Article 1846

The surname of a limited partner shall not appear in the partnership name unless:

(1) It is also the surname of a general partner

(2) Prior to the time when the limited partner became such, the business had been carried on under a
name in which his surname appeared A limited partner whose surname appears in a partnership name
contrary to the provisions of the first paragraph is liable as a general partner to partnership creditors who
extend credit to the partnership without actual knowledge that he is not a general partner.

● The surname of the limited partner should not appear except if it is also the surname of a general
partner or if at the time of his admission, it was already being used.
● If the limited partner allows that his sumame be used, then he shall be held liable as a general
partner as to 3 persons who extended credit not knowing he was a limited partner.
● If the creditor has knowledge of his being a limited partner. then this rule shall not apply.

Article 1848
A limited partner shall not become liable as a general partner unless, in addition to the exercise of his
rights and powers as a limited partner, he takes part in the control of the business.
● The limited partner who, aside from his powers, participates in the management of the
partnership becomes liable as a general partner.

Article 1849
After the formation of a limited partnership, additional limited partners may be admitted upon filing an
amendment to the original certificate in accordance with the requirements of Article 1865

● Suppose that in a limited partnership, there are only 2 general partners and 1 limited partner. Can
you add another limited partner? Yes, amend the certificate under Article 1865 and do so.

Article 1850
A general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of
a partner in a partnership without limited partners. However, without the written consent or ratification of
the specific act by all the limited partners, a general partner or all of the general partners have no
authority 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 a judgment against the partnership
(4) Possess partnership property, or assign their rights in specific partnership property, for other than 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 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

● Refers to the power, liabilities and limitations of general partners in a limited partnership.
● A general partner has the same rights, powers and limitations in a limited partnership as when he
would have been in a general partnership.
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• A general partner, without written consent from ALL limited partners, cannot
(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 a judgment against the partnership
(4) Possess partnership property, or assign their rights in specific partnership property
(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 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 If there are 100 general
partners and 1 dies, the partnership will be dissolved. However, this rule will not apply in the case of
limited partners. If there are 5 limited partners and 1 dies. then the partnership will still continue. A limited
partnership will continue (not dissolve) even in cases of the death of a limited partner as long as there is
still ONE surviving limited partner in the partnership

Article 1851
A limited partner shall have the same rights as a general partner to:
(1) Have the partnership books kept at the principal place of business of the partnership, and at a
reasonable hour to inspect and copy any of them.
(2) Have on demand true and full information of all things affecting the partnership, and a formal account
of partnership affairs whenever circumstances render it just and reasonable
(3) Have dissolution and winding up by decree of court

A limited partner shall have the right to receive a share of the profits or other compensation by way of
income and to the return of his contribution as provided in Articles 1856 and 1857.
● This Article is important as far as the limited partner is concerned as it shows them what rights
they have.
● A limited partner is given the same rights as the general partner, that is
(1) They can require that the partnership books be kept at the principal place of business.
(2) Inspect and copy partnership books.
(3) Demand true and full information regarding all matters concerning the partnership.
(4) Demand for legal winding up or dissolution
(5) Share in profits, other compensation by way of income and the return of contributions.

Article 1852
Without prejudice to the provisions of Article 1848, a person who has contributed to the capital of a
business conducted by a person or partnership erroneously believing that he has become a limited
partner in a limited partnership, is not, by reason of his exercise of the rights of a limited partner, a
general partner with the person or in the partnership carrying on the business, or bound by the obligations
of such person or partnership, provided that on ascertaining the mistake he promptly renounces his
interest in the profits of the business, or other compensation by way of income.

● Refers to a failure to create a limited partnership.

● Suppose A, B and C form a limited partnership, with C being the limited partner with a
contribution of P20,000,00. The certificate that they sign says that C is a general partner. What,
then, if C. believing himself to be a limited partner, begins to exercise his rights as such? C
cannot be held liable, as a general partner, if upon his realization of the error, he prompt
renounces his involvement with the partnership, except
(1) If he participates in the management of the partnership
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(2) If his surname is used in the partnership name Consider the situation above, but this time, C's
name is not
● mentioned at all. What happens then? If that is the case, then there is no limited partnership
because there is no limited partner mentioned. The law anticipates a situation where in the
person is a limited partner but his name is not mentioned as such or not mentioned at all in the
certificate.

Article 1853
A person may be a general partner and a limited partner in the same partnership at the same time,
provided that this fact shall be stated in the certificate provided for in Article 1844.

A person who is a general, and also at the same time a limited partner, shall have all the rights and
powers and be subject to all the restrictions of a general partner; except that, in respect to his
contribution, he shall have the rights against the other members which he would have had if he were not
also a general partner.

