printed, "then in a newspaper printed in the city of Boston; and in case such publication be not "so made, the partnership shall be deemed general.

"Sect. 6. Upon every renewal or continuation of a limited partnership, beyond the "time originally agreed upon for its duration, a certificate thereof shall be made, acknowledged, recorded, and published, in the like manner as is provided in this chapter for "the original formation of limited partnerships; and every such partnership, which shall "not be renewed, in conformity with the provisions of this section, shall be deemed a general partnership."

"Sect. 8. During the continuance of any partnership under the provisions of this chapter, no part of the capital stock thereof shall be withdrawn, nor any division of inte"rest or profits be made, so as to reduce such capital stock below the sum stated in the "certificates before mentioned; and if at any time during the continuance, or at the ter"mination of the partnership, the property or assets shall not be sufficient to pay the part

* The sections between inverted commas are given verbatim. Of the other sections it is thought sufficient to give the marginal abstract only.

† 1850. c. 91.

"An Act relating to Limited Partnerships.

"Sect. 1. In all limited partnerships the business of the partnership shall be conducted under a firm, in which the names of the general partners only shall be inserted, without the addition "of the word company, or any other general term, and if the name of any special partner shall "be used in such firm, with his consent or privity, he shall be deemed and treated as a general partner, or if he shall personally make any contract respecting the concerns of the partnership "with any person except the general partners, he shall be deemed and treated as a general partner "in relation to such contract, unless he shall make it appear that in making such contract he "acted as special partner only.

"Sect. 2. The seventh section of the thirty-fourth chapter of the revised statutes is hereby repealed."