MEMORY MATRIX OF DISSOLUTION, LIQUIDATION,
TERMINATION OF PARTNERSHIPS
GENERAL PARTNERSHIP
GROUNDS FOR (1) Without violation of the agreement between the
DISSOLUTION partners:
(a) By the termination of the definite term or
particular undertaking specified in the
agreement;
(b) By the express will of any partner, who must act
in good faith, when no definite term or particular
is specified;
(c) By the express will of all the partners who have
not assigned their interests or suffered them to be
charged for their separate debts, either before or
after the termination of any specified term or
particular undertaking;
(d) By the expulsion of any partner from the
business bona fide in accordance with such a
power conferred by the agreement between the
partners;
(2) In contravention of the agreement between the Upon the death of a limited partner, his executor or
partners, where the circumstances do not permit a administrator shall have:
dissolution under any other provision of this article, by the a. All the rights of a limited partner for the purpose of
express will of any partner at any time;
(3) 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;
(4) When a specific thing which a partner had promised
LIMITED PARTNERSHIP
A limited partner may have the partnership dissolved and its
affairs wound up when:
1. He rightfully but unsuccessfully demands the return
of his contribution; or
2. He has a right to contribution but his contribution is
not paid because the partnership property is
insufficient to pay its liabilities. (Art. 1857)
A limited partnership is dissolved in much the same way and
causes as an ordinary partnership.
General rule: The retirement, death, insolvency, insanity or
civil interdiction of a general partner dissolves the
partnership.
Exception: It is not so dissolved when the business is
continued by the remaining general partners:
a. Under a right to do so stated in the certificate; or
b. With the consent of all members. (Art. 1860)
settling his estate; and
b. The power to constitute an assignee as a
substituted limited partner, if the deceased was so
empowered in the certificate. The estate of a
deceased limited partner shall be liable for all his
liabilities as a limited partner. (Art. 1861)
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

to contribute to the partnership, perishes before the
delivery; in any case by the loss of the thing, when the
partner who contributed it having reserved the
ownership thereof, has only transferred to the partnership
the use or enjoyment of the same; but the partnership
shall not be dissolved by the loss of the thing when it
occurs after the partnership has acquired the ownership
thereof;
(5) By the death of any partner;
On due application to a court of competent jurisdiction by
any creditor of a limited partner, the court may charge the
interest of the indebted limited partner with payment of the
unsatisfied amount of such claim, and may appoint a
receiver, and make all other orders, directions and inquiries
which the circumstances of the case may require. (Art. 1862)
The interest may be redeemed with the separate property of
any general partner, but may not be redeemed with
partnership property.

(6) By the insolvency of any partner or of the partnership; The remedies conferred by the first paragraph shall not be
deemed exclusive of others which may exist.
(7) By the civil interdiction of any partner;
Nothing in this Chapter shall be held to deprive a limited
(8) By decree of court under Article 1831 of the Civil partner of his statutory exemption.
Code. (Art. 1830)
Limited Partnership: Priority in Distribution of Assets (Art. 1863)
On application by or for a partner the court shall decree (1) Those to creditors, in the order of priority as provided by
a dissolution whenever: law, except those to limited partners on account of their
(1) A partner has been declared insane in any contributions, and to general partners;
judicial proceeding or is shown to be of unsound (2) Those to limited partners in respect to their share of the
mind; profits and other compensation by way of income on their
(2) A partner becomes in any other way contributions;
incapable of performing his part of the (3) Those to limited partners in respect to the capital of their
partnership contract; contributions;
(3) A partner has been guilty of such conduct as (4) Those to general partners other than for capital and
tends to affect prejudicially the carrying on of the profits;
business; (5) Those to general partners in respect to profits;
(4) A partner wilfully or persistently commits a (6) Those to general partners in respect to capital.
breach of the partnership agreement, or
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

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;
(5) The business of the partnership can only be
carried on at a loss;
(6) Other circumstances render a dissolution
equitable. (Art. 1831)
On the application of the purchaser of a partner's
interest under Article 1813 or 1814:
(1) After the termination of the specified term or
particular undertaking;
(2) At any time if the partnership was a partnership
at will when the interest was assigned or when the
charging order was issued.
Subject to any statement in the certificate or to subsequent
agreement, limited partners share in the partnership assets
in respect to their claims for capital, and in respect to their
claims for profits or for compensation by way of income on
their contribution respectively, in proportion to the
respective amounts of such claims.
A limited partner in a partnership shall not become liable as
a general partner, unless in addition to the exercise of his
rights and powers as a limited one, he takes part in the
control and management of the business. As limited partners
will not be able to avail of the protection of the law as
regards liability.

