Article 1828.

The dissolution of a
partnership is the change in the relation of the
partners caused by any partner ceasing to be
associated in the carrying on as distinguished from
the winding up of the business.
Winding up
The process of settling the business or partnership affairs
after dissolution
Termination
All partnership affairs are completely wound up and
finally settled. It signifies the end of the partnership life
1. Without violation of the agreement between the partners
2. 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
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 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.
6.
7.
By the insolvency of any partner or of the partnership.
By the civil interdiction of any partner
CAUSES
8. By decree of court OF
DISSOLUTION
 Effect of Dissolution on Authority of a
Partner

Dissolution terminates all authority of any partner to act for

the partnership, except with respect to the following:
1. Acts to wind up partnership affairs.
2. Acts to complete transactions begun before dissolution
When authority of a partner to enter into new
transactions is terminated among the partners (Arts.
1832, 1833, 1834)

1. If the cause of dissolution is not by the act, insolvency or death of a partner (such as by
the expiration of the term for which the partnership was constituted or by decree of
court).
2. 2. If the cause of dissolution is the act of a partner and the partner who entered into the
new transaction had knowledge of the dissolution.
3. 3. If the cause of dissolution is the insolvency or death of a partner and the partner who
entered 'into the new transaction had notice or knowledge of such insolvency or death.
When the act of a partner after dissolution
binds the partnership (Art 1834)

1. When the act is necessary for winding up of partnership

affairs.
2. When the act is necessary to compete transactions begun
before dissolution.
3. In case of a new transaction or business
4. Where although the partner has no authority to wind up
partnership affairs, the other party to the transaction
When the act of a partner after dissolution does
not bind the partnership (Art. 1834)

1. Where the partnership is dissolved because it is unlawful to

carryon the business, unless the act is appropriate for winding
up partnership affairs.
2. Where the acting partner is insolvent.
3. Where a partner's authority is already terminated among the
partners and the third person had actual or constructive
knowledge, as the case may be, of the dissolution of the firm.
Summary of rules on liability of the partners and the
partnership for acts of a partners after dissolution.

1. If a partner's authority is terminated among the partners (or such partner

has no authority to act) but the partnership is bound by the transaction.
2. If a partner's authority is not terminated among the partners and the
partnership is bound by the transaction.
3. If a partner's authority is terminated among the (or has no authority to
act for the partnership) and the partnership is not bound by transaction.
4. If a partner's authority is not terminated among the partners, but the
partnership is not bound by the transaction.
Rules on existing liability of a partner
upon dissolution (Art. 1835)
1. The dissolution does not of itself discharge the partner's liability.
2. A partner is discharged from any existing liability upon dissolution
by the agreement
3. The individual property of a deceased partner (i.e., his estate) shall
be liable for obligations of the partnership while he was a partner,
but subject to the prior payment of his separate debts.
Liquidation of dissolves partnership ( Article. 1839)

1. Liquidation or winding up
2. Order of payment of partnership liabilities
3. Asset of the Partnership
4. Priority in the payment of liabilities if partnership property and the
individual property of the partners are in possession of the court for
distribution
5. Priority of claim against separate property of a debtor who is
insolvent or whose estate is insolvent.
• When liabilities of dissolved partnership are also liabilities of the
person or partnership continuing the business ( Article 1840)
• Rights of partner who retires or the legal representative of a
deceased partner if business is continued without settlement of
accounts (Art. 1841)
1. To have the value of the interest of the retiring or deceased partner
ascertained as of the date of dissolution.
2. To receive as ordinary creditor an amount equal to value of his
interest in the dissolved partnership with interest, or at his option, in
lieu of the interest on such value, the profits attributable to the use
of his, right in the property of the dissolved partnership.
• Preference of partnership creditors
Partnership creditors enjoy a prior right as against the separate
creditors of a retiring or deceased partner with respect to the
claim of a retiring partner or of a deceased partner's legal
representative. (Arts. 1840 and 1841)
• Right to accounting (Art. 1842)
Any partner or the legal representative of a deceased partner has
aright to an accounting of his interest against the following:1.
Winding up partners.2. The surviving partners.3. The person or
partnership continuing the business.
LIMITED PARTNERSHIP
• A limited partnership is a partnership which has
one or more general partners and one or more
limited partners. The limited partners as such
shall not be bound by the obligations of the
partnership, (Art. 1843) except up to the extent of
their contribution.
Requirements for Formation (Article 1844)
• Two or more persons desiring to form a limited partnership must comply
with following requirements;

1. They must subscribe and swear to a certificate

2. They must file for record the certificate with the Securities and
Exchange Commission (SEC) (Article 1844)
• Liability for false statement
(Art. 1847)
1. At the time he signed the
certificate, or
2. Subsequently, but within a
sufficient time before the
statement was relied upon
to enable him to cancel or,
amend the certificate or
petition for its cancellation
or amendment.
• Admission of additional
limited partners after
formation
Additional 'limited partners may
be admitted after formation by
filing an amendment to the
original certificate. (Art. 1849)
However, this right must be
stated in the original certificate.
(Art. 1844)
• Rights and liabilities of a general partner in a limited
partnership (Art. 1850)

