December 1, 1993

Atty. Val Antonio B. Suarez

Sycip, Salazar, Hernandez & Gatmaitan
105 Paseo de Roxas, 1200 Makati,
Metro Manila
Sir:

This refers to your letter of November 29, 1993 requesting confirmation on the
opinion previously issued by the Commission that a corporation can enter into a
partnership under certain conditions.
As stated, your client, a Dutch corporation, intends to establish a branch in the
Philippines. The Dutch corporation, through its Philippine branch, will then form a general
partnership with a Philippine corporation. The partnership will be registered with the
Commission and will engage in the development of a power plant on a build, operate and
transfer basis, pursuant to which the partnership will design, construct, own and operate
the power plant for 10 years. Hence, your request for confirmation that the Dutch
corporation, through its Philippine branch and the Philippine corporation may enter into a
general partnership for the purpose described above and register such partnership with the
Commission.
As a general rule, a corporation cannot enter into a contract of partnership with an
individual or another corporation, and the reasons, quoting American Authorities are, as
follows:
"According to the prevailing view a corporation has no implied
power to become a partner with an individual or another
corporation. This limitation is based on public policy, since in a
partnership the corporation would be bound by the acts of the
persons who are not its duly appointed and authorized agents
and officers, which would be entirely inconsistent with the
policy of the law that the corporation shall manage its own
affairs separately and exclusively." (13 A. Jur. S 823 [1938])
"It is fairly well settled that corporations cannot ordinarily
enter into partnerships with other corporations or with
individuals, for, in entering into a partnership the identity of
the corporation is lost or merged with that of another and the
directions of the affairs is placed on other hands than those
provided by the law of its creation. A corporation can act only
through its duly authorized agents and is not bound by the acts
of anyone else, while in partnership each member binds the
firm when acting within the scope of the partnership." (6

Fletcher Cyclopedia Corporations, S 2520 [perm. ed. rev. repl.

1950])

However, the Commission, on several occasions allowed exceptions to the application of the
above rule, provided the following conditions are complied with:

1.
The authority to enter into a partnership relation is expressly conferred by the
respective charters or articles of incorporation of the constituent corporations, and the
nature of the business venture to be undertaken by the partnership is in line with the
business authorized by the charter or articles of incorporation of the constituent
corporations.

2.
The agreement on the articles of partnership must provide that all the partners will
manage the partnership, and consequently, the articles of partnership must stipulate that
all the partners are and shall be jointly and severally liable for all the obligations of the
partnership;
"In a solidary or joint and several obligations, the relationship
between the active and passive subjects is so close that each of
the former or of the latter may demand the fulfillment of or
must comply with the whole obligations." (Paras, Civil Code of
the Philippines Annotated, citing 8 Manresa 194)

3.
The foreign corporation must obtain a license to transact business in the country in
accordance with the Corporation Code of the Philippines and the Foreign Investments Act.

Thus, for as long as the foregoing conditions are met, the above-mentioned proposed
articles of partnership may be registered.

Very truly yours,

(SGD.) ROSARIO N. LOPEZ

Chairman