KINDS OF DISSOLUTION 1. JUDICIAL DISSOLUTION 1. DISSOLUTION BY JUDICIAL DECREE

A partner may apply for dissolution in court when: A limited partner may petition for the dissolution of the
1. A partner has been declared insane in any judicial partnership when:
proceeding or is shown to be of unsound mind; a.) his demand for the return of his contribution is denied
although he has a right to such return; or
The partner may have been previously declared insane b.) his contribution is not paid although he is entitled to its
in a judicial proceeding; otherwise, his insanity must be return because the other liabilities of the partnership have
duly proved. It must materially affect the capacity of the not been paid or the partnership property is insufficient for
partner to perform his contractual duties as such (De their payment.
Leon)
2. DISSOLUTION BY PARTNER
2. A partner becomes in any other way incapable of The limited partner must first ask the other partners to have
performing his part of the partnership contract; the partnership dissolved; if they refuse, then he can seek the
3. A partner has been guilty of such conduct as tends to dissolution of the partnership by judicial decree.
affect prejudicially the carrying on of the business;
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

4. A partner willfully or persistently commits a breach of 3. DISSOLUTION BY OPERATION OF LAW

the partnership agreement, or otherwise so conducts The retirement, death, insolvency, insanity, or civil interdiction
himself in matters relating to the partnership business that of a general partner dissolves the partnership, unless the
it is not reasonably practicable to carry on the business business is continued by the remaining general partners or
in partnership with him; (1) Under the right to do so stated in the certificate, (2) With
5. The business of the partnership can only be carried on the consent of all the members. (Art. 1860)
at a loss;
6. Other circumstances render a dissolution equitable. A limited partnership may also be dissolved when all the
limited partners ceased to be such; or upon expiration of the
Reason for necessity of court decree: In the instances term for which it was to exist.
mentioned in Art. 1831, the facts may be so far open to
dispute as to make necessary judicial determination as
to dissolution, rather than allow them to be the occasion
for automatic dissolution by operation of law (De Leon)

2. EXTRAJUDICIAL DISSOLUTION
Where circumstances do not permit dissolution under
any other provision of Art. 1830, NCC it may also be
dissolved by the express will of any partner at any time.
Thus, even if there is a specified term, one partner can
cause its dissolution by expressly withdrawing even
before the expiration of the period, with or without
justifiable cause. Note that in no case a partner can be
compelled to remain in the partnership.

3. BY OPERATION LAW
1. 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;
2. When a specific thing which a partner had promised
to contribute, perishes before delivery, or by the loss of
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

the thing, only the use or enjoyment of which has been

contributed; the loss of a specific thing, however, does
not dissolve the corporation after its ownership has
already been transferred to the partnership;
3. By the death of any partner;
4. By the insolvency of any partner or of the partnership;

NOTE: The insolvency of the partner or of the partnership

must be adjudged by the court (De Leon)

5. By the civil interdiction of any partner;

Civil interdiction deprives the offender during the time of
his sentence of the right to manage his property and
dispose of such property by any act or any conveyance
inter vivos. [Art. 34, RPC]

PROCEDURE AND STEPS

(SOLVENT)

a. JUDICIAL DISSOLUTION 1. An application for dissolution of the partnership filed

