PARTNERSHIP

GENERAL PROVISIONS
What is a Contract Of Partnership?

By the contract of partnership, two or more

persons bind themselves to contribute money,
property, or industry to a common fund, with the
intention of dividing the profits among themselves.
Two or more persons may also form a partnership
for the exercise of a profession.
 What are the essential requisites of a
Contract of Partnership?

❑ There must be a valid contract

❑ There must be a contribution of money, property or
industry to a common fund
❑ It must be organized for gain or profit
❑ There should have a lawful object or purpose
❑It must be established for the common benefit or
interest of the partners
 What are the tests or indicia to determine the
existence of a partnership?
There are always 2 tests which must be applied to
determine if partnership exists:
❖ whether or not there is an agreement to contribute
money, property or industry to a common fund, and
❖ whether or not there is an intent of the contracting
parties to divide the profits among themselves
 What is meant by the Common Law and
Mercantile Law views of the nature of a
partnership?
❑In COMMON LAW VIEW – partnership is NOT a
juridical or legal person
❑In MERCANTILE VIEW – partnership is a juridical or
legal person

Note: In our jurisdiction we follow the mercantile view.

 What is the
“Principle of Separate Juridical Personality”
in partnership relations?
Within the context of Philippine law, a "partnership" is
treated as an artificial being created by operation of law
with a legal personality separate and distinct from its
partners. It proceeds from the concept that persons may
be allowed to pool their resources and funds to engage in
the pursuit of a common business objective without
necessarily organizing themselves into a corporation,
upon which the law imposes a much higher form of
regulation, limitation and standards.
What is the “Principle of Delectus Personae” in
partnership relations?
This refers to the rule which is inherent in every
partnership that no one can become a member of the
partnership association without the consent of all the
partners. Thus, even if a partner will associate another
in his share in the partnership, the associate shall not
be admitted into the partnership without the consent
of ALL the partners, even if the partner having an
associate, should be a manager.
What are the formalities required by law for the
organization or constitution of a partnership?

❑ If the partnership is general – it may be

constituted in any form, EXCEPT where immovable
property or real rights are contributed to the
common fund, in which case a public instrument, to
which is attached an inventory of said property,
signed by any of the partners, shall be necessary for
validity. ( Arts. 1771, 1773, NCC)
What are the formalities required by law for the
organization or constitution of a partnership?

Furthermore, if it has a capital of

P3,000.00 or more, it must appear in a
public instrument, which shall be recorded
in the securities and Exchange Commission.
However, this is not necessary for validity.
What are the formalities required by law for the
organization or constitution of a partnership?

❑ If the partnership is limited – it is required that the

contracting parties, in addition to the formalities
prescribed for the organization of a general partnership,
shall execute a certificate of limited partnership which
must be recorded in the Securities and Exchange
Commission. ( Art. 1843, NCC)
Note: These formalities must be complied with, otherwise,
the partnership is not limited but general.
 How are Partnerships formed?
Partnerships are required to be registered with the Securities and
Exchange Commission [SEC]. Registration is done by filing the Articles of
Partnership with the SEC. The Articles of Partnership set forth all the
terms and conditions mutually agreed by the partners thereto.
More specifically, the documents required are as follows:
[1] Proposed Articles of Partnership;
[2] Name Verification Slip;
[3] Bank Certificate of Deposit;
[4] Alien Certificate of Registration, Special Investors Resident Visa or
proof of other types of visa [in case of foreigner];
[5] Proof of Inward Remittance [in case of non-resident aliens].
 Distinguish between
Partnership and Private Corporation.
PARTNERSHIP
With regard to creation Created by voluntary
agreement of the partners
With regard to liability of Partners are usually liable to
members partnership creditors not only
to the extent of their
contribution to the firm but
even with their own private
property
CORPORATION
Always created by some
express legislative authority
either in the form of a special
law or of a general law
Stockholders of a corporation,
after they have paid for their
shares, are not subject to any
further liability, unless
otherwise provided by law.
 Distinguish between
Partnership and Private Corporation.
PARTNERSHIP
With regard to effect of death Death or bankruptcy of a
or bankruptcy of members partner usually causes the
dissolution of the partnership
With regard to effect of Because of the rule of delectus
transfer of interest personarum, a third person to
whom a partner has transferred
his interest in the partnership
does not become a partner
without the consent of ALL the
other partners
CORPORATION
Death or bankruptcy of a
stockholder does not result in
dissolution
a third person to whom a
stockholder has transferred his
shares becomes automatically a
stockholder even without the
consent of the other
stockholders
 Distinguish between
Partnership and Private Corporation.
PARTNERSHIP CORPORATION
With regard to effect of acts of As a general rule, the partners Whatever acts executed by
members are the agents of the stockholders for the account of
partnership, hence, the acts of the corporation, either
the partners done for the individually or collectively, are
account of the partnership are not binding on the corporation
binding not only to the
partnership but also on the
members

With regard to its existence no time limit for the existence a corporation can exist for a
of the partnership as this period not exceeding fifty (50)
depends on the agreement of years.
the parties
END OF PRESENTATION