● A partner can be a limited and general partner at the same time provided that this fact is STATED
IN THE CERTIFICATE that he signs, Who are they to 3 persons then?
-They are general partners as to 3" persons but as amongst the partners themselves, they are
seen as limited partners with regards to their contribution

Article 1854
A limited partner also may loan money to and transact with other businesses with the partnership, and,
unless he is also a general partner, receive on account of resulting claims against the partnership, with
general creditors, a pro rata share of the assets. No limited partner shall in respect to any such claim:

(1) Receive or hold as collateral security any partnership property

(2) Receive from a general partner or the partnership any payment, conveyance, or release from liability,
if at the time the assets of the partnership are not sufficient to discharge partnership liabilities to persons
not claiming as general or limited partners.

The receiving of collateral security, or a payment, conveyance or release in violation of the foregoing
provisions is a fraud on the creditors of the partnership.
● •Provides that a limited partner can extend credit or transact with partnerships that he is part of.
He is also entitled to partnership assets pro rata to creditors but it cannot be used as collateral
from the partnership. • Suppose X & Co. owes D a sum of P20,000.00 and C, a limited partner,
P20,000.00. The total assets of the partnership is P50,000.00. How shall these be settled? Both
C and D can simultaneously collect from the partnership as partnership assets are sufficient to
cover BOTH. However, if partnership assets are only P20,000.00, C cannot share in it because it
would prejudice D's claim.

Article 1851
Where there are several limited partners the members may agree that one or more of the limited partners
shall have a priority over other limited partners as to the return of their contributions, as to their
compensation by way of income, or as to any other matter. If such an agreement is made, it shall be
stated in the certificate, and in the absence of such a statement, all the limited partners shall stand upon
equal footing.
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● Suppose that there are three limited partners. These partners can agree (because there are more
than 1) that one of them can have priority over the others provided that such SHOULD BE
STATED IN THE CERTIFICATE.

Article 1856
A limited partner may receive from the partnership the share of the profits or the compensation by way of
income stipulated for in the certificate; provided, that after such payment is made, whether from the
property of the partnership or that of a general partner, the partnership assets are in excess of all
liabilities of the partnership except liabilities to limited partners on account of their contributions and to
general partners.

● The limited partner is entitled to share in payment by share. in profits or other compensation by
way of income provided that the partnership assets are sufficient to meet such.
● To determine total liability, do not deduct contributed capital.
● Liabilities owed to general partners are not considered part of the partnership's total liabilities.
● The ability of the limited partner to share is based on the total liability, which must be known.
● Suppose that A, B and C are in partnership wherein C is the limited partner and total assets are
P50,000.00. They owe D a sum of P10,000.00, C P15,000.00 and A P50,000.00, is C still entitled
to share in the surplus after clearing liabilities? Yes, because total liabilities in this case is only
P25,000,00 and the assets are still sufficient to pay out the surplus.

Article 1857
A limited partner shall not receive from a general partner or out of partnership property any part of his
contribution until:

(1) All liabilities of the partnership, except liabilities to general partners and to limited partners on account
of their contributions, have been paid or there remains property of the partnership sufficient to pay them
(2) The consent of all members is had, unless the return of the contribution may be rightfully demanded
under the provisions of the second paragraph
(3) The certificate is canceled or so amended as to set forth the withdrawal or reduction Subject to the
provisions of the first paragraph, a limited partner may rightfully demand the return of his contribution:
(1) On the dissolution of a partnership
(2) When the date specified in the certificate for its return has arrived
(3) After he has given six months' notice in writing to all other members, if no time is specified in the
certificate, either for the return of the contribution or for the dissolution of the partnership.
In the absence of any statement in the certificate to the contrary or the consent of all members, a limited
partner, irrespective of the nature of his contribution, has only the right to demand and receive cash in
return for his contribution.

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
(2) The other liabilities of the partnership have not been paid, or the partnership property is insufficient for
their payment as required by the first paragraph, No. 1, and the limited partner would otherwise be
entitled to the return of his contribution.

What are the requisites for the limited partner to be entitled to the return of his contribution?
(1) When, after deducting partnership liabilities, partnership assets are sufficient to do so.
(2) If he has the consent of all partners unless the right can be demanded.
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(3) The certificate must be amended to reflect the return of his contribution. When may a limited partner
rightfully demand the return of his contribution?
(1) During dissolution
(2) Upon arrival of the date of return of his contribution
(3) After he has given 6 months notice, WRITTEN, and there was no date of return nor dissolution

● The limited partner is only entitled to the return of his contribution, IN CASH, except
(1) If it was agreed upon
(2) He has the consent of all the partners
● When can a limited partner ask for dissolution?
(1) He rightfully but unsuccessfully demanded the return
(2) If he was entitled to receive his contribution and the certificate was already amended but
partnership assets are not sufficient to pay off partnership creditors.

Article 1858
A limited partner is liable to the partnership:

(1) For the difference between his contribution as actually made and that stated in the certificate as
having been made
(2) For any unpaid contribution which he agreed in the certificate to make in the future of the time and on
the conditions stated in the certificate

A limited partner holds as trustee for the partnership:

(1) Specific property stated in the certificate as contributed by him, but which was not contributed or which
has been wrongfully returned
(2) Money or other property wrongfully paid or conveyed to him on account of his contribution The
liabilities of a limited partner as set forth in this article can be waived or compromised only by the consent
of all members; but a waiver or compromise shall not affect the right of a creditor of a partnership who
extended credit or whose claim arose after the filing and before a cancellation or amendment of the
certificate, to enforce such liabilities.

