• as much of the salaries, wages or earnings within the four months preceding the levy as
5. A REHABILITATION PLAN
are necessary for the support of the family;
• lettered gravestones;
• monies, benefits, privileges or annuities accruing or in any manner growing out of any
life insurance;
• the right to receive legal support, or money or property obtained as such support, or
any pension or gratuity from the government
b. INVOLUNTARY INSOLVENCY
Any creditor or group of creditors with a claim or claims totaling at least P500,000 may file a
petition for the liquidation of the individual debtor with the court of the province or city in
which the individual debtor resides.
STEPS:
1. Filing of PETITION
IMPORTANT: the petitioning creditor must post a bond the court will set. If the
petition is dismissed or withdrawn by the petitioner, the creditor will pay the costs and
damages incurred by the debtor including his legal costs.
The minimum evidence to be presented would be:
a. Schedule of debts and liabilities
b. Inventory of assets;
2. Court will issue a liquidation order and appoint a liquidator
3. The assets will be liquidated and the proceeds will be used to pay creditors
ACTS OF INSOLVENCY
The following shall be considered acts of insolvency, and the petition for liquidation shall set forth
or allege at least one of such acts:
(a) That such person is about to depart or has departed from the Republic of the Philippines,
with intent to defraud his creditors;
(b) That being absent from the Republic of the Philippines, with intent to defraud his creditors,
he remains absent;
(c) That he conceals himself to avoid the service of legal process for the purpose of hindering or
delaying the liquidation or of defrauding his creditors;
(d) That he conceals, or is removing, any of his property to avoid its being attached or taken on
legal process;
(e) That he has suffered his property to remain under attachment or legal process for three (3)
days for the purpose of hindering or delaying the liquidation or of defrauding his creditors;
(f) That he has confessed or offered to allow judgment in favor of any creditor or claimant for
the purpose of hindering or delaying the liquidation or of defrauding any creditors or
claimant;
(g) That he has willfully suffered judgment to be taken against him by default for the purpose of
hindering or delaying the liquidation or of defrauding his creditors;
(h) That he has suffered or procured his property to be taken on legal process with intent to give
a preference to one or more of his creditors and thereby hinder or delay the liquidation or
defraud any one of his creditors;
(i) That he has made any assignment, gift, sale, conveyance or transfer of his estate, property,
rights or credits with intent to hinder or delay the liquidation or defraud his creditors;
(j) That he has, in contemplation of insolvency, made any payment, gift, grant, sale, conveyance
or transfer of his estate, property, rights or credits;
(k) That being a merchant or tradesman, he has generally defaulted in the payment of his current
obligations for a period of thirty (30) days;
(l) That for a period of thirty (30) days, he has failed, after demand, to pay any moneys
deposited with him or received by him in a fiduciary; and
(m) That an execution having been issued against him on final judgment for money, he shall have
been found to be without sufficient property subject to execution to satisfy the judgment.
II. REHABILITATION pertains to the process of recovery and reorganization, and is especially
applicable to a juridical entity, such as a corporation.
REQUISITES:
PAGE 2
6. A Schedule of Payments and Disposition of Assets which the debtor may have effected
within three (3) months immediately preceding the filing of the petition;
7. A Schedule of Cash Flow of the debtor for three (3) months immediately preceding the
filing of the petition, and a detailed schedule of the projected cash flow for the
succeeding three (3) months;
8. A Statement of Possible Claims by or against the debtor which must contain a brief
statement of the facts which might give rise to the claim and an estimate of the
probable amount thereof;
9. An Affidavit of General Financial Condition
10. At least three (3) nominees for the position of rehabilitation receiver as well as
their qualifications and addresses, including but not limited to their telephone
numbers, fax numbers and e-mail address; and
11. A certificate attesting under oath that (i) the filing of the petition has been duly
authorized; and (ii) the directors and stockholders of the debtor have irrevocably
approved and/or consented to, in accordance with existing laws, all actions or matters
necessary and desirable to rehabilitate the debtor including, but not limited to,
amendments to the articles of incorporation and by-laws or articles of partnership;
increase or decrease in the authorized capital stock; issuance of bonded indebtedness;
alienation, transfer, or encumbrance of assets of the debtor; and modification of
shareholders' rights.
4. REHABILITATION PLAN - CONTENTS