• Application to court before the Regional Trial Court by or for a partner, or by a
A. By a partner on the ff grounds: purchaser or an assignee of a partner’s interest pursuant to
i. Insanity
the grounds provided under Article 1831 of the NCC
ii. Incapacity
iii. A partner has been guilty of such conduct as
tends to affect prejudicially the carrying on of the 2. If the application is sufficient in form and substance, and
business after hearing, the court shall issue a decree to dissolve the
iv. Business can be carried on at a loss partnership and direct the disposition of all the non-cash
vi. Other circumstances (abandonment of the assets in accordance with existing rules and regulations
business, fraud in the management of the business
and refusal without justifiable cause to render
3. Upon initiation of the liquidation proceedings, the court-
accounting of partnership affairs)
 GENERAL PARTNERSHIP
B. By a purchaser of a partner’s interest:
i. After the termination of the specific term or
particular undertaking; and
ii. at any time the partnership at will when the
interest was assigned or the charging order was
issued. (Art. 1834, De Leon)
WINDING UP
Unless otherwise agreed, the partners who have not
wrongfully dissolved the partnership or the legal
representative of the last surviving partner, not insolvent,
has the right to wind up the partnership affairs, provided
however, that any partner, his legal representative or his
assignee. Upon cause shown, may obtain winding up by
the court. (Art. 1836)
LIQUIDATION
Rules in settling accounts between partners after
dissolution
1. Assets of the partnership- They are:
a. Partnership property (including goodwill); 5. The court decree shall be submitted to the Securities and
and
b. Contributions of the partners necessary for
the payment of all liabilities in accordance with 6. Upon receipt of the lawful order dissolving the partnership,
Art. 1797.
2. Order of application of the assets- the partnership the partnership.
assets shall be applied to the satisfaction of the liabilities
LIMITED PARTNERSHIP
appointed liquidator shall administer the company and
perform the following tasks:
1. Sale of properties or non-cash assets
2. Settling partnership liabilities
3. Company management for the purpose of winding
up
4. Payment of partnership liabilities which shall be in the
following order:
1. Those owing to partnership creditors and limited
partner-creditors
2. Those owing to limited partners in respect of their
share of the profits and other compensation by way
of income on their contributions
3. Those owing to limited partners in respect to their
capital contributions
4. Those owing to general partners other than for capital
and profits
5. Those owing to general partners in respect to profits
6. Those owing to general partners in respect to capital
Exchange Commission (SEC)
the SEC shall issue a certificate canceling the registration of
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

of the partnership in the ff order:

a. Those owing to the partnership creditors;
b. Those owing to partners other for capital
and profits such as loans given by the partners or
advances for business expenses;
c. Those owing for the return of the capital
contribution by the partners; and
d. The share of the profits, if any, due to each
partner.

3. Right of a partner where assets insufficient- If the assets

enumerated in no. 1 are insufficient, the deficit is a
capital loss which requires contribution like any other loss.
Any partner or his legal representative or assignee for the
benefit of creditors or any person appointed by the
court, shall have the right to enforce the contributions of
the partners provided in Article 1797. If any of the
partners does not pay his share of the loss, the remaining
partners have to pay but they can sue the non-paying
partner for indemnification.

4. Liability of deceased partner’s individual property- the

individual property of the deceased partner shall be
liable for his share of the contributions necessary to satisfy
the liabilities of the partnership incurred while he was a
partner.

5. Priority of payment of partnership creditors/partner’s

creditors- When partnership properties of the partners
are in possession of the court for distribution, partnership
creditors shall first be paid from partnership property and
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

separate creditors from the individual properties of the

partners.

6. Distribution of property of insolvent partner- if a partner

is insolvent, his individual property shall be distributed as
follows:
a. Those owing to his separate creditors;
b. Those owing to partnership creditors;
c. Those owing to partners by way of contribution.
(De Leon)

b. EXTRAJUDICIAL 1) Appointment of liquidating partner/s who shall beThe partners agreed to dissolve the limited partnership and
responsible for: there is a settlement or agreement by them as to what to
a) making inventory of assets and liabilities of
receive.
the partnership; 1. There will be an appointment of liquidating
b) preservation of existing partnership assets; partner/partners who will be responsible for:
c) converting all partnership assets into cash;
a. making inventory of assets and liabilities of the
d) paying partnership creditors; partnership;
e) settling and closing partnership affairs; b. preservation of existing partnership assets;
f) disposing, conveying, and distributing the
c. converting all partnership assets into cash;
partnership’s remaining assets; and d. paying partnership creditors;
g) submitting the necessary reports to the e. settling and closing partnership affairs;
Securities and Exchange Commission (SEC). f. disposing, conveying, and distributing the
partnership’s remaining assets; and
g. submitting the necessary reports to the Securities and
2) The liquidating partner/s who have direct access Exchange Commission (SEC).
and responsibility to partnership funds shall be
covered by adequate bonds.
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

