Types of Companies under Syrian Law

• Choosing a company's legal form is the first decision partners make, and the most consequential. It determines who bears the company's debts, to what extent, and whether liability reaches a partner's personal assets or stops at the limit of his share. This matter is governed by Legislative Decree No. 29 of 2011.

First: Form versus Type:

• The law distinguishes between two concepts that are frequently confused:
• Form concerns the company's internal structure: the number of partners, the manner of management, and the extent of each partner's liability for debts. Article 5 confines it to five forms and no more.
• Type concerns the company's purpose, ownership, or place of activity. Article 6 enumerates seven types.
• A single company therefore has both a form and a type: it may be a limited liability company in form and a holding company in type.

Second: The Five Legal Forms:

1. General Partnership

- Composed of two or more partners, with unlimited liability: a partner answers for the company's debts with all of his personal assets, not merely with his share. He acquires the status of a merchant, and the company's bankruptcy entails his personal bankruptcy.

- It is distinguished as the only form permitting a partner's - contribution to consist of work rather than capital.

- Suitable for: small ventures between partners bound by complete personal trust.

2. Limited Partnership

- Comprises two categories of partner: a general partner who manages the company and answers with all of his assets, and a limited partner who contributes to the capital without managing, whose liability is confined to the extent of his contribution.

- Care must be taken that the limited partner's name does not appear in the company's name; otherwise he is deemed a general partner and forfeits that protection.

- Suitable for: those wishing to finance a venture without managing it or assuming its full risk.

3. Undisclosed Partnership

- A concealed company unknown to third parties, confined to the partners themselves, with a single apparent partner dealing with third parties in his own name. It is the only form that possesses no legal personality and is not subject to registration or publication.

- Suitable for: a single defined transaction, or where a partner wishes not to appear.

4. Limited Liability Company

- Composed of at least two partners; the law permits it to consist of a single person, in which case it is termed a single-member limited liability company.

- A partner's liability is confined to the extent of his share and does not reach his personal assets. This accounts for its prevalence.

- Its shares may not be offered for public subscription, nor may it engage in banking, insurance, or savings activities.

- Suitable for: small and medium enterprises, family investments, and service and contracting companies.

5. Joint Stock Company

- Of two kinds: a public company whose shareholders number no fewer than ten and whose shares are tradable and may be listed on financial markets, and a private company whose shareholders number no fewer than three, without public offering.

- A shareholder's liability is confined to the value of his shares.

- Suitable for: large projects requiring substantial capital, and banking and insurance activities.

Third: Types of Companies:

• Article 6 enumerates seven types: commercial companies; joint companies in which the State participates; joint stock companies wholly owned by the State; free zone companies; holding companies, whose activity is confined to owning interests in other companies; offshore companies, whose activity is confined to outside Syria; and civil companies among members of the intellectual professions.

Fourth: When a Company Acquires Legal Existence:

• A company acquires legal personality vis-à-vis third parties only upon its publication and registration; the undisclosed partnership alone is excepted.
• A consequence of great importance follows: whoever contracts in the company's name before its registration answers for its obligations personally and jointly. The pre-registration stage is therefore the most hazardous phase of any venture.
• The law further requires that the company's constitutive contract be drawn up by an attorney enrolled on the roll of senior advocates for no less than five years.

Fifth: The Unregistered Company:

• Partners may work together without a written contract and without registration, supposing that this relieves them of liability. The reality is the opposite.
• The law does not permit partners to invoke the company's nullity against third parties, and it grants third parties the right to claim against all partners jointly. The company's existence may be proved by all means of evidence, including witness testimony — a position settled by the General Assembly of the Court of Cassation in Decision No. 261, File No. 442 of 1999.

Conclusion:

Each of the five forms has its place, and none is superior in the abstract. The decisive criterion is the extent of personal assets a partner is willing to expose to risk.

A carefully drafted contract — one regulating management, the mechanism for a partner's exit, and what occurs upon his death remains the first safeguard against disputes that seldom arise from bad faith, but from a contract silent on what it ought to have addressed.

This article is a general overview and does not substitute for legal advice in a particular case.