The serious cause for removing the manager partner nominated in the partnership agreement: a security for investments with specific value

Abstract

This paper discusses the rule contained in the second paragraph of section 2072 of the Chilean Civil Code. Pursuant to this regulation, a “serious cause” is required in order to remove the partner designated as manager in the partnership agreement. The concept of “serious cause” is not defined by any statutory provision. Meanwhile, the courts and the scholarship have not agreed on a clear definition. To ascertain when a “serious cause” concurs, this paper argues that the economic rationale behind some decisions made by the partners have to be considered. These are the choice of the partnership form and the designation of a partner as its sole manager, being the latter a consequence of the presence of investments consisting in the partner-manager’s personal services, which have a specific value for the entrepreneurship. Finally, this paper describes some situations in which a “serious cause” would concur in light of the aforementioned interpretation.