COMPANY LAW

Chapter 2
• WHAT IS A COMPANY?

UNIT 1 – Introduction to
COMPANY LAW
• All companies results from the express consent of a will
and from a legal act.

• This legal act is mainly a contract, and very less often it’s
a unilateral act (as in the case of sole owner company –
SUARL)

A company is a contract
• There is no doubt regarding the contractual aspect of a
company: it is even mentioned in Art 2 of the Tunisian
commercial companies statute (Code des Sociétés
Commerciales) which states that “a company is a contract”.

• This derives from the fact that you can only create a company
out the EXPRESS AGREEMENT of its founders.

• Thus as in all contracts, there are multiple parties, and there is

a will to be bound by the agreement.

Company as a contract
• When a company is created, and in this case we talk
about INCORPORATION, the will to create obligations
is present in every step: Nobody can force you to be part
of a partnership or to create a company.

• In the same way, the partners/ shareholders of a company

have to sign written constituent acts, these agreements
called “article of incorporation” (or STATUTS in French)
embody their will to be part of a company.

…a written contract
• There are also arguments that tend to prove that a company also has an
institutional nature.

• First there are only a few defined types of companies, and you can NOT choose
any different type of company when you create a company.
• You can NOT combine different types of companies and create your own hybrid
type.

• Once your chose your type of company, you are BOUND by all the rules that
apply to it that are for example provided in the CSC, and it is strictly forbidden to
disrespect the imperative rules that apply to it.

• Incorporating a company automatically create a legal person which is distinct

from the founders/shareholders and this person is going to accomplish the object
of the company i.e conduct the business for which it was created in its own name
and on behalf of its shareholders.

But it is also an
institution
• There are 6 types of companies provided by the Tunisian
CSC:
• SNC – SCA – SCS – SARL – SA – SP

• There are some types of companies and businesses where

you are not even allowed to choose the type of
partnership you want to create.

• Example: To create a Bank you must be a… SA

• As all contracts, a company falls under the elements of a
valid contract:
• - Consent
• - Capacity
• - Object
• - Cause

Elements of validity
• Companies were first defined in the 1906 Tunisian Code des Obligations
et des Contrats as follows:
• Art 1249: “a company is a contract under which 2 or more persons put
their goods or their work or both of them in common, in order to share
the profit that would derive from it”.
• This is a general definition that could apply to civil and commercial
companies.
• In 2000 when the code des sociétés commerciales was enacted, the
legislator brought a new legal definition of a company:
• Art 2: “a company is a contract under which 2 or more persons decide to
joint their contributions in order to share the profit or benefit from the
savings that could derive from the activity of the company.
• However, in a sole owned company, the company is created by a sole
shareholder.”

Definition of a company
• What are the interests for creating a company?

• There is a economical interest

• A Legal interest
• And a social interest

Why creating a company?

• Nowadays, it is difficult for a person alone to have the
economical assets to make a company have a exponential
growth and to gain market shares in this modern society.

• Your own resources can allow you to create a small

commercial entity, but in order to grow, one may need to seek
funds from other people, this joint contribution of the assets of
different people can be a company.

• Thus a company allows its shareholders to have a bigger

common financial asset, to maximize profits and to minimize
losses.

ECONOMIC INTEREST
• This is the biggest advantage in creating a company: the
procedure separates the shareholders’ belongings from the
created legal person’s belongings.

• This separation limits the shareholders’ liability to their

contribution in capital companies. This is different from
Personal Companies where the owners pledge their own assets
to guarantee their debts.

• Moreover creating a company permits to maintain its activity

whatever happens to the shareholders (sickness, death, etc…)

LEGAL INTEREST
• The more a company grows the more positive impact it
has in its region in terms of job creation, decrease of
unemployment, and social welfare.

SOCIAL INTEREST
• What are the different categories of companies?

• Companies can be classified in Civil Companies vs

Commercial Companies
• And capital companies vs partnerships

Classification of
companies
• This is the category of companies that fall under the definition given in
article 1249.

• They are generally companies of which object isn’t commercial and

doesn’t fall under the definition of a commercial activity (as per art 2 of
the Commercial Code).

• They are usually encountered in civil operations such as agriculture and

teaching and within liberal professions such as lawyers, doctors,
architects.

• The registration rules apply to them, and they usually have a legal person
but are not bound by commercial accounting rules.

Civil Companies
• They are all the companies which usual professional activity falls
under the definition of Art 2 of the commercial code (Production,
Circulation, Entremise, speculations).

• These companies’ object is commercial (sociétés commerciales par

objet)

• Some of companies are automatically deemed commercial by their

form:
• Art 7 of CSC states that all SCA, SARL and SA are commercial
companies notwithstanding their object.

• There companies have been regulated by the CSC since 2000.

Commercial Companies
• These are « Intuitu Personae » companies that are founded basing on personal
considerations.

• The shareholders all know each other personally, and decided to gather in a
company for their interpersonal skills.

• Transfer of shares can only happen if the other shareholders agree, and the death
of one the shareholders can lead to the termination of the company if the other
shareholders do not agree otherwise.

• Such companies are generally family owned, closed to the public, and one of its
legal specifications is the unlimited joint liability of the shareholder proportional
to their belongings/their own patrimony.

• (SNC – SCS – SP)

Partnerships
• Capital companies – that will later be refered to as joint-stock
companies, are based on the joint monetary contribution of the
shareholder, notwithstanding any personal consideration.

• Shareholders can freely transfer their shares in the company,

and the death or insolvency of one of the shareholders doesn’t
have any effect on the company.

• Each shareholder’s liability is limited to his contribution to the

company. (SCA – SA)

Capital companies
• SARL can NOT be classified as a capital company; neither can
it be considered a partnership.

• Its legal framework is a mixture of both forms of companies.

• It is an « Intuitu Personae » company founded basing on

personal considerations;

• Each shareholder’s liability is limited to his contribution to the

company but at the same time transfer of shares can only
happen if the other shareholders agree, and the death of one the
shareholders can lead to the termination of the company

The HYBRID TYPE - SARL