Silent partnerships - hybrid legal form between contract and organisation?

• Applicant: Dr. Anja Sophia Schwemmer
• Subject Area: Private Law
• Term: since 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 508231115

The German "Innengesellschaft" (probably best translated as "silent partnership") allows for a cooperation to achieve a common purpose without appearing as a company to the outside. The importance of such flexible, heterarchically structured forms of cooperation in business transactions is steadily increasing. Rigid organizations are being replaced by long-term business cooperation based on relational contracts: Whether it is the development of diesel engines in joint ventures or the administration of complex financial products by fintechs, a large number of highly specialized, independent market participants often work together. Legally, these network-like forms of cooperation are difficult to grasp. They lead into the grey area between exchange contract and company, in which the distribution of opportunities and risks and the scope of transparency and fiduciary duties often remain vague. This area is also becoming increasingly important in corporate financing: for example, venture capital is not always being granted in exchange for company shares, but often as so-called mezzanine capital in the form of loans with profit-related rates of interest or silent partnerships.The recently reformed partnership law for the first time explicitly provides for the silent partnership as a subtype of the civil law partnership that bridges the gap between contract and organization. Like other types of contract, it could have an important function as a yardstick, gap-filler and supplement for the many different practical arrangements. However, even in the course of the most recent "reform of the century," the silent partnership has received little attention, in contrast to its legally capable sister. The legislator has designed the silent partnership with only very few default rules while many legal uncertainties persist. These result from the hybrid character of the silent partnership between contract and organization and concern not only the difficult distinction between the silent partnership and other long-term contracts. The applicability of specific elements of company law is also anything but clear. The civil law problems also affect tax law, since the doctrine of "Mitunternehmerschaft" has, at least so far, has not consistently emancipated itself from civil law.Against this background, the research project will focus on the legal doctrine of "Innengesellschaften" under German law. It asks what exactly defines a partnership at the lower end of the spectrum of organizational consolidation and how the default rules for this type of cooperation should look like.

• DFG Programme: Research Grants