In the legislation of certain European countries, a specific form of contractual relationship is recognized, known as a silent partnership. This institute is based on an obligation law relationship between two parties, whereby one party invests capital in the business of the other, without that relationship being manifested toward third parties. The essential characteristic of a silent partnership lies precisely in its internal nature – the legal relationship remains confined to the contracting parties and produces no effects vis-à-vis third parties.
One of the participants in this relationship appears as the business operator, who acts in legal transactions and bears liability toward third parties, while the other participant, the so-called silent partner, remains in the background, without formally appearing in external relations. Although this institute is, in certain legal systems, situated within legislation governing companies, in a greater number of cases it is regulated under laws governing obligations.
Comparative law overview
In German law, the silent partnership appears in the form of stille Gesellschaft, governed by §§ 230-237 of the Handelsgesetzbuch (HGB), with the institute further developed through case law. German doctrine and practice additionally distinguish between typical and atypical silent partnerships, depending on the degree of involvement of the silent partner in the business and their economic position.
In French law, there exists an institute known as société en participation (Articles 1871-1873 of the Code civil), which likewise represents a form of internal partnership without legal personality. French law distinguishes between ‘hidden’ (occult) and ‘disclosed’ (ostensible) partnerships, depending on whether the relationship among partners is known to third parties, which has significant implications in terms of liability.
In Italian law, a related institute exists under the name associazione in partecipazione (Articles 2549-2554 of the Codice civile). It is an obligation law relationship in which one party manages the business and bears the business risk, while the other party contributes capital and acquires the right to participate in profits. Although it traditionally played an important role in practice, this institute has recently been normatively narrowed and today has significantly limited application.
In Croatian law, the silent partnership is expressly regulated by the provisions of the Companies Act (Articles 148-157). It is stipulated that a silent partnership is formed by a contract whereby one person (the silent partner) contributes a certain asset value to the business of another person (the entrepreneur), thereby acquiring the right to participate in profits and losses. At the same time, it is explicitly emphasized that a silent partnership does not have legal personality.
Unlike the aforementioned legal systems, Serbian law does not recognize the institute of a silent partnership as a separately regulated legal category. The Company Law does not provide for this form of organization, but similar legal effects are achieved in practice through general institutions of obligation law, primarily through partnership agreements or various investment agreements.
Domestic solutions
A partnership agreement implies joint investment for the purpose of achieving a specific goal but differs from a silent partnership in that it generally entails joint action and greater visibility of the relationship toward third parties. In contrast, in a silent partnership there is a pronounced asymmetry – one party acts in legal transactions, while the other remains invisible to third parties and exercises its rights exclusively within the internal relationship with the business operator.
In business practice in Serbia, contractual relationships frequently arise in which an investor contributes capital to another’s business, with the right to a share in profits, but without formally entering the corporate structure of the company. In this way, through flexible obligation law arrangements, effects similar to those of a silent partnership are achieved, but without a specific normative framework that would precisely regulate the position of the investor as a ‘silent partner’. Such a situation raises certain legal issues, particularly regarding investor protection, the legal qualification of the investment, and the allocation of risk.
In this context, the question often arises as to the relationship between the institute of a silent partnership and so-called joint venture agreements. A joint venture represents an innominate contractual concept, most commonly defined as a form of business cooperation aimed at the realization of a specific project. Unlike a silent partnership, which has a distinctly internal character and implies a more passive role of the investor, a joint venture encompasses a broader and more flexible framework of cooperation between two or more parties.
Additionally, a joint venture does not constitute a single legal institute with a predefined normative regime, but rather a concept that may be implemented through various legal forms – both contractual and corporate. In practice, this may involve a cooperation agreement, as well as the establishment of a separate legal entity as the project vehicle. Unlike a silent partnership, where there is a clear distinction between the ‘visible’ and ‘invisible’ partner, a joint venture is typically characterized by a greater balance among participants, as well as transparency in relations with third parties. Governance within a joint venture is most often shared, either through contractual decision-making mechanisms or through the bodies of a newly established legal entity. By contrast, in a silent partnership, decision-making is concentrated in the hands of the business operator, while the role of the silent partner is primarily limited to financial participation and the right to a share of profits.
Thus, the institute of a silent partnership is explicitly regulated in legal systems such as those of Germany, Austria, and Croatia, primarily within the framework of company law. In other continental systems, such as the French and Italian, this concept exists through related institutions of obligation law – société en participation and associazione in partecipazione. At the same time, in certain jurisdictions this institute has, over time, lost importance or undergone normative modifications.
In Serbian law, as in some other legal systems, the silent partnership does not exist as an independent statutory form. Nevertheless, its economic and functional effects are achieved through general rules of contract law, which demonstrates both the flexibility of obligation law and the need for careful legal structuring of specific business arrangements.
Note: This text reflects solely the personal opinion of the author and does not constitute legal advice.