2. The liquidating partner/s who have direct access

and responsibility to partnership funds shall be covered by
3) Filing of the required documents for the dissolution adequate bonds.
of the partnership before the SEC and other 3. Filing of the required documents for the dissolution of
agencies. the partnership before the SEC and other agencies.
4. Once the dissolution is approved by the SEC, a
notice of dissolution shall be published in a newspaper of
4) Once the dissolution is approved by the SEC, a
general circulation and posted in public places in order for
notice of dissolution shall be published in a
interested parties to file their objections and/or claims.
newspaper of general circulation and posted in
5. If objections and/or claims by interested parties are
public places in order for interested parties to file
settled, the partnership assets shall be applied to the
their objections and/or claims.
satisfaction of the liabilities of the partnership and
distributed to those entitled thereto.
5) If objections and/or claims by interested parties 6. Partnership assets shall be converted to cash in order
are settled, the partnership assets shall be applied to satisfy partnership liabilities.
to the satisfaction of the liabilities of the
partnership and distributed to those entitled The liabilities of the partnership shall rank in order of
thereto. payment, as follows:
a. those owing to the partnership creditors;
6) Partnership assets shall be converted to cash in b. those owing to partners other than for capital and
order to satisfy partnership liabilities. profits;
c. those owing to partners in respect of capital;
The order of application of assets to the satisfaction d. Those owing to partners in respect of profits.
of the liabilities of the partnership must be in the
following order: 7. The remaining assets of the partnership shall be
distributed to the partners after full settlement of the
(1) those owing to the partnership creditors; liabilities of the partnership.
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

(2) those owing to partners other than for capital 8. Upon distribution of all the remaining partnership assets, a
and profits; report of liquidation shall be submitted to the SEC who will in
(3) those owing for the return of the capital turn, issue a certificate of cancellation.
contributed by the partners;
(4) the share of the profits due to each partner (if
any).

7) All remaining assets of the partnership shall be

distributed to the partners only after full settlement
of the liabilities of the partnership.

8) Upon distribution of all the remaining partnership

assets, a report of liquidation shall be submitted to
the SEC.

The SEC shall then issue a certification to the effect of

canceling the Articles of Partnership.

PROCEDURE AND STEPS

(INSOLVENT)

a. JUDICIAL Liquidation Procedure under the Civil Code Procedures and steps for liquidating a Limited Partnership
(INCLUDING UNDER 1. Application
FRIA) 1.a. by or for a partner the court shall decree a The General Partner(s) or the Liquidating Partners, as the
dissolution whenever: case may be, shall take care or cause to be taken a full
(1) A partner has been declared insane in any account of the Limited Partnership’s assets and liabilities as
judicial proceeding or is shown to be of unsound as of the date of the dissolution and shall proceed with
mind; reasonable promptness to liquidate the Limited Partnership’s
(2) A partner becomes in any other way assets and to terminate its business on a dissolution of the
incapable of performing his part of the Limited Partnership.
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

