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
+for the exercise of a profession. (Art. 1767)
• has a juridical personality which is separate and distinct from
that of the partners. May sue and be sued in its name or by
its duly authorized representatives.
FORM OF PARTNERSHIP CONTRACT:
GENERAL RULE: No special form is required for the validity or
existence of the contract of partnership.
EXCEPTIONS:
1. Where immovable property or real rights are contributed, the
partnership contract shall be void unless:
a. It is reduced to writing in a public instrument (Art.
1771).
b. An inventory of the property contributed is made, signed
by the parties and attached to the public instrument.
(Art.1773)
2. Where the contract is by its terms not to be performed within
a year from the making thereof, such partnership contract is
covered by the statute of frauds and thus requires a written
agreement to be enforceable.
3. Where the contract of partnership has a capital of 3,000 pesos
or more, in money or property, it shall appear in a public
instrument and must be recorded in the Office of the
Securities and Exchange Commission.
• However, a partnership STILL has a juridical personality
even in case of failure to comply with this requirement.
REQUISITES OF A PARTNERSHIP:
1. Intention to create a partnership
2. Common fund obtained from the contributions
3. Joint interest in the profits
ESSENTIAL FEATURES:
1. there must be a valid contract
2. the parties must have legal capacity to enter into the contract
3. there must be mutual contribution of money, property and
industry to a common fund
4. the object must be lawful; and
5. the primary purpose must be to obtain profits
PARTNERSHIP VS. CO-OWNERSHIP
Creation: P-by contracts, express/implied C-by law, may exist
without contracts.
Juridical personality: P-has C-Has no JP
Purpose: P-profit realization C-common enjoyment of a thing or
right, not necessarily sharing profit.
Duration: P- No limitation C-agreement for the thing to be
undivided not more than 10 years.
Transfer of interest: P-unanimous consent C-can dispose without
consent
Power to act with 3rd person: P- in absence of stipulation, a
partner may bind the partnership C- cannot represent
Dissolution: P- Death/incapacity of partner C- D/I does not
Agency/Representation: P-rule, mutual agency C-No mutual
representation
PARTNERSHIP VS. CORPPORATION
Creation: P-Agreement of parties C-by law/operation of L.
Number of incorporators: P-at least 2 C-at least 5
Commencement of Juridical personality: P-at execution C-at date
of issuance of certificate of incorporation by SEC
Powers: P-any power authorized by partners C-only powers
expressly granted by law/implied for those granted/incident
Management: P-when management isn’t agreed upon, all the
partners are agent. C- Board of Directors/ Trustees
Term of Existence: P-any period of time stipulated (Agreed) by
partners C- may not be formed for a term in excess of 50 years
extendible to not more than 50 years in any one instance.
JOINT VENTURE
-Main distinction from partnership is that P is a general business
with some degree of continuity while JV is formed for the
execution of a single transaction and temporary in nature.
OTHER SIMILAR CONTRACTS:
1. Collaboration- the act of working together in a joint project.
2. Association- act of a number of persons uniting together for
some special purpose or business.
RULES TO DETERMINE EXISTENCE OF
PARTNERSHIP (ART 1769)
1. GENERAL RULE: Persons who are not partners as to each
other are not partners as to third persons. Don’t assume.
(can’t say partners if not.)
EXCEPTION: Partnership by estoppel. (Fake/Acting)
2. Co-ownership of a property does not itself establish a
partnership even if they share profit because of incidental
joint ownership.
3. Sharing of gross returns alone does not indicate a
partnership
4. Receipt of share in the profits is a strong presumptive
evidence of partnership. However, no such inference will be
drawn if such profits were received in payment:
(a) as a debt by installments or otherwise;
(b) as wages of an employee or rent to a landlord;
(c) as an annuity to a widow or representative of a deceased
partner;
d) as interest on a loan, though the amount of payment vary with
the profits of the business; and
(e) as the consideration for the sale of a goodwill of a business or
other property by installments or otherwise.
CLASSIFICATION OF A PARTNERSHIP:
• as to OBJECT:
1. Universal Partnership
a. UNIVERSAL PARTNERSHIP OF ALL
PRESENT PROPERTY -partners contribute all the
property which actually belong to them to a common
fund, with the intention of dividing the same among
themselves, as well as all the profits which they may
acquire therewith.
