What is a collective society?

We explain what a collective society is and the structure of its administration. In addition, examples and what is a limited partnership.

1. What is a collective society?

In commercial law , a collective society is understood as  one of the modes of commercial society that exist , that is, an external company (which acts as a person other than that of its partners) that conducts commercial or civil activities under the same name or business name. In other words, it is a form of commercial grouping.

Being a direct descendant of mercantile societies originating in the Middle Ages, it is one of the oldest corporate forms that exist . It is usually given as a continuation of a merchant’s inheritance, and even as an extension of a family business.

The collective society has as its main and distinctive feature an unlimited liability to the debt, that is, in case of not being able to cover its debts even for the liquidation of its assets, bankruptcy cases, suspension of payments, among others, the partners of the same must pay the payment to the creditors. The latter is distinguished from other forms such as the  public limited company  or the  limited liability company .

On the other hand, the administration of this type of society can take place from a structural point of view, as follows:

• Legal . Any member of the same will be the administrator, whose action must be agreed in a plural way. This method is imposed when the bylaws say nothing regarding the administration of the company.
• Privative . The company has an express administrator, appointed by an express agreement or by the bylaws of the company, and such responsibility will not be transferable without the signing of another agreement.
• Not privative . The figure of one or several possible administrators is established by agreement or contract, but said position will not be linked to the individual, but may be held by others, in accordance with the instructions of the partners.

2. Examples of collective society

Possible examples of collective societies are law firms , studies of architects, economists or auditors, when not medical groups; collective organizations in which the prestige of their partners and the trust they create is key to obtaining new clients .

3. Limited partnership

A limited partnership or limited partnership is, on the other hand, a type of personalist society , which presents both collective partners that respond unlimitedly to the debts incurred and participate in the conduct of the company; and limited partners that do not take part in the management but also in the responsibilities that exceed the capital strictly committed to the limited partnership.