partnership contract;
(3) A partner has been guilty of such conduct as The assets of Limited Partnership, as and when available,
tends to affect prejudicially the carrying on of the shall be applied in the following order:
business;
(4) A partner willfully or persistently commits a 1. To the payment of all taxes, debts and other
breach of the partnership agreement, or obligations and liabilities of the Limited Partnership,
otherwise so conducts himself in matters relating including the necessary expenses of liquidation,
to the partnership business that it is not reasonably provided, however, that all debts and other
practicable to carry on the business in partnership obligations and liabilities of the Limited Partnership as
with him; to which personal liability exits with respect to any
(5) The business of the partnership can only be Partner shall be satisfied, or a reserve established for
carried on at a loss; them, prior to the satisfaction of any other debt or
(6) Other circumstances render a dissolution other obligation or liability of the Limited Partnership
equitable. as to which no personal liability of the General Partner
1.b. On the application of the purchaser of a exists; and provided further, however, that if a
partner’s interest under article 1813 or 1814: contingent debt, obligation or liability exists, a reserve,
(1) After the termination of the specified term or in such amount as the General Partner (s) or the
particular undertaking; Liquidating Partners deem reasonable, shall be
(2) At any time if the partnership was a partnership established to meet the contingent debt, obligation,
at will when the interest was assigned or when the or liability, which reserve shall be distributed as
charging order was issued. provided here, only on the termination of the
contingency;
2. Dissolution (effect)
Whether the partnership is the creditor or the debtor, the 2. To the Partners pro rata in accordance with their
contracts and obligations do not automatically cease. A respective Partner’s Percentage Interests.
dissolved partnership still has personality for the purpose
of winding up of its affairs, or of completing transactions The General Partner(s) or the Liquidating Partners shall
begun but finished. administer the liquidation of the Limited Partnership and the
termination of its business. It shall be allowed a reasonable
3. Termination of Authority time for the orderly liquidation of the Limited Partnership’s
Except so far as may be necessary to wind up assets and the discharge of liabilities to creditors, so as to
 GENERAL PARTNERSHIP
partnership affairs or to complete transactions begun but
not then finished, dissolution terminates all authority of
any partner to act for the partnership:
With respect to the partners,
When the dissolution is not by the act, insolvency or
death of a partner; or
When the dissolution is by such act, insolvency or death
of a partner, in cases where article 1833 so requires;
With respect to persons not partners, as declared in
article 1834.
4. Liability within the partnership
Where the dissolution is caused by the act, death or
insolvency of a partner, each partner is liable to his co-
partners for his share of any liability created by any
partner acting for the partnership as if the partnership
had not been dissolved unless:
The dissolution being by act of any partner, the partner
acting for the partnership had knowledge of the
dissolution; or
The dissolution being by the death or insolvency of a
partner, the partner acting for the partnership had
knowledge or notice of the death or insolvency. (Article
1833, NCC)
5. Distribution of Proceeds
In settling accounts between the partners after
dissolution, the following rules shall be observed, subject
to any agreement to the contrary:
(1) The assets of the partnership are:
(a) The partnership property,
LIMITED PARTNERSHIP
minimize losses resulting from the liquidation of the Limited
Partnership’s assets. Notwithstanding anything to the
contrary elsewhere provided in this Agreement, the General
Partner(s) or the Liquidating Partners shall not be personally
liable for the return of any part of any Partner’s capital
contribution. Any return shall be made solely from the Limited
Partnership’s assets.
Except as otherwise provided in this Agreement, no
dissolution or termination of the Limited Partnership shall
relieve, release, or discharge any Partner, or any of his or her
successors, assigns, heirs, or legal representatives from any
previous breach or default of, or any obligation incurred or
accrued under, any provision of this Agreement, and any
and all liabilities, claims, demands, or causes of action arising
from any of those breaches, defaults, and obligations shall
survive the dissolution and termination.
Upon compliance with the foregoing plan of liquidation and
distribution, the Limited Partnership shall be terminated and
the General Partner(s) or the Liquidating Partners shall file or
cause to be filed a cancellation of the Certificate of Limited
Partnership.
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

(b) The contributions of the partners necessary for

the payment of all the liabilities specified in No. 2.
(2) The liabilities of the partnership shall rank in order of
payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital
and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.
(3) The assets shall be applied in the order of their
declaration in No. 1 of this article to the satisfaction of the
liabilities.

(4) The partners shall contribute, as provided by article

1797, the amount necessary to satisfy the liabilities.

(5) An assignee for the benefit of creditors or any person

appointed by the court shall have the right to enforce
the contributions specified in the preceding number.

(6) Any partner or his legal representative shall have the

right to enforce the contributions specified in No. 4, to the
extent of the amount which he has paid in excess of his
share of the liability.