B. UNIVERSAL PARTNERSHIP OF PROFITS -
Universal partnership of profits: is one which
comprises all that the partners may acquire by their
industry or work during the existence of the
partnership and the usufruct of movable or
immovable property which each of the partners may
possess at the time of the celebration of the contract
(PROFIT ONLY)
2. Particular Partnership -one which has for its object
determinate things, their use and fruits, or a specific
undertaking, or the exercise of a profession or vocation.
(OBJECT IS UNIQUE/IRREPLACEABLE)
• as to LIABILITY OF PARTNERS:
1. General Partnership -pambayad even personal p. -A
partnership consisting of general partners who are liable
pro rata (PROPORTIONAL) and subsidiarily and
sometimes solidarily with their separate property for
partnership debts.
2. Limited Partnership -protected from liab. Only the
funds in the partnership are subject to partnership’s debt.
• as to DURATION:
1. Partnership at will-kung kalian gusto i-stop
2. Partnership with a fixed period-Fixed deadline
• as to LEGALITY OF BUSINESS:
1. De Jure Partnership- legal with papers (Jure=Judicial)
2. De Facto Partnership- no legal papers (Facto=Facts)
• as to REPRESENTATION TO OTHERS:
1. Ordinary or real partnership -as it is (real) exists among
the partners and also as to third persons.
2. Ostensible or partnership by estoppel -act (kunwariiii)
A
• as to PUBLICITY:
1. Secret Partnership -not known in public
2. Notorious or Open Partnership -public
• as to PURPOSE:
1. Commercial or Trading -transaction of business
2. Professional or Non-Trading -Profession
CLASSIFICATION OF PARTNERS:
• as to CONTRIBUTION:
1. Capitalist partner- money or property
2. Industrial Partner- industry/personal service
• as to LIABILITY:
1. General partner- includes separate property
2. Limited Partner- limited to capital contribution
• as to MANAGEMENT:
1. Managing partner- manages the business or affairs of
the partnership
2. Silent partner- known, not active.
3. Liquidating partner- one who takes charge of the
winding up of the partnership affairs upon dissolution
• MISCELLANIOUS:
1. Ostensible partner- active, known. Whether he is
interested in the business or not.
2. Secret partner- active, not known.
3. Dormant partner- not active, not known
CAPITALIST VS. INDUSTRIAL
Contribution: C-money or property I-mental/physical Ind.
Prohibition to engage in other business: C-no to similar enterprise
I-cannot engage in any, similar or not.
Profits: C-agreement, if none, pro rata to his contribution I-just
and equitable share
Losses: C-stipulation, agreement, pro rata to contri. I-exempted to
losses between partners BUT liable to 3rd persons without
prejudice (no bias/to be fair) to reimbursement from the capitalist
partner.
OBLIGATIONS OF PARTNERS AMONG THEMSELVES:
• Obligation with respect to contribution of property:
1. To contribute what had been promised.
2. To answer for eviction in case the partnership is deprived
of determinate property contributed.
3. To answer to the partnership for the fruits of the
property the contribution of which is delayed, from the
date they should have been contributed to the time of
actual delivery
4. To preserve the property with the diligence of a good
father of a family pending delivery to the partnership
5. To indemnify (compensate) the partners for any
damages caused to it by the retention of the same or by
delay in its contribution
OBLIGATIONS WITH RESPECT TO CONTRIBUTION OF
MONEY AND MONEY CONVERTED TO PERSONAL USE:
1. To contribute on the date due the amount he has
undertaken (promised) to contribute to the partnership
2. To reimburse any amount he may have taken from the
partnership coffers (cash box) and converted to his own
personal use
3. To pay the agreed or legal interest, if he fails to pay his
contribution on time or in case he takes any amount from
the common fund and converted to his own personal use
4. To indemnify the partnership for the damages caused to
it by the delay in the contribution or the conversion of
any sum for his personal benefit
OBLIGATION NOT TO ENGAGE IN OTHER BUSINESS
FOR HIMSELF:
• Industrial partner- cannot engage in any business for
himself unless the partnership expressly permits him to do
so. The other partners have the remedy of either excluding
the erring (nagkamali) partner from the firm or of availing
themselves of the benefits which he may have obtained.
