What are The Differences Between Company Types under Jordanian Law
Jordanian law allows investors and entrepreneurs to choose the legal form that best suits their business from several available company types, each with its own requirements and characteristics in terms of capital, management, liability, and investment opportunities. This article outlines the key differences between the Limited Liability Company (LLC), Private Shareholding Company, Public Shareholding Company, General Partnership, Simple (Limited) Partnership, and Non-Profit Company, to help you choose the form best suited to your venture.
First: Capital and Registration Requirements
Capital requirements, the minimum number of partners, and the duration of registration procedures vary significantly depending on the type of company, as follows:
Minimum Capital
- Limited Liability Company (LLC): Just one Jordanian Dinar (JOD 1).
- Private Shareholding Company: Determined by the founders themselves.
- Public Shareholding Company: JOD 500,000.
- General Partnership: No minimum capital requirement.
- Simple (Limited) Partnership: No minimum capital requirement.
- Non-Profit Company: No capital for distribution, as these companies are not profit-driven.
Minimum Number of Partners
- LLC: Two partners, with the possibility of converting into a single-member company.
- Private Shareholding Company: Two partners.
- Public Shareholding Company: Two partners plus shareholders.
- General Partnership: Two partners.
- Simple (Limited) Partnership: A minimum of two partners (a general partner and a limited partner).
- Non-Profit Company: Two or more partners.
Registration Duration
- LLC: Around 15 days.
- Private Shareholding Company: Around 20 to 30 days.
- Public Shareholding Company: More than 30 days.
- General Partnership: Relatively fast procedures.
- Simple (Limited) Partnership: Relatively fast procedures.
- Non-Profit Company: A moderate duration.
Second: Management and Governance
The management structure and the degree of compliance with corporate governance rules differ from one company type to another, as outlined below:
Required Board of Directors
- LLC: No board is required; a manager or a board of managers suffices.
- Private Shareholding Company: A board of directors is required.
- Public Shareholding Company: A board of directors is required, with between three and thirteen members.
- General Partnership: No board is required.
- Simple (Limited) Partnership: Management is limited to the general partners.
- Non-Profit Company: A board of directors is required.
Corporate Governance Rules
- LLC: Limited governance rules.
- Private Shareholding Company: Organized governance rules.
- Public Shareholding Company: Bound by full governance rules.
- General Partnership: Not subject to governance rules.
- Simple (Limited) Partnership: Limited governance rules.
- Non-Profit Company: Organized governance rules.
Auditor
- LLC: Required.
- Private Shareholding Company: Required.
- Public Shareholding Company: Required.
- General Partnership: Not mandatory except in certain cases.
- Simple (Limited) Partnership: Not mandatory except in certain cases.
- Non-Profit Company: Required.
Lawyer
- LLC: Not mandatory except in certain cases.
- Private Shareholding Company: Usually required.
- Public Shareholding Company: Mandatory.
- General Partnership: Not mandatory except in certain cases.
- Simple (Limited) Partnership: Not mandatory except in certain cases.
- Non-Profit Company: Varies depending on the company's objectives.
Third: Investment
Company types vary considerably in how well suited they are to attracting investment or going public, as follows:
Public Offering of Shares
- LLC: Not permitted.
- Private Shareholding Company: Not permitted.
- Public Shareholding Company: Permitted.
- General Partnership: Not permitted.
- Simple (Limited) Partnership: Not permitted.
- Non-Profit Company: Not permitted.
Suitability for Startups
- LLC: The most suitable option for startups.
- Private Shareholding Company: Suitable for fast-growing startups.
- Public Shareholding Company: Not suitable for startups.
- General Partnership: Possible.
- Simple (Limited) Partnership: Limited suitability.
- Non-Profit Company: Not applicable, since it is not profit-driven.
Institutional Investment
- LLC: Limited.
- Private Shareholding Company: Available.
- Public Shareholding Company: Available.
- General Partnership: Rare.
- Simple (Limited) Partnership: Rare.
- Non-Profit Company: Not applicable.
Fourth: Liability Structure
The liability structure is one of the most important differences between company types, as it determines the extent to which partners or shareholders are personally exposed to the company's obligations:
Scope of Partners' Liability
- LLC: A partner's liability is limited to their share of the capital.
- Private Shareholding Company: A shareholder's liability is limited to the shares they hold.
- Public Shareholding Company: A shareholder's liability is limited to the shares they hold.
- General Partnership: Partners bear joint and unlimited liability.
- Simple (Limited) Partnership: The general partner bears unlimited liability, while the limited partner's liability is limited to their share.
- Non-Profit Company: Limited liability.
Legal Personality
All the company types mentioned above enjoy a legal personality independent of their partners. The exception is the General Partnership, which, despite having an independent legal personality, still leaves its partners personally liable for the company's obligations.
Conclusion
Choosing the most suitable legal form for a company depends on several factors, including the amount of available capital, the number of partners, the need to attract investors or go public, and the willingness to bear personal liability for the company's obligations. Given the long-term legal and financial consequences of this choice, it is advisable to consult a specialized lawyer before making a final decision on the type of company best suited to your venture.