(7) The individual property of a deceased partner shall

be liable for the contributions specified in No. 4.

(8) When partnership property and the individual

properties of the partners are in possession of a court for
distribution, partnership creditors shall have priority on
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

partnership property and separate creditors on

individual property, saving the rights of lien or secured
creditors.

(9) Where a partner has become insolvent or his estate is

insolvent, the claims against his separate property shall
rank in the following order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of
contribution.

Financial Rehabilitation and Insolvency Act and AM 15-

04-06-SC
1. VOLUNTARY LIQUIDATION
1.a. Petition for Liquidation.
The insolvent debtor may apply for liquidation by filing a
verified petition for liquidation with the court. The petition
must include the following:
(a) a certificate attesting to the holding of a meeting of
the Board of Directors of a stock corporation or the Board
of Trustees of a non-stock corporation, as the case may
be, called for the purpose and the approval during the
meeting of a resolution to file the petition, signed by the
secretary of the meeting and at least a majority of the
members of the Board present during the meeting;
(b) a certificate attesting to the holding of a meeting of
the stockholders, members or partners comprising the
debtor, as the case may be, called for the purpose and
the approval during the meeting of a resolution to file the
petition by the stockholders holding at least two-thirds
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

(2/3) of the outstanding capital stock of the stock

corporation, or two-thirds (2/3) of the members or
partners in case of a non-stock corporation, association
or partnership, as the case may be, signed by the
chairman and the secretary of the meeting;
(c) a schedule of debts and liabilities, which lists all the
creditors of the debtor, indicating the name and last
address of record of each creditor; the amount of each
claim as to principal, interest, or penalties due thirty (30)
days prior to the date of filing; the nature of the claim;
and any pledge, lien, mortgage, judgment or other
security given for the payment thereof;
(d) an inventory of assets, which must list with reasonable
particularity all the assets of the debtor, whether in the
possession of the debtor or third parties, stating the
nature of each asset; the location and condition thereof;
the book value and market value of the asset, attaching
the corresponding certified copy of the certificate of title
thereof in case of real property, or the evidence of title
or ownership in case of movable property; the
encumbrances, liens or claims thereon, if any, and the
identities and addresses of the lien holders and
claimants;
(e) a schedule of current income and expenditures
within three (3) months prior to the filing of the petition;
(f) a list of all properties acquired by the debtor in the
immediately preceding two (2) years;
(g) a list of all properties sold, disposed of, or donated by
the debtor in the immediately preceding two (2) years;
(h) a schedule of the debtor's executory contracts and
unexpired leases;
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

(i) the audited financial statements of the debtor for the

immediately preceding three (3) years; and
(j) the income tax return of the debtor for the
immediately preceding year.1.a.1. Motion to convert to
liquidation.

At any time during the pendency of court-supervised or

pre-negotiated rehabilitation proceedings, the debtor
may also initiate liquidation proceedings by filing a
motion in the same court where the rehabilitation
proceedings are pending to convert the rehabilitation
proceedings into liquidation proceedings. The motion
shall be verified, shall contain or set forth the same
matters required in the preceding paragraph, and state
that the debtor is seeking immediate dissolution and
termination of its corporate existence.
1.b. Liquidation Order
If the petition or the motion, as the case may be, is
sufficient in form and substance, the court shall issue a
Liquidation Order or dismiss the petition within 10 working
days.

2. INVOLUNTARY LIQUIDATION
2.a.1. Petition for liquidation.
Three or more creditors the aggregate of whose claims is
at least either P1,000,000 or at least 25% of the subscribed
capital stock or partner’s contributions of the debtor,
whichever is higher, may apply for and seek the
liquidation of an insolvent debtor by filing a petition for
liquidation of the debtor with the court. The petition,
which must be verified, must indicate the names of at
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

least 3 nominees to the position of liquidator, and must

show that:
(a) there is no genuine issue of fact or law on the claim/s
of the petitioner/s, and that the due and demandable
payments thereon have not been made for at least one
hundred eighty (180) days or that the debtor has failed
generally to meet its liabilities as they fall due; and
(b) there is no substantial likelihood that the debtor may
be rehabilitated.
The petition shall also include information to the best
knowledge of the petitioners on:
(a) the schedule of debts and liabilities, including a list of
its known creditors with their addresses, amounts of
claims and collaterals, or securities, if any;
(b) the debtor's assets, including receivables and claims
against third parties; and
(c) the audited financial statements of the debtor for the
immediately preceding three (3) years.