• Capitalist partner- The prohibition extends only to any
operation which is of the same kind of business in which the
partnership is engaged unless there is a stipulation to the
contrary
OBLIGATION OF MANAGING PARTNER WHO
COLLECTS DEBT:
• Pro rata payments. (Proportionate)
Example: If a person/institution has a liability to a partnership,
PHP 80 and at the same time he/she also has separate liability
to the managing partner who collects debt for the partnership
of PHP 20, then the said debtor paid PHP110 with interest
therein. Therefore, as the payment is pro rata or proportional
PHP 88 is for the partnership, which will be the obligation of
the managing partner to deposit on their partnership and PHP
22 is for the managing partner as his personal money.
Requisites for the application of the rule:
1.
There exist two debts, one where the collecting partner is
creditor, the other, where the partnership is creditor.
2. Both debts are demandable
3. The partner who collects is authorized to manage and
actually manages the partnership
OBLIGATION OF PARTNER WHO RECEIVES SHARE IN
PARTNERSHIP CREDIT:
• (1) A partner who receives, in whole or in part, his share
in the partnership, (2) when the others have not collected
theirs, shall be obliged, if (3) the debtor (yung
pinautang ng partnership) should thereafter become
insolvent (wala ng pambayad), to bring to the
partnership capital what he received even though he
may have given receipt for his share only.
Requisites for application of rule: (1,2,3)
OBLIGATION OF PARTNER FOR DAMAGES TO
PARTNERSHIP:
• Every partner is responsible to the partnership for
damages suffered by it through his fault. He cannot
compensate them with the profits and benefits which he
may have earned for the partnership by his industry.
(Industrial partner)
DUTY TO RENDER INFORMATION:
• Partners shall render on demand true and full
information of all things affecting the partnership to any
partner or the legal representative of any deceased
partner, of any partner under legal disability.
OBLIGATION TO ACCOUNT FOR ANY BENEFIT AND
HOLD AS TRUSTEE UNAUTHORIZED PERSONAL
PROFITS:
• Every partner must account to the partnership for any
benefit, and hold as trustee for it any profits derived by
him without the consent of the other partners from any
transaction connected with the formation, conduct,
liquidation of the partnership or form any use by him
of its property.
RIGHTS OF A PARTNER:
• Property rights of a partner:
1. His rights in the specific partnership property
2. His interest in the partnership
3. His right to participate in the management
• Right to reimbursement for amounts advanced to the
partnership and to indemnification for risks in
consequence of management
• Right to associate with another person in his share
• Right of access and inspection of partnership books
• Right to true and full information of all things affecting
the partnership
• Right to a formal account of partnership affairs under
certain circumstances
• Right to have partnership dissolved under certain
conditions
A
RULES FOR DISTRIBUTION OF PROFITS AND LOSSES:
1. Distribution of profits:
a. According to their agreement (but not inequitously to
defeat Art.1799)
b. If none/no agreement,
• Share of capitalist partner shall be in proportion to
his capital contribution.
• Industrial partner shall receive such share as may
be just and equitable under the circumstances
2. Distribution of losses:
a. According to their agreement as to losses (but not
inequitously to defeat Art.1799)
b. If none, according to their agreement as to profits
c. If none, in proportion to his capital contribution, but the
purely industrial partner shall not be liable for the
losses. (no to losses, only liabilities from 3rd persons)
GENERAL RULE: A stipulation excluding a partner from any
share in the profits or losses is VOID (Article 1799)
EXCEPTION: Article 1797(2) excludes an industrial partner
from losses. Thus, a stipulation excluding an industrial partner
from losses is VALID, but he is NOT exempted from liability
insofar as third persons are concerned.
• NOTE: In general, LIABILITY refers to responsibility
towards third persons, and LOSSES refers to
responsibility as among partners. (INDUSTRIAL P.:
LOSSES=EXEMPT & LIABILITY=NOT EXEMPT)
CONTRACT OF SUB-PARTNERSHIP:
• One formed between a member of a partnership and a
third person for a division of profits owing to him from
the partnership enterprise.
• It is a partnership within a partnership distinct and
separate from the main or principal partnership
• Note: In the absence of unanimous consent of all the
partners, a sub-partner does not become a member of the
partnership. Hence, a sub-partner does not acquire the
rights of a partner nor is he liable for its debts.
