ART.

1843 - DEFINITION OF LIMITED PARTNERSHIP

1) One or more general partners and one or more limited partners.

2) Limited partners are not subsidiarily liable or not liable beyond their
capital contribution.
3) Limited partners do not participate in the management.
4) Comply (mandatory) with statutory requirements in its formation.

WHAT IS SUBSIDIARY LIABILITY?

The partner is liable beyond his capital contribution or after all assets of the
partnership is exhausted, the partner pays the partnership liabilities from his
personal funds.

ART. 1844 – STATUTORY REQUIREMENTS

1) Certificate or Articles of Limited Partnership

2) File the certificate or articles at the SEC.
3) Important contents or the certificate or articles:
a) Add the word “Limited” in the partnership name.
b) Name, address, contribution of limited partner

ART. 1845 – CONTRIBUTIONS OF A LIMITED PARTNER

1) Cash or property
2) Services is not allowed

ART. 1846 – EFFECT IF SURNAME OF LIMITED PARTNER IS INCLUDED IN THE

PARTNERSHIP NAME

1) Surname of limited partner shall not appear in the partnership name

UNLESS also a surname of general partner or surname appeared prior to
becoming a limited partner
2) Violation – limited partner is liable as a general partner or subsidiarily
liable to partnership creditors.
ART. 1847 – LIABILITY FOR FALSITY IN CERTIFICATE OR ARTICLES OF LIMITED
PARTNERSHIP

1. Not liable as a general partner; merely a statutory penalty

ART. 1848 – EFFECT OF PARTICIPATION IN THE MANAGEMENT

1) Limited partner becomes liable as a general partner; subsidiarily liable.

2) Provision contemplates existing limited partnership. If participation is
during liquidation, not liable as a general partner.

ART. 1849 – ADMISSION OF ADDITIONAL LIMITED PARTNERS

1) File an amendment to the original certificate or articles of limited

partnership.

ART. 1850 – ACTS WHICH REQUIRES CONSENT OR RATIFICATION OF LIMITED

PARTNERS.

1) Contravention of the certificate i.e. any other business

2) Make impossible to carry the ordinary business
3) Confess a judgment
4) Possess partnership property or assign SPP
5) Admit a general partner
6) Admit a limited partner
7) Continue the business on the death, retirement, insanity, civil
interdiction or insolvency of a general partner.

ART. 1838 – RIGHTS OF A LIMITED PARTNER

1) Inspect and copy partnership books

2) Demand true and full information of all things affecting the partnership.
3) Ask for dissolution and winding up by decree of court.
4) Receive a share of the profits or other compensation by way of income
5) Return of his contribution (Art. 1856 & 1857)
ART. 1852 – STATUS OF PERSONS IN CASE OF FAILURE TO CREATE A LIMITED
PARTNERSHIP

1. Not liable as a general partner provided:

a) Renounces his interest in the profits or other compensation by
way of income before partnership becomes liable to third persons
b) Surname does not appear in the partnership name
c) Does not participate in the management

ART. 1853 – EFFECT OF BEING A GENERAL AND LIMITED PARTNER AT THE SAME
TIME

1) Has rights and powers of a general partner.

2) Subsidiarily liable to creditors
3) With respect to his contribution as limited partner, has rights of a
limited partner insofar as other partners are concerned (Art. 1855-
1858)

ART. 1854 – ALLOWABLE AND PROHIBITED BUSINESS TRANSACTIONS WITH

LIMITED PARTNERS.

1) ALLOWABLE TRANSACTIONS
a. Grant loans to the partnership
b. Other business transactions
c. Receive a pro rata share of the partnership assets except if also a
general partner

2) PROHIBITED TRANSACTIONS
a. Receiving or holding as collateral security any partnership property
b. Receiving any payment, conveyance, release from liability if it will
prejudice third persons

3) Any violation of the prohibition is presume to defraud partnership

creditors

4) Third persons enjoy preferential rights to the partnership property over

limited partners
ART. 1855 – PREFERRED LIMITED PARTNERS

1) Preference over other limited partners

a) Return of contribution
b) Compensation by way of income
c) Any other matter
2) Preference must be stated in the certificate or articles otherwise equal
footing.