2.a.2. Motion to convert to liquidation.

At any time during the pendency of or after a court-
supervised rehabilitation proceedings or pre-negotiated
rehabilitation proceedings, three or more creditors
whose claims is at least either P1,000,000 or at 25% of the
subscribed capital or partner’s contributions of the
debtor, whichever is higher, may also initiate liquidation
proceedings by filing a motion in the same court where
the rehabilitation proceedings are pending to convert
the rehabilitation proceedings into liquidation
proceedings. The motion shall be verified, shall contain
or set forth the same matters required in the preceding
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

paragraph, and state that the movants are seeking the

immediate liquidation of the debtor.

2.b. Bond
The petitioners shall post a bond in an amount at least
equal in value to the aggregate of their claims,
conditioned upon payment to the debtor of all expenses
and damages it may incur by reason of the filing of the
petition if the same is later denied or dismissed by the
court, or withdrawn by the petitioners without the
consent of the debtor.

2.c. Order of the court.

If the court finds the petition or motion sufficient in form
and substance, it must issue an order:
(1) directing the publication of the petition or motion in
a newspaper of general circulation once a week for two
(2) consecutive weeks; and

(2) directing the debtor and all creditors who are not the
petitioners to file their comment on the petition or motion
within fifteen (15) days from the date of last publication.
If, after considering the comments filed, the court
determines that the petition or motion is meritorious, it
shall issue the Liquidation Order

3. CONVERSION INTO A LIQUIDATION PROCEEDINGS

During the pendency of court-supervised or pre-
negotiated rehabilitation proceedings, the court may
order the conversion of rehabilitation proceedings to
liquidation proceedings pursuant to:
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

a) Section 25(c) of this Act- Within ten (10) days from

receipt of the report of the rehabilitation receiver
mentioned the court may convert the proceedings into
one for the liquidation of the debtor upon a finding that:
(1) the debtor is insolvent; and
(2)there is no substantial likelihood for the debtor to be
successfully rehabilitated as determined in accordance
with the rules to be promulgated by the Supreme Court.
b) Section 72 of this Act- If within the maximum
period of one (1) year from the date of the filing of the
petition to confirm a Rehabilitation Plan, no
Rehabilitation Plan is confirmed, a conversion may be
ordered motu propio or upon motion.
c) Section 75 of this Act- if the termination of
proceedings is due to failure of rehabilitation or dismissal
of the petition for reasons other than technical grounds,
the proceedings shall be immediately converted to
liquidation.; or
d) Section 90 of this Act-At any time during the
pendency of court-supervised or pre-negotiated
rehabilitation proceedings, through a motion filed by the
debtor to convert the proceedings;
e) or at any other time upon the recommendation of
the rehabilitation receiver that the rehabilitation of the
debtor is not feasible.

Thereupon, the court shall issue the Liquidation Order.

b. EXTRAJUDICIAL 1) By the partners who have not wrongfully dissolved the Extrajudicial dissolution, liquidation and termination of limited
partnership partnership are in case of Death, Insolvency, Insanity and
Civil Interdiction. A limited partner shall not become liable as
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

2) or by the legal representative of the last surviving a general partner, unless in addition to the exercise of his
partner (when all the partners are already dead), rights and powers as a limited one, he takes part in the
provided the last survivor was not insolvent. control and management of the business. The partnership
will be dissolved extrajudicially due to the death, Insolvency,
NOTE: Where the managing partners of the partnership Insanity or Civil Interdiction of any of the partner of the
has the necessary authority to liquidate its affairs under partnership unless the business is continued by the surviving
its article of co-partnership, he may sell the partnership partner in a limited partnership. A limited partner shall not
properties even AFTER the life of the partnership has become liable as a general partner, unless in addition to the
already expired since he, as manager, is empowered to exercise of his rights and powers as a limited one, he takes
wind up the business affairs of the partnership. part in the control and management of the business. As
limited partners will not be able to avail of the protection of
The following are authorized to wind up the affairs of the the law as regards liability
partnership:
(a) The partners designated by the agreement;
(b) In the absence of such agreement, all the
partners who have not wrongfully dissolved the
partnership; or
(c) The legal representative (executor or
administrator) of the last surviving partner (when
all the partners are already dead), not insolvent.
(Art. 1830[6].)