PROPERTY RIGHTS OF A PARTNER:
1. Right to specific partnership property:
• contemplates tangible property
• The specific partnership property belongs to the partnership
as a separate juridical personality. The partners have no
actual interest in it until after dissolution.
2. Interest in the partnership:
• share in the profits and surplus
• A partner actually owns his respective share.
EFFECTS OF CONVEYANCE (PAGLIPAT) BY A
PARTNER OF HIS INTEREST IN THE PARTNERSHIP:
1. Conveyance of his whole interest –partnership may either
remain or be dissolved.
2. Assignee does not necessarily become a partner
3. Assignee cannot interfere in the management or
administration of the partnership business or affairs
4. Assignee cannot demand information, accounting and
inspection of the partnership books.
REMEDIES OF SEPARATE JUDGMENT CREDITOR OF A
PARTNER:
• Application for a charging order after securing
judgment on his credit to subject the interest of the
debtor partner with payment of unsatisfied amount
of the judgment debt.
• • GENERAL RULE: Act does not bind the
MANAGEMENT OF PARTNERSHIP
WHEN THE MANNER OF MANAGEMENT HAS BEEN
PROVIDED FOR IN THE PARTNERSHIP AGREEMENT:
A. When a managing partner has been appointed:
1. Appointment in the articles of partnership
a. Power is irrevocable without just or lawful cause
i. to remove him for JUST cause, vote of partners
representing controlling interest is necessary.
ii. to remove him without just cause or for an UNJUST
cause, there must be unanimity including his own vote.
b. Extent of Power:
i. if he acts in good faith, he may do all acts of
ADMINISTRATION, despite opposition of his partners
ii. if in bad faith, he cannot.
2. Appointment other than in the articles of partnership:
a. Power to act may be revoked at any time, with or without
just cause
b. Extent of power:
-as long as he remains manager, he can perform all acts
of administration, but if others oppose and he persists,
he can be removed.
WHEN TWO OR MORE MANAGING PARTNERS HAVE
BEEN ENTRUSTED WITH THE MANAGEMENT OF
PARTNERSHIP:
1. Without specification of their respective duties and
without stipulation requiring unanimity of action:
• GENERAL RULE: Each managing partner may
execute all acts of administration.
• EXCEPTION: If any of the managing partners
should oppose:
a. Decision of the majority of the managing
partners shall prevail
b. In case of a tie, decision of the partners
representing the controlling interest shall
prevail
2. With stipulation requiring unanimity of action:
• GENERAL RULE: Unanimous consent of all the
managing partners shall be necessary for the validity
of the acts and absence or inability of any managing
partner cannot be alleged.
• EXCEPTION: When there is an imminent danger of
grave or irreparable injury to the partnership, partner
may act alone without the consent of the partner who
is absent or under disability.
WHEN MANNER OF MANAGEMENT HAS NOT BEEN
AGREED UPON:
1. All partners shall be considered managers and agents
2. Unanimous consent required for alteration of
immovable property.
OBLIGATIONS OF PARTNERS TO THIRD PERSONS:
I. Liability for contractual obligations (ART 1816)
1. All partners, including industrial partners, are
personally liable with all their property. Their
individual liability is pro rata and subsidiary, unless
otherwise stipulated.
2. Liability of partnership for acts of partners:
a. Acts for apparently carrying on in the usual way the
business of the partnership.
• GENERAL RULE: Act binds the partnership
• EXCEPTION: Partnership is bound if:
i. acting partner has in fact no authority and
ii. the third person knows that the acting partner
has no authority
b. Acts of Strict Dominion or Ownership (acts which
are not apparently for carrying on in the usual way
the business of the partnership)
partnership
• EXCEPTION: Partnership is bound if:
i. the act is authorized by all the partners; or
ii. they have abandoned the business
c. Acts in contravention of a restriction on authority
• Partnership is not liable to third persons having actual or
presumptive knowledge of the restrictions.
A
LIABILITY ARISING FROM PARTNER’S TORT (ART
1822) OR BREACH OF TRUST (ART 1823)
1. Where, by any wrongful act or omission of any partner
acting in the ordinary course of business of the
partnership or with authority of his co-partners, loss or
injury is caused to any person, not being a partner in the
partnership (Article 1822)
2. Where one partner, acting within the scope of his
apparent authority, receives money or property of a
third person and misapplies it (Article 1823)
3. Where the partnership, in the course of its business,
receives money or property and it is misapplied by any
partner while it is in the custody of the partnership
(Article 1823)
NOTE: All partners are solidarily liable with the partnership for
any penalty or damage arising from a partnership tort or breach of
trust.