1. Desired business targets or goals
2. Duration and coverage of the rehabilitation
3. Terms and conditions of such rehabilitation
4. Means for the execution of the rehabilitation plan
5. Other relevant information to enable a reasonable investor to make an informed
decision on the feasibility of the rehabilitation plan
“CRAM-DOWN” is the power of the rehabilitation court to approve and implement a
rehabilitation plan notwithstanding the objection of the majority of creditors. The “cram-down”
clause, is necessary to curb the majority creditors’ natural tendency to dictate their own terms and
conditions to the rehabilitation, absent due regard to the greater long-term benefit of all
stakeholders. Hence, it forces the creditors to accept the terms and conditions of the rehabilitation
plan, preferring long-term viability over immediate but incomplete recovery.
Under the Cram-Down rule, the court may confirm the Rehabilitation Plan if all of the following
circumstances are present:
1. The Rehabilitation Plan complies with the requirements specified under the FRIA
2. The rehabilitation receiver recommends the confirmation of the Rehabilitation Plan;
3. The shareholders, owners or partners of the juridical debtor lose at least their controlling
interest as a result of the Rehabilitation Plan; and
4. The Rehabilitation Plan would likely provide the objecting class of creditors with
compensation which has a net present value greater than that which they would have
received if the debtor were under liquidation.
5. ACTION ON THE PETITION AND COMMENCEMENT OF PROCEEDINGS.
If the court finds the petition for rehabilitation to be sufficient in form and substance, it
shall, within five (5) working days from the filing of the petition, issue a
COMMENCEMENT ORDER. The rehabilitation proceedings shall commence upon
the issuance of the Commencement Order.
6. CONTENTS OF COMMENCEMENT ORDER.
1. Identity of the debtor, its principal business or activity/ies and its principal place of
business
2. Summary of the ground/s for initiating the proceedings
3. The relief sought under FRIA
4. The legal effects of the Commencement Order
5. Declaration that the debtor is under rehabilitation
6. Directing the publication of the Commencement Order
PAGE 4
 3. General familiarity with the rights of creditors in suspension of payments or rehabilitation
and general understanding of the duties and obligations of a rehabilitation receiver
4. Good moral character, independence and integrity
5. LACK OF CONFLICT OF INTEREST and
6. Willingness and ability to file a bond in such amount as may be determined by the court.
There is CONFLICT OF INTEREST on the part of the receiver if:
1. He/she is creditor or stockholder of the debtor
2. He/she is engaged in a line of business which competes with the debtor
3. He is, or was within two (2) years from the filing of the petition, a director, officer, or
employee or the auditor or accountant of the debtor;
4. He is or was within two (2) years from the filing of the petition, an underwriter of the
outstanding securities of the debtor;
5. He is related by consanguinity or affinity within the fourth civil degree to any creditor,
stockholder, director, officer, employee, or underwriter of the debtor; or
6. He has any other direct or indirect material interest in the debtor or any creditor.
10. DISPLACEMENT OF EXISTING MANAGEMENT BY THE REHABILITATION RECEIVER
OR MANAGEMENT COMMITTEE. – Upon motion of any interested party, the court
may appoint and direct the rehabilitation receiver to assume the powers of management
of the debtor, or appoint a management committee that will undertake the management
of the debtor. upon clear and convincing evidence of any of the following circumstances:
1. Actual or imminent danger of dissipation, loss, wastage or destruction of the debtor’s
assets or other properties
2. Paralyzation of the business operations of the debtor; or
3. Gross mismanagement of the debtor. or fraud or other wrongful conduct on the part of, or
gross or willful violation of this Act by. existing management of the debtor Or the owner,
partner, director, officer or representative/s in management of the debtor.
11. TERMINATION OF PROCEEDINGS
The court shall, upon motion or upon recommendation of the rehabilitation receiver, terminate
the proceeding when:
1. The petition is dismissed,
2. The debtor fails to submit a rehabilitation plan or the same is disapproved,
3. Successful implementation of an approved rehabilitation plan.
12. LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS
A. VOLUNTARY LIQUIDATION
An insolvent debtor may apply for liquidation by filing a petition for liquidation with the court.
The petition shall be verified, shall establish the insolvency of the debtor and shall contain,
whether as an attachment or as part of the body of the petition:
1. A schedule of the debtor’s debts and liabilities including a list of creditors with their
addresses, amounts of claims and collaterals, or securities, if any
2. An inventory of all its assets including receivables and claims against third parties; and
