Types of Corporates

What is a company? 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.

This definition is taken from the Saudi Companies Law and Egyptian Civil Code, which stipulates that "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. This provision is derived from the French Civil Code.

Companies are divided in terms of the nature of the work being done into civil companies and commercial companies; in turn the Commercial companies divided, based on the personal or financial consideration, into Firms, Corporations and Companies of mixed character. The corporation only that acquires merchant status, and bears the obligations arising therefrom and subject to bankruptcy whenever it ceases to pay its commercial debts.

While, civil company can take a special form of commercial companies, such as Partnership, special (limited) partnership, partnership limited by shares, Joint Stock Company, or Limited Liability Company.  

Partnerships

It is the companies that established on personal consideration, and mainly composed of a small number of persons who are related together with a particular connection such as kinship, friendship or knowledge, and trust each other in its ability and efficiency, thus, whatever arises that may threatens the trust between companies and undermining the personal consideration on which these companies are based, the company may be exposed to dissolution. Therefore, originally, the death of a partner in partnership companies or put under quarantine, get bankrupt or withdrew from the company, make the company dissolves.

Partnerships Companies includes general partnership, special (limited) partnership, and particular partnership:

1- General Partnership: It is the ideal form of Partnerships, where each partner is jointly liable, and in all his money for the company's debts, as each partner acquires the status of the merchant.

2- Special (limited) Partnership: it consists of two partners: General Partners who are subject to the same legal system as the partners in General Partnership, so they are jointly liable for the company's debts and acquire the status of the merchant, and Limited Partners who are not asked for the company's debts only within the limits of their shares and do not acquire the status of the merchant and not involve in company's management.

3- Particular Partnership: It is a hidden company that doesn't have the juristic character and it doesn't exist to the third party and its effects are limited to partners only.

Corporations:

These companies are mainly based on the financial consideration and the character of the partner doesn't affected by him. The lesson of these companies is by what provided of money by a partner. Therefore, these companies are not affected by what may occur to the partner character as his death, get bankruptcy, or put under quarantine.

Corporations include only Joint Stock Company; in which the capital is divided into shares of equal value and commercially negotiable. The partners in these companies are called shareholders, and they are not merchants and do not ask about the company's debts except within the value of the shares they owned in the company.

Mixed companies:

These companies are based on financial and personal consideration at the same time and therefore they combine the characteristics of Corporations and Firms.

The mixed companies include partnership limited by shares and Limited Liability Company.

1- Partnership limited by shares: It is similar to special (limited) partnership in which it includes two kinds of partners: General Partners who are subject to the same legal system as the partners in General Partnership, so they are jointly liable for the company's debts and acquire the status of the merchant, and in return they account for management, and Limited Partners who are not acquire the status of the merchant and not asked about the company's debts except within the limits of their shares which take the form of commercially negotiable shares, accordingly, the company is considered for them as a corporation.

2- Limited Liability Company

A company that consists of a few partners not exceeds fifty partners. This company is similar to Partnerships in terms of the limited number of partners and prohibits resorting to public saving by subscribing to shares or bonds and restricts transferring partners' shares, it is similar to corporations in terms of determining the responsibility of each partner for the company's debt by its share, and in terms of its management and supervision thereto.

It is noted that the lesson in determining the company's form is not the description that partners added in Articles of incorporation, but the lesson is the availability of the legal conditions for the company's form, according to the true will of the partners, the partners may describe the company as general partnership while it is clear from the terms of the contract that it is a special (limited) partnership, then it shall be adapted as a special (limited) partnership, thus the adaptation of  contracts entrusted with what the contractors intended, not what they described.