Explanation of Article 537
Articles (537-541) address the provisions related to the management of the company's funds. This article clarifies who has the authority to manage the company, as follows: The first paragraph states that the partners, according to the company's contract, can appoint someone to manage the company and act on its behalf, whether this appointee is from among the partners or from outside them. This agency may be stipulated in the company contract or through a special agreement, and the agency document specifies the agent's powers and the limits of their agency. The agent is not allowed to exceed the limits of this agency, and the general rules of contracting by agency, as stipulated in articles (98), apply to this agency. This agency generally includes management activities and transactions that fall within the company's purpose. It is assumed under the general agency that the partners have granted the manager sufficient authority to achieve the company's objectives, including management activities and transactions, such as collecting the company's rights, regular maintenance of the company's equipment, and the like. The second paragraph clarified the ruling if the partners did not appoint someone to manage it, whether from among them or from outside them, and decided that each partner has the right to manage the company's funds and act in a way that achieves the purpose for which it was established without needing to refer to the other partners. The system considers the lack of appointment by the partners of someone to manage the company's affairs as an implicit agreement by all partners that each of them is an agent for the other partners in managing the company's funds and acting to the extent that achieves the company's purpose for which it was established. The paragraph also referred to the right of the other partners to object to a partner who wants to perform a management activity or a transaction that falls within the company's purposes. If one of the partners objects, their objection must be presented to all partners, and there are two scenarios: The first scenario: The majority of partners, based on the value of the shares, reject the objection submitted by the objecting partner. In this scenario, the partner who wants to perform the activity may complete the objected activity. The second scenario: The majority does not reject the objection submitted by the partner. In this scenario, the objection remains, and the partner who wants to perform the activity may not complete the objected activity. This scenario includes cases where the partners' votes are equal, with half rejecting the objection and half supporting it; the objection remains, and the partner may not perform the activity. If the partner performs the objected activity, it will not be valid against the other partners because it exceeds the limits of the agency. The provisions contained in the article are not of public order; if there is an explicit or implicit agreement to the contrary, it must be adhered to, and an implicit agreement includes customary practices to the contrary.
Related To
Article 537
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Partners may appoint from among themselves or others a person to manage the company’s affairs and assets on their behalf.
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Unless agreed otherwise, if the partners do not appoint a person to manage the company’s affairs and assets, each partner shall be deemed an agent of the other partners in such management in order to achieve the purpose for which the company was established without consulting with the other partners. Each partner shall have the right to object to any act prior to completion thereof. Partners with majority shares shall have the right to reject an objection.