3. The names of at least three (3) nominees to the position of liquidator.
B. INVOLUNTARY LIQUIDATION
Three (3) or more creditors the aggregate of whose claims is at least either One Million Pesos
(PhP1,000,000,00) or at least twenty-five percent (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 shall show that:
1. 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
2. There is no substantial likelihood that the debtor may be rehabilitated.
PAGE 6
exclusively for agricultural purposes. Trailers having any number of wheels, when
propelled or intended by attachment to a motor vehicle, shall be classified as separate
motor vehicle with no power rating;
(k) NONCONFORMITY refers to any defect or condition that substantially impairs the use, value
or safety of a brand new motor vehicle which prevents it from conforming to the
manufacturer’s or distributor’s standards or specifications, which cannot be repaired, but
excluding conditions resulting from noncompliance by the consumer of his or her
obligations under the warranty, modifications not authorized by the manufacturer or
distributor, abuse or neglect, and damage due to accident or force majeure;
(l) Purchase price refers to the invoice price or the amount of money which the dealer or retailer
actually received for the brand new motor vehicle, in consideration of the sale of such
brand new motor vehicle;
(m) Warranty refers to the written assurance, so labeled, of the manufacturer of a brand new
motor vehicle including any term or condition precedent to the enforcement of obligations
under the warranty; and
(n) Warranty rights period refers to the period provided for under the contract of sale when the
manufacturer would guarantee the materials used, the workmanship and the
roadworthiness of a brand new motor vehicle for ordinary use or reasonable intended
purposes.
"REASONABLE ALLOWANCE FOR USE" shall mean twenty percent (20%) per annum deduction
from the purchase price, or the product of the distance traveled in kilometers and the
purchase price divided by one hundred thousand (100,000) kilometers, whichever is
lower.
3. PHILIPPINE COOPERATIVE CODE (R.A. 9520)
COOPERATIVE - is an autonomous and duly registered association of persons with a common
bond of interest who have voluntarily joined together to achieve their social, economic,
and cultural needs and aspirations by making equitable contributions to the capital
required by patronizing their products and services, and by accepting a fair share of the
risks and benefits of the undertaking in accordance with universally accepted cooperative
principles.
Federation of Cooperatives -Three or more primary cooperatives doing the same line of
business organized from the municipal to the provincial level registered with the CDA to
undertake business activities in support of its members.
PURPOSES of cooperatives:
(1) To encourage thrift and savings mobilization among the members;
(2) To generate funds and extend credit to the members for productive and provident
purposes;
(3) To encourage among members systematic production and marketing;
(4) To provide goods and services and other requirements to the members;
(5) To develop expertise and skills among its members;
(6) To acquire lands and provide housing benefits for the members;
(7) To insure against losses of the members’
(8) To promote and advance the economic, social and education status of the members;
PAGE 8
12. Electric Cooperative. Organized for the primary purposed of undertaking power
generations, utilizing renewable energy sources, including hybrid systems, acquisition
and operation of subtransmission or distribution to its household members.
13. Financial Service Cooperative. One organized for the primary purpose of engaging
in savings and credit services and other financial services.
14. Fishermen Cooperative. Organized by marginalized fishermen in localities whose
products are marketed either as fresh or processed products;
15. Health Services Cooperative. Organized for the primary purpose of providing
medical, dental and other health services.
16. Housing Cooperative. Organized to assist or provide access to housing for the benefit
of its regular members who actively participate in the savings program for housing. It is
co-owned and controlled by its members.
17. Insurance Cooperative. Engaged in the business of insuring life and poverty of
cooperatives and their members.
18. Transport Cooperative. Includes land and sea transportation, limited to small
vessels, as defined or classified under the Philippine maritime laws, organized under the
provisions of this Code;
19. Water Service Cooperative. Organized to own, operate and manage waters systems
for the provision and distribution of potable water for its members and their households.
20. Workers Cooperative. Organized by workers, including the self-employed, who are at
same time the members and owners of the enterprise. Its principal purpose is to provide
employment and business opportunities to its members and manage it in accordance with
cooperative principles.