When a contributor has rightfully received the return in whole or in part of the capital of his contribution,
he is nevertheless liable to the partnership for any sum, not in excess of such return with interest,
necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before
such return.

● Suppose A promises to contribute P20,000.00 but only pays P15,000.00. What is his obligation to
the partnership?
-Then A must pay the P5,000.00 difference NOW
● Suppose C. the limited partner, promises to contribute P20,000.00 more. What should be done?
-It should be paid on the date he promised to pay it. When can a limited partner be held as
trustee?
(1) When he promises specific things but does not follow through with the promise of delivery
(2) In circumstances of wrongful returns
(3) In cases of money and/or property that is wrongfully conveyed
● Can the partnership waive the difference of contributions? (EX: the first situation)
-Yes, as long as it will not affect creditors who had extended credit before the waiver of such.
● Can theq partnership reclaim the returns if it is needed? (EX: C's contribution was already
returned but the partnership needs it to finish paying off D, a creditor)
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-Yes, as long as the claim came into existence before the return of contribution.

Article 1859
A limited partner's interest is assignable. A substituted limited partner is a person admitted to all the rights
of a limited partner who has died or has assigned his interest in a partnership.

An assignee, who does not become a substituted limited partner, has no right to require any information
or account of the partnership transactions or to inspect the partnership books; he is only entitled to
receive the share of the profits or other compensation by way of income, or return of his contribution, to
which his assignor would otherwise be entitled.

An assignee shall have the right to become a substituted limited partner if all the members consent
thereto or if the assignor, being thereunto empowered by the certificate, gives the assignee that right.

An assignee becomes a substituted limited partner when the certificate is appropriately amended in
accordance with Article 1865. The substituted limited partner has all the rights and powers, and is subject
to all the restrictions and liabilities of his assignor, except those liabilities of which he was ignorant at the
time he became a limited partner and which could not be ascertained from the certificate.

The substitution of the assignee as a limited partner does not release the assignor from liability to the
partnership under Articles 1847 and 1858.

● The interest of a limited partner can be assigned. His interest. is his share in profits, other
compensation by way of income or his return,
● A substituted limited partner is the person admitted and has all the rights of a limited partner who
dies or has assigned his interest.
● What if the person is not qualified to be a substituted limited partner?
Then he shall remain an assignee with the following rights and limitations
(1) Receive share in profits, other compensation by way of income or return of contribution
(2) Cannot demand information on partnership activities nor inspect partnership books
● When will the assignee become a substituted limited partner?
(1) If consent from all other partners was given
(2) If the limited partner is empowered by the certificate to constitute a substituted limited partner,
and the certificate is amended under Article 1865
● What are the rights of a substituted limited partner?
-He has all the powers, limitations and liabilities as his assignor except those which he was
ignorant of at the time he became a limited partner and those that could not be ascertained from
the certificate.
● What about the assignor?
-The assignor is still liable for false statements and claims before the admittance of a substitute
limited partner, as in Articles 1847 and 1858

Article 1860
The retirement, death, insolvency, insanity or civil interdiction of a general partner dissolves the
partnership, unless the business is continued by the remaining general partners:
(1) Under a right so to do stated in the certificate
(2) With the consent of all the members
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● Again, this does not apply to limited partners because as long as there is ONE limited partner still
living, then the partnership is continued.
● General partners can only continue the business if
(1) The right was stated in the certificate
(2) All partners consent to such.

Article 1861
On the death of a limited partner, his executor or administrator shall have the rights of a limited partner for
the purpose of settling his estate, and such power as the deceased had to constitute his assignee a
substituted limited partner.

The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner.
● The executor/administrator has the power to settle the dead partner's estate and those to
constitute his assignee as a substituted limited partner, if the limited partner originally had the
power to do so, or was allowed such.
● The estate of a limited partner will pay for all his liabilities as a limited partner.

Article 1863
In settling accounts after dissolution, the liabilities of the partnership shall be entitled to payment in the
following order:
(1) Those to creditors, in the order of priority as provided by the law, except those to limited partners on
account of their contributions, and to general partners
(2) Those to limited partners in respect to their
share of the profits and other compensation by way of income on their contributions
(3) Those to limited partners in respect to the
capital of their contributions
(4) Those to general partners other than for capital and profits
(5) Those to general partners in respect to profits (6) Those to general partners in respect to capital

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.

● Who has priority over distribution of assets in a limited partnership?

(1) Creditors, including limited partners who have a claim against the partnership,
(2) Limited partners share in profits
(3) Limited partners return of capital contribution
(4) General partners who have claims against the partnership
(5) General partners share in profits
(6) General partners return of capital contribution The difference of this with general partnerships
is that in a general partnership, capital contributions are returned BEFORE profits from surplus
are shared.