1. Rights
A general partner has all the rights and powers of a general
partner in a partnership without limited partners.
2. Liabilities
A general partner shall be subject to all restrictions and liabilities
of a partner in a partnership without limited partners.
 Obligation of a Limited Partner
1. Not to allow the inclusion of his surname in the partnership name.
2. To be liable as a general partner if he takes part in the control of the
business
3. To be liable to the partnership
4. To hold a trustee for the partnership
5. To be liable to the partnership after he has rightfully received the return
of his capital contribution,. for any sum not in excess of such return with
interest, which is necessary to discharge its liabilities to all creditors who
extended credit or whose claims arose before such return. (Art. 1858)
6. Not to receive or hold as collateral security any partnership
property on account of his claims for loan granted to or other
business transaction with the partnership. (Art. 1854)

7. Not to receive from a general partner or the partnership on

account of such claims 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. (Art. 1854)
• Rights of a limited partner
1. To have the partnership books kept at the principal place of business of
the partnership, (Art. 1851)
2. To inspect and copy the partnership books or any of them at a
reasonable hour. (Art. 1851)
3. To have on demand true and full information of all things affecting the
partnership. (Arts. 1806, 1851)
4. To have on demand a formal account of partnership affairs whenever
circumstances render it just and equitable. (Arts. 1809,1851)
5. To have dissolution and winding up by decree of court. (Arts. 1831,
1851, 1857)
6. To receive a share of the profits or other compensation by way of income
stipulated in the certificate. (Arts. I851, 1856)
7. To receive the return of his contribution provided partnership
assets exceed the liabilities. (Arts. 1851, 1857)
8. To loan money to the partnership. (Art. 1854)
9. To transact business with the partnership. (1bid.)
10. To receive, unless he is also a general partner, on account of
resulting claims against the partnership, with general creditors, a
pro rata share of the asset. (bid.)
11. To agree with other limited partners that one or more of them
shall have priority over other limited partners
• Status of a person who has contributed to the capital of the
partnership erroneously believing that he has become a
limited partner

Such person is not, by reason of his exercise of the rights of a limited

partner, a general partner provided:
1. On ascertaining the mistake, he promptly renounces his interest in the
profits of the business or other compensation by way of income (Art.
1852), and
2. He does not take part in the control of the business. (Arts. 1848,1852)
GENERAL- LIMITED PARTNER (ARTICLE 1853)

• A person may be a general partner and a limited

partner at the same time provided that this fact is
stated in the certificate
 Return of a Limited Partner’s Contribution
(Art.1857)
1. Requisites for the return of 3. Contribution of limited
the contributions partner to be returned in
2. When limited partner may cash
rightfully demand return of 4. When limited partner may
his contribution have the partnership
dissolved and wound up
• ASSIGNMENT OF LIMITED PARTNER’S
INTEREST (ART. 1859)

1. RULE: A limited partner’s interest is assignable

2. EFFECT OF ASSIGNMENT
• If the assignee dos not become a substituted partner
• If the assignee becomes a substituted limited partner
• Retirement, death, civil interdiction, insanity or
insolvency of a partner (Art. 1860)
1. Effect
a. Partner is a general partner - Here, the partnership is dissolved. (Art. 1860)
b. Partner is a limited partner - Here, the partnership is not dissolved except if
there is no more limited partner
2. Continuation of business
The business may be continued by the remaining general partners if:
a. The right to do so is stated in the certificate, or
b. All the members consent. (Art: 1860)
• Right of executor/ administrator on the death
of a limited partner (Art.1861)

1. All the rights of a limited partner for the purpose of settling his
estate.
2. To have the same power as the deceased had to constitute
his assignee as a substituted limited partner
• Charging of limited partner's interest

1. Creditor's right to charge

The creditor of a limited partner may charge (1.e., subject to attachment
and execution) the latter's interest in the partnership.(Art. 1862)

2. Redemption
• Order of payment of liabilities (Art. 1863)
1. In settling accounts after dissolution, the liabilities of the partnership
shall be entitled to payment in the following order:
a. Those to creditors, including limited partners, in the order of priority as provided
by law, except those to limited partners on account of their contributions, and to
general partners.
b. Those to limited partners by way of their share of the profits and other
compensation by way of income on their contributions
C. Those to limited partners in respect to the capital of their contributions.
d. Those to general partners other than for capital and profits.
e. Those to general partners in respect to profits.
f. Those to general partners in respect to capital.
2. Sharing among limited partners in partnership assets
• Cancellation or amendment of certificate (Art.
1864)
• Requirements for amendment of certificate
(Art. 1865)

1. The amendment must be in writing

2. It must be signed and sworn to by all members
3. The amended certificate must be filed with SEC
• Requirements for cancellation of Certificate
(Article 1865)

1. The cancellation must be in writing

2. It must signed by all members
3. It must be filed with the SEC
• Limited partner, not a proper party to proceedings
(Art. 1866)
1. A limited partner is not a proper party to proceedings:
a. By a partnership, or
b. Against a partnership
2. Exceptions:
a. If he is also a general partner.
b. Where the object of the proceedings is to enforce a limited partner's
right against the partnership.
c. Where the object of the proceedings is to enforce a limited partner's
liability to the partnership.
THANK YOU ♡