CRIMINAL LIABILITY OF PARTNERSHIP:
• Partnership liability does not extend to criminal liability
where the wrongdoing is regarded as individual in
character. But where the crime is statutory(permitted),
especially when it involves a fine rather than
imprisonment, criminal liability may be imposed.
PRINCIPLE OF DELECTUS PERSONARUM (choice of
person):
-A rule inherent in every partnership wherein no one can become
a member of the partnership without the consent of all the
partners.
• NOTE: This element of delectus personae is true only in
case of a general partner, but NOT as regards a limited
partner
MUTUAL AGENCY:
• Partnership is a contract of “mutual agency”, each partner
acting as a principal on his own behalf, and as an agent
of his co-partners and the partnership.
REQUISITES WHEN A PARTNER BINDS THE
PARTNERSHIP:
1. When he is expressly or impliedly authorized
2. When he acts in behalf and in the name of the
partnership.
PARTNERSHIP BY ESTOPPEL:
• Arises when a person, by words spoken or written or by
conduct, represents himself or consents to another
representing him to anyone, as partner in an existing
partnership, or with one or more persons not actual
partners; he is liable to any such person to whom such
representation has been made, who has, on the faith of
such representation given credit to the actual or apparent
partnership. (Art 1825)
DISSOLUTION:
• Change in the relation of the partners caused by any
partner ceasing to be associated in carrying on the
business. (Article 1828) (ayaw na)
• It is the point in time when the partners cease to carry on
the business together. It represents the demise (death) of
a partnership.
WINDING UP:
• Process of settling the partnership business or affairs
after dissolution.
TERMINATION:
• Point in time when all partnership affairs are wound up
or completed and is the end of the partnership life.
CAUSES OF DISSOLUTION:
1. Extrajudicial dissolution (ART 1830) - the parties may
agree to expand the grounds provided under Art 1830 but
NOT to delimit them. The causes enumerated are as
follows:
a. Without violation of the agreement between the
partners:
i. By the termination of the definite term or particular
undertaking specified in the agreement
ii. By the express will of any partner, who must act in
good faith, when no definite term or particular
undertaking is specified.
iii. By the express will of all the partners who have not
assigned their interest or suffered them to be
charged for their separate debts, either before or
after the termination of any specified term or
particular undertaking.
iv. By the expulsion of any partner from the business
bona fide (real) in accordance with such power
conferred (grant) by the agreement between the
partners
b. In contravention of the agreement between the partners,
where the circumstances do not permit a dissolution
under any other provision of this article by the express
will of any partner at any time.
c. By any event which makes it unlawful for the business
of the partnership to be carried on or for the members to
carry it on in partnership.
d. When a specific thing, a partner had promised to
contribute, perishes before its delivery. Or where the
partner only contributed the use or enjoyment of the
thing and has reserved ownership thereof, its loss,
before or after delivery dissolves the partnership.
e. By the death of any partner
f. By the insolvency of any partner or the partnership
g. By the civil interdiction (incapacity) of any partner
2. Judicial dissolution (ART 1831) - when so decreed
(ordered) by the court, the presiding judge may place the
partnership under receivership and direct an accounting to be
made towards winding up the partnership affairs
a. On application by or for any partner, the court shall
decree a dissolution whenever:
i. A partner has been declared insane in any
judicial proceeding or is shown to be of
unsound mind
ii. A partner becomes in any other way incapable
of performing his part of the partnership
contract.
iii. A partner has been guilty of such conduct as
tend to affect prejudicially (bias) the carrying
on of the business
iv. A partner willfully or persistently commits a
breach of the partnership agreement, or
otherwise so conducts himself in matters
relating to the partnership business that it is not
reasonably practicable to carry on the
business in partnership with him.
v. The business of the partnership can only be
carried on in a loss
vi. Other circumstances render a dissolution
equitable.
b. On application of the purchaser of a partner’s interest
under Article 1813 or 1814
i. After the termination of the specified term or
particular undertaking
ii. At any time if the partnership was a
partnership at will when the interest was
assigned or when the charging order was
issued.
