Three partners established a company and one of them was the poorest among them and he...

Three partners established a company and one of them was the poorest among them and he was reluctant to enter the business. The other partners told him that he can join the company and he will be only shared for the profit and pay nothing for the loss of the company based on a contract that the other two partners agree on. Explain if this agreement is accepted according to the Iraqi Company Law.

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Expert Solution

Such kind of an agreement is not acceptable according to Iraqi Company Law because Article 186 of Iraqi Company Law says that if it is agreed by the partners that one of the partners will not have a share in the loss, the company's contract stands null and void.

Same is the case if one of the partner’s will not have a share in the profit, the contract stands null and void.

However, it is possible to exclude one of the partners from bearing the loss if that partner contributes in the company just by providing his/her services and no wage or salary is paid for rendering that service.

To explain further, Article 185 of Iraqi Company Law says that if a contract states partner's share in the profit only, then it should be considered as their share in loss also. Similarly if a contract states partner's share in loss only, then it should be considered as their share in the profit also. But if there is no mention of extent to which or how profit or loss will be shared among partners in a contract then the share of each partner shall be decided according to the ratio of his subscribed share in the company's capital.

keosha answered 11 months ago

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