With the entry into force on September 22, 2022, of the new Commercial Code, approved by Decree – Law no. 1/2022 of May 25 (the “New CCom”), the unlimited liability general partnership will cease to exist being replaced by the limited liability general partnership (the “SNCL”), in which the respective shareholders limit their liability to the company´s assets, thus opening space to revitalize a type of company, in which working shareholders are foreseen, which has fallen into disuse.
The possibility of forming a limited liability company with working shareholders is, in our opinion, specially advantageous for companies that do not have enough capital for their activity and still need to attract talent and skills to grow and succeed in the market, such as start-ups, catering/restaurant companies where the chef does not have capital to contribute but his/her talent and name makes the company grow, law firms where the working shareholder contributes with his/her expertise, value, name and technical knowledge, among others.
The lack of limitation of the shareholders´ liability in general partnerships under the commercial code revoked by the New CCom was, in our opinion, the main reason for this type of company being disregarded by investors thus falling into disuse.
In fact, nowadays companies in which shareholders participate without limiting their liability are increasingly rare. Currently, in their great majority, business companies are characterized by the limitation of the shareholders liability to the capital each one, or all, globally subscribe. As such, when choosing among the type of companies that are available, the limitation of liability assumes a primordial relevance and it is precisely the limitation of liability in the SNCL one of the great innovations brought by the New CCom.
Characterized by being a small, family type of company, the SNCL is the only type of company in the New CCom with the requirement of a minimum of 2 shareholders, which may be capital or working shareholders, or both.
The capital shareholder is the one whose shareholding is based on an entry of cash or kind and participates in profits and losses in the proportion to the nominal value of the respective shareholding.
The working shareholder is the one whose contribution is made only of service (labour) and does not participate in the company´s loss, save if the contrary is provided for in the articles of association. The working shareholder participation is based on the contribution of a certain activity, work, or service that such shareholder undertakes to perform for the benefit of the company. Work contributions are not accounted for in the company´s share capital, and the articles of association must stipulate the percentage attributed to the working shareholder for profit distribution purposes.
In Mozambique, the Law of the Law Firms only provides for the type of private limited liability company (sociedade por quota), which means that it is not yet possible for form law firms as SNCL. We do, however, see great benefits in allowing the adoption of the SNCL type for law firms.