Categories of Cooperative.
A. In terms of membership –
1. Primary – Members are natural persons
2. Secondary – Members are primaries
3. Tertiary – Members are secondary cooperatives
B. In terms of territory, cooperatives shall be categorized according to areas of operations
which may or may not coincide with the political subdivisions of the country.
Organizing a Primary Cooperative . – Requirements:
1. Fifteen (15) or more NATURAL persons
2. FILIPINO citizen
3. of LEGAL AGE
4. ACTUALLY residing or working in the intended area of operation
5. PROVIDED, a prospective member of a primary cooperative must complete a pre-
membership education seminar (PMES).
Capital requirement for Cooperatives.
No cooperative, other than a cooperative union, shall be registered unless the articles
of cooperation is accompanied with the bonds of the accountable officers and a sworn
statements of the treasurer elected by the subscribers showing that at least twenty-five per
centum (25%) of the authorized share capital has been subscribed and at least twenty-five per
centum (25%) of the total subscription has been paid.
The minimum paid-up share capital is PhP15,000, subject to increase by the CDA upon
consultation with the cooperative sector and the NEDA.
The par value of shares of a primary cooperative shall not exceed PhP1,000.
No member of primary cooperative other than cooperative itself shall own or hold more than 10%
of the share capital of the cooperative.
PAGE 10
(2) Special meeting of the general assembly may be called at any time by a majority vote of the
board of directors or as provided for in the bylaws. However, a special meeting shall be called by
the board of directors after compliance with the required notice within from at least ten per
centum (10%) of the total members who are entitled to vote to transact specific business covered
by the call.
(3) In the case of a newly approved cooperative, a special general assembly shall be called within
ninety (90) days from such approval
Voting System . – Each member of a primary cooperative shall have only one (1) vote.
in case of secondary or tertiary cooperatives the members shall have one (1) basic vote and up to
five (5) incentive votes.
Composition and Term of the Board of Directors.
Board of directors which shall be composed of not less than five (5) nor more than fifteen (15)
members elected by the general assembly for a term of two (2) years and shall hold office until
their successors are duly elected an qualified, or until duly removed for caused.
Powers of the Board of Directors. The board of directors shall be responsible for the
strategic planning, direction-setting and policy-formulation activities of the cooperatives.
Meeting of the Board and Quorum Requirement.
(1) Regular meetings of the board of directors shall be held at least once a month.
(2) Special meetings of the board of directors may be held at any time upon the call of the
chairperson or a majority of the members of the board
(3) A majority of the members of the Board shall constitute a quorum or the conduct of business,
unless the bylaws proved otherwise.
(4) Directors cannot attend or vote by proxy at board meetings.
Vacancy in the Board of Directors. Any vacancy in the board of directors, other than by
expiration of term, may be filled by the vote of at least a majority of the remaining directors,
if still constituting a quorum; otherwise, the vacancy must be filled by the general assembly
in a regular or special meeting called for the purpose.
A director so elected to fill a vacancy shall serve only the unexpired term of his predecessor in
office.
An elective officer may be removed by three fourths (3/4) votes of the regular members present
and constituting a quorum, in a regular or special general assembly meeting called for the
purpose.
Officers of the Cooperative.
1. The board of directors shall elect from among themselves the chairperson and vice-chairperson
2. Elect or appoint other officers of the cooperative from outside of the board in accordance with
their bylaws.
Compensation.
(1) In the absence of any provisions in the bylaws fixing their compensation, the directors shall
not receive any compensation except for reasonable per diems, EXCEPT when, in the
preceding calendar year, the cooperative reported a net loss or had a dividend rate less than
the official inflation rate for the same year.
(2) Any compensation other than per diems may be granted to directors by a majority vote of the
members with voting rights at a regular or special general assembly meeting specifically
called for the purpose
No additional compensation other than per diems shall be paid during the first year of
existence of any cooperative.
REPORTS REQUIRED FOR COOPERATIVES • Submit annual Cooperative Annual
Progress Report (CAPR) with the following attachments:
1. Social Audit Report including its program of activities pursuant to its socio-civic
goals of the cooperative;
2. Performance Audit Report, including copies of the semi-annual Report on
mediation and conciliation
3. Audited Financial Statements;
PAGE 12

