Affectio societatis and company law

The concept of affectio societatis in company law generates considerable controversy. First, regarding whether it exists as a legal construct at all. Then, if its existence is acknowledged, both legal theory and judicial practice diff er on its role. The French legal doctrine and judicial practice have discussed this concept most extensively, as well as the concept of cause, while other relevant jurisdictions, such as German, British, and Swiss law, recognize neither of these concepts. Serbian company law does not explicitly recognize the aff ectio societatis as a named legal institution, but the question remains whether it can be presumed to exist, similar to the institution of cause, which the Serbian legislator does name but does not require to be explicitly stated in a contract, as it can be presumed (as a rebuttable presumption) to exist and to have signifi cance as a general condition for concluding a contract, like other such general conditions (legal capacity of contracting parties, mutual consent, lawful and permitted subject matter, cause/basis, and prescribed or agreed form). This paper discusses the conceptual defi nition of aff ectio societatis, stating that it has both a subjective defi nition (a common will to conclude a contract for establishing a company and acquiring the status of a member of that company) and an objective defi nition (contributing a certain share for the purpose of conducting specifi c activities to generate profi t under shared risk). Based on these premises, the paper concludes that this is a concept diff erent from other general contractual conditions, especially from mutual consent and cause. Ultimately, it concludes that the existence of aff ectio societatis in a company formation contract can be presumed by establishing both its subjective and objective components (determining the common intentionion of the contracting parties), and it emphasizes the importance of its existence due to its multiple roles. The role of aff ectio societatis can be synthesized into three areas. First, to diff erentiate a company from other organizational forms that may have the nature of an association but not of a legally valid commercial company (civil associations, de facto companies, secret companies, or fi ctitious entities). Second, to distinguish a company contract from other contracts that may contain some company-like elements but not all (employment contracts, loan or credit agreements, deposit agreements, consortium agreements, contractor-subcontractor agreements, etc.). Third, to distinguish companies from other organizational forms (economic interest groupings, associations, cooperatives, foundations, banking syndicates, insurance pools, etc.). This gives the concept a status comparable to other general conditions for concluding a company formation contract and other essential elements of such a contract, whose absence could render both the contract and the company established upon it null and void; yet, aff ectio societatis remains rare in company law due to the need to protect third parties who act in good faith when doing business with the company.