Survivor’s right and duty to liquidate:

When a member of a partnership dies, the duty of

liquidating its affairs devolves upon the surviving member
or members of the firm, not upon the legal representative
of the deceased partner (except when such partner was
the last surviving partner). (Lota vs. Tolentino, 90 Phil. 829
[1952]; Po Yeng Cheo vs. Lim Ka Yan, 44 Phil. 172 [1922];
Guidote vs. Borja, 53 Phil. 950 [1929].)
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

Powers of liquidating partner:

1. Make new contracts for the purpose of winding
up the partnership;
2. Powers of liquidating partner
3. Incur obligations to complete existing contracts or
preserve partnership assets
4. Incur expenses necessary in the conduct of
litigation

Steps in liquidation:
1. The insolvency of any partner or of the partnerships
shall cause the dissolution of the partnership. (Article
1830 NCC)
2. The liquidating partner (either designated in the
Articles of Incorporation or appointed by the
partners themselves) shall settle the accounts of the
partnership by making an inventory of the assets of
the partnership.
3. If any partner is insolvent, the claims against his
separate property shall rank in the following order:
a) Those owing to separate creditors;
b) Those owing to partnership creditors;
c) Those owing to partners by way of contribution.
(Article 1839(9) NCC)
4. If the partnership is insolvent, the claims against the
partnership’s assets shall be paid in the following order:
d) Those owing to creditors other than partners;
e) Those owing to partners other than for capital and
profits;
f) Those owing to partners in respect of capital;
g) Those owing to partners in respect of profits.
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

(Article 1839(2) NCC)

5. If the assets of the partnership are not enough to satisfy
the liabilities of the partnership, the partners shall
contribute the amount necessary to satisfy the liabilities.
(Article 1839(4) in relation to Article 1797 NCC)
6. A report of liquidation shall be submitted to the SEC.
7. the SEC shall issue a certification to the effect of
canceling the Articles of Partnership

Payment:
• Rights where dissolution not in contravention of
agreement:
a) to have the partnership property applied to
discharge the liabilities of the partnership
b) to have the surplus, if any, applied to pay in cash
the net amount owing to the respective partners
XPN: Unless otherwise agreed
• Rights where dissolution in contravention of
agreement:
A. Rights of partner who has not caused the dissolution
wrongfully:
a) to have partnership property applied for the
payment of its liabilities and to receive in cash his
share of the surplus
b) to be indemnified for damages caused by the
partner guilty of wrongful dissolution
c) to continue the business in the same name during
the agreed term of the partnership, by themselves
or jointly with others
d) to possess partnership property should they
decide to continue the business
 GENERAL PARTNERSHIP LIMITED PARTNERSHIP

B. Rights of partner who has wrongfully caused the

dissolution:
a) if partnership not continued by others, to have the
partnership property applied to discharge its
liabilities and to receive in cash his share of the
surplus less damages caused by his wrongful
dissolution
b) if the business is continued:
i) to have the value of his interest in the partnership
at the time of the dissolution to his co-partners,
ascertained and paid in cash or secured by bond
approved by the court
ii) to be released from all existing and future
liabilities of the partnership

Settlement of Account between partners:

Assets of the partnership include:
a. Partnership property (including goodwill)
b. Contributions of the partners

Order of application of the Assets:

a. First, those owing to partnership creditors
b. Second, those owing to partners other than for capital
and profits such as loans given by the partners or
advances for business expenses
c. Third, those owing for the return of the capital
contributed by the partners
d. Fourth, the share of the profits, if any, due to each
partner.