----------------------------END OF PAGE 4----------------------------
SLIDE: 94
“SO DO NOT FEAR, FOR I AM WITH YOU, DO NOT BE
DISMAYED, FOR I AM YOUR GOD. I WILL
STRENGTHEN YOU AND HELP YOU; I WILL UPHOLD
YOU WITH MY RIGHTEOUS RIGHT HAND.”
ISAIAH 41:10
A
EFFECTS OF DISSOLUTION
As to partner’s authority to act for the partnership:
GENERAL RULE: Dissolution terminates all authority of any
partner to act for the partnership.
EXCEPTIONS:
1. Acts necessary to wind up partnership affairs
2. Acts necessary to complete transactions begun but not then
finished
Note: Thus, dissolution terminates the ACTUAL authority
of a partner to undertake NEW business for the partnership.
(NO NEW TRANSACTIONS)
RIGHTS OF A PARTNER UPON DISSOLUTION
Where dissolution is NOT in contravention of the partnership
agreement:
1. To have partnership property applied to discharge
partnership liabilities
2. To receive in cash his share of the surplus
Where dissolution is in contravention of the partnership
agreement:
1. Rights of a partner who has not caused the dissolution
wrongfully:
• To have partnership property applied to discharge
partnership liabilities
• To receive in cash his share of the surplus
• To be indemnified for damages caused by the partner
guilty of the wrongful dissolution
• To continue the business in the same name during
the agreed term of the partnership, by themselves or
jointly with others
2. Rights of a partner who has wrongfully caused the
dissolution:
• If the business is not continued by the other partners:
a. To have partnership property applied to
discharge partnership liabilities
b. To receive in cash his share of the surplus less
damages caused by his wrongful dissolution
• If the business is continued:
a. To have the value of his interest in the
partnership at the time of the dissolution;
surplus less damages caused by his wrongful
dissolution to his co-partners, ascertained and
paid in cash or secured by a bond approved by
the court
b. To be released from all existing and future
liabilities.
RIGHTS OF A PARTNER WHERE PARTNERSHIP
CONTRACT IS RESCINDED (CANCELLED) ON THE
GROUND OF FRAUD OR MISREPRESENTATION
1. LIEN/RETENTION (of money contributed by him),
surplus of partnership property after paying the
liabilities.
2. SUBROGATION in place of the partnership creditors
after payment of partnership liabilities
3. INDEMNIFICATION by the guilty partner against all
debts and liabilities of the partnership.
MANNER OF WINDING UP:
• Extrajudicial – personal, no court intervention
• Judicial – court
PERSONS AUTHORIZED TO WIND UP:
1. Partners designated by the agreement
2. In the absence of such agreement, all partners who have
not wrongfully dissolved the partnership
3. Legal representative of last surviving partner not
insolvent
ORDER OF PAYMENT IN WINDING UP:
• General Partnership (ART 1839 (2))
1. Those owing to creditors other than partners
2. Those owing to partners other than for capital or
profits
3. Those owing to partners in respect of capital
4. Those owing to partners in respect of profits
• Limited Partnership (ART 1863)
1. Those owing to creditors, except those to limited
partners on account of their contribution, and to
general partners
2. Those owing to limited partners in respect of their
share of the profits and other compensation by way
of income
3. Those owing to limited partners in respect of their
capital contributions
4. Those owing to general partners other than for capital
and profits
5. Those owing to general partners in respect of profits
6. Those owing to general partners in respect of capital
DOCTRINE OF MARSHALLING OF ASSETS (ARTICLE
1839(8)) [Study of Arranging of Assets]
1. Partnership creditors have preference in partnership
assets
2. Separate or individual creditors have preference in
separate or individual properties
3. Anything left from either goes to the other
PARTNER’S LIEN (right to keep possession)
-Right of every partner to have the partnership property applied to
discharge partnership liabilities AND to have the surplus assets, if
any, distributed in cash to the respective partners, after deducting
what may be due to the partnership from them as partners.
LIMITED PARTNERSHIP
-A partnership with both general and limited partners where the
limited partners are not personally liable for partnership’s debt.
CHARACTERISTICS OF LIMITED PARTNERSHIP:
1. Formed by substantial compliance in good faith with the
statutory requirements.