ART. 1856 – CONDITIONS WHEN A LIMITED PARTNER CAN RECEIVED

COMPENSATION BY WAY OF INCOME OR SHARE IN THE
PROFITS

1) Excess of partnership assets over partnership liabilities after payment

2) Liabilities to limited partners are not included in no. 1 (only liabilities to
third persons)

ART. 1857 – REQUISITES FOR RETURN OF CONTRIBUTION

1. REQUISITES
a) All liabilities have been paid or assets are sufficient to pay such liabilities
b) Consent of all partners (general and limited) except when matter of right
c) Certificate is cancelled or amended.

2. When return of contribution is a matter of right:

a) Dissolution
b) On the date specified in the articles or certificate
c) After expiration of six months’ notice in writing given to the partners
if no time is fixed.

3. Return of contribution shall be cash only even if property is contributed

EXCEPT:
a) Agreement
b) Consent of all partners (general or limited)

4. Grounds for dissolution by a limited partner (court decree):

a) Demand for the return of contribution is denied even if he has a right
b) Return of contribution is a matter of right but assets are not
sufficient to pay liabilities.
c) Judicial dissolution only if other partners are not willing to dissolve
extrajudicially.

ART. 1858 – LIABILITY OF LIMITED PARTNER TO PARTNERSHIP

1) Not to the partnership creditors EXCEPT for false statement (art. 1847)

2) For unpaid contribution

3) As trustee for property not contributed or wrongfully returned to

him, money and other property wrongfully paid or conveyed to him
on account of his contribution

4) Requisites for waiver or compromise of liability of limited partner

a) Consent of all partners
b) Does not prejudice partnership creditors.

5) Liability for return of contribution lawfully received – to pay creditors

who extended credit before such return.

ART. 1859 – ASSIGNMENT OF LIMITED PARTNER’S INTEREST

1) No dissolution is effected.

2) Rights of assignee:
a) Receive the share of the profits of the assignor
b) No right to accounting except when he becomes a substituted
limited partner.

3) When assignee becomes a substituted limited partner:

a) Consent of all partners
b) Amendment of certificate or articles
c) Amendment must be registered with SEC

4) Liability of substituted limited partner (SLP) and assignor

a) SLP is liable for all liabilities of the assignor
 b) Assignor is released from liability EXCEPT when there is false
statement in the certificate and liability arose before the
substitution

ART. 1860 – EFFECT OF RETIREMENT, DEATH, INSOLVENCY, INSANITY OR CIVIL

INTERDICTION OF A GENERAL PARTNER

1) Partnership is dissolved unless business is continued by the remaining

general partners:
a) Remaining general partners have a right to continue business
b) Consent of all partners

2) If it involves a limited partner, no dissolution takes place

ART. 1861 – RIGHT OF EXECUTOR ON DEATH OF A LIMITED PARTNER

1) Settle the affairs of the limited partner.

2) Act as a substituted limited partner

ART. 1862 – RIGHTS OF CREDITORS OF LIMITED PARTNER

1) Ask the court for charging order for the payment of claims
2) Interest charged may be redeemed by the separate property of any
general partner
3) Interest charged may be redeemed by SPP with consent of all partners

ART. 1863 – PRIORITY IN THE DISTRIBUTION OF PARTNERSHIP ASSETS.

1) Due to creditors (including limited partners)

2) Due to limited partners – profits
3) Due to limited partners – contribution
4) Due to general partners – liability
5) Due to general partners – profits
6) Due to general partners – contribution

ART. 1864 – CERTIFICATE OR ARTICLES IS CANCELLED

1) Dissolution
2) No more limited partners
3) All other cases requires only amendment

ART. 1865 – REQUIREMENTS FOR AMENDMENT/CANCELLATION OF

CERTIFICATE OR ARTICLES

1) In writing
2) Signed and sworn
3) Filed before the SEC

ART. 1866 – A MERE CONTRIBUTOR

1) Limited partner is not included in the suit except to enforce a limited

partner’s liability

2) No right of action against third persons involving partnership affairs

except to enforce a limited partner’s right.

ART. 1867 – PROVISIONS FOR EXITING LIMITED PARTNERSHIP (NOT

APPLICABLE ANYMORE AT THE PRESENT)