2. One or more general partners control the business and
are personally liable to creditors
3. One or more limited partners contribute to the capital
and share in the profits, not engaged in management, not
personally liable beyond the amount of capital
contribution.
4. Limited partners may ask for the return of their capital
contributions under the conditions prescribed by law.
5. The partnership debts are paid out of the common fund
and the individual properties of the general partners
MANAGEMENT OF LIMITED PARTNERSHIP:
-A general partner in a limited partnership is vested with the
entire control of the firm’s business
EXEMPTION:
Without written consent or ratification of all limited partners, to:
1. Do any act in contravention of the certificate;
2. Do any act which would make it impossible to carry on
the ordinary business of the partnership
3. Confess judgment against the partnership;
4. Possess partnership property, or assign their rights in
specific partnership property, for other that a partnership
purpose;
5. Admit a person as a general partner
6. Admit a person as a limited partner, unless the right to
do so is given in the certificate
7. Continue the business with the partnership property on
the death, retirement, insanity, civil interdiction or
insolvency of a general partner, unless the right to do so
is given in the certificate
• A limited partner is liable as a general partner for the
firm’s obligations if he takes part or interferes in the
management of the business. (If a limited partner
intervenes in managing the bus. he’ll also be liable in
liab.)
A
RIGHTS OF A LIMITED PARTNER • The prohibition is NOT ABSOLUTE, there is no such
1. To have the partnership books kept at the principal prohibition if the partnership assets are sufficient to discharge
place of business of the partnership partnership liabilities to persons not claiming as general or
2. To inspect, at a reasonable hour, partnership books and limited partners.
copy any of them
3. To demand true and full information of the things
affecting the partnership “Being confident of this very thing, that He who has begun a
4. To demand a formal account of the partnership affairs good work in you will complete it until the day of Jesus Christ”
whenever circumstances render it just and reasonable
5. To ask for dissolution and winding up by decree of Philippians 1:6
court
6. To receive a share in the profits or other compensation
by way of income (Provided: that the partnership assets
are in excess of partnership liabilities after such
payment)
7. To receive the return of his contribution provided:
a. All the liabilities of the partnership have been paid
OR the partnership assets are sufficient to pay
partnership liabilities
b. The consent of all the members (general and limited
partners) has been obtained.
c. The certificate is cancelled or so amended as to set
forth the withdrawal or reduction
LIABILITIES OF A LIMITED PARTNER:
1. Liability for unpaid contribution:
• Difference between actual contribution and stated
contribution in the certificate
• Unpaid contribution which he agreed to make in the
future at the certificate (at stated time and conditions)
2. Liability as trustee: (nasa kanya pero dapat hindi)
• Specific property stated in the certificate as
contributed by him, but which was not contributed or
which has been wrongfully returned
• Money or other property wrongfully paid or
conveyed to him on account of his contribution
SUBSTITUTED LIMITED PARTNER:
-A person admitted to all the rights of a limited partner who has
died of has assigned his interest in the partnership.
GENERAL RULE: He has all the rights and powers, and is
subject to all the restrictions and liabilities of his assignor
EXCEPTION: Those liabilities which he was ignorant (di niya
pa alam na assignee siya) at the time he became a limited partner
AND which could not be ascertained (can’t be discovered/find)
from the certificate
REQUISITES IN ORDER THAT THE ASSIGNEE MAY
BECOME A SUBSTITUTED LIMITED PARTNER
1. All the members must be consented OR the owner of the
certificate (limited partner) gives the assignee the right.
2. The certificate must be amended in accordance with
Art.1865
3. The certificate as amended must be registered in the
Securities and Exchange Commission (SEC)
ALLOWABLE TRANSACTIONS OF A LIMITED
PARTNER:
Being merely a contributor to the partnership is not prohibited
from:
1. Granting loans to the partnership
2. Transacting other business with the partnership
3. Receiving a pro rata share of the partnership assets
with the general creditors if he is NOT also a general
partner
PROHIBITED TRANSACTIONS OF A LIMITED
PARTNER:
1. Receiving or holding as collateral security any
partnership property
2. Receiving any payment, conveyance, or release from
liability if it will prejudice the partnership creditors
• Violation of the prohibition will give rise to the presumption
that it has been made to defraud partnership creditors