Liquidation of a Cooperative
three (3) years after the time it is dissolved
at any time during the said three (3) years, the cooperative is authorized and empowered
to convey all of its properties to trustees for the benefit of its members, creditors and other
persons in interest. From and after any such conveyance, all interests which the
cooperative had in the properties are terminated.
Upon the winding up of the cooperative affairs, any asset distributable to any
creditor, shareholder or member who is unknown or cannot be found shall be given to the
federation or union to which the cooperative is affiliated with.
certificates, permits, licenses which include primary and secondary, clearances and such similar
authorization or documents which confer eligibility to operate or continue to operate as a
legitimate business
3. Complex transactions - applications or requests submitted by applicants or requesting
parties of a government office which necessitate evaluation in the resolution of complicated issues
by an officer or employee of said government office, such transactions to be determined by the
office concerned
4. FIXER - any individual whether or not officially involved in the operation of a government
office or agency who has access to people working therein, and whether or not in collusion with
them, facilitates speedy completion of transactions for pecuniary gain or any other advantage or
consideration

5. Highly technical application - an application which requires the use of technical

knowledge, specialized skills and/or training in the processing and/or evaluation thereof

6. RED TAPE - any regulation, rule, or administrative procedure or system that is ineffective
or detrimental in achieving its intended objectives and, as a result, produces slow, suboptimal.
and undesirable social outcomes

7. Simple transactions - applications or requests submitted by applicants or requesting

parties of a government office or agency which only require ministerial actions on the part of the
public officer or employee, or that which present only inconsequential issues for the resolution by
4. Philippine Deposit Insurance Corporation Law (R.A. 3591) an officer or employee of said government office

CONCEPT OF INSURED DEPOSITS CITIZEN'S CHARTER - All government agencies shall set up their respective most current, and
Insured deposit means the amount due to any bona fide depositor for legitimate deposits in an updated service standards to be known as the Citizen's Charter in the form of information
insured bank net of any obligation of the depositor to the insured bank as of the date of closure, billboards, that detail;
but not to exceed 500,000 or its equivalent in foreign currency. 1. A comprehensive and uniform checklist of requirements for each type of application or
request;
Whenever an insured bank shall have been closed by the Monetary Board, payment of the insured 2. The procedure to obtain a particular service;
deposits on such closed bank shall be made by the PDIC as soon as possible either: 3. The person/s responsible for each step:
(1) by cash; or 4. The maximum time to conclude the process;
(2) by making available to each depositor a transferred deposit in another insured bank in an 5. The document/s to be presented by the applicant or requesting party, if necessary;
amount equal to insured deposit of such depositor 6. The amount of fees, if necessary; and
7. The procedure for filing complaints.
Note: ‘Transfer Deposit’ means a deposit in an insured bank made available to a depositor by the
PDIC as payment of insured deposit of such depositor in a closed bank and assumed by another ZERO-CONTACT POLICY.- Except during the preliminary assessment of the request and
insured bank evaluation of sufficiency of submitted requirements, no government officer or employee shall
have any contact, in any manner, unless strictly necessary with any applicant or requesting party
DEPOSIT ACCOUNT NOT ENTITLED TO PAYMENT concerning an application or request.
(1) Investment products such as bonds and securities, trust accounts, and other similar
instruments; Automatic Approval or Automatic Extension of License, Clearance, Permit, Certification or
(2) Unfunded, fictitious or fraudulent deposit accounts or transactions; Authorization:
(3) Deposits accounts or transactions constituting, and/or emanating from, unsafe and unsound If a government, office or agency fails to approve or disapprove an original application or request
banking practice/s, as determined by the PDIC, in consultation with the BSP, after due notice and for issuance of license, clearance, permit, certification or authorization within the prescribed
hearing, and publication of a cease and desist order issued by the PDIC against such deposit processing time, said application or request shall be deemed approved.
accounts or transactions; and
(4) Deposits that are determined to be the proceeds of an unlawful activity

Notice and publication requirement

(1) The PDIC shall give notice to the depositors of the closed bank of the insured deposits due
them by whatever means deemed appropriate by the Board of Directors.
(2) The PDIC shall publish the notice once a week for at least three (3) consecutive weeks in a
newspaper of general circulation or, when appropriate, in a newspaper circulated in the
community or communities where the closed bank or its branches are located

CALCULATION OF LIABILITY - Per depositor, per capacity rule

PAGE 14 PAGE 16
III. COVERED AND EXCLUDED TRANSACTIONS
d. as interest on a loan, though the amount of payment vary with the profits of
the business;
COVERED TRANSACTIONS:
e. as the consideration for the sale of a goodwill of a business or other property
1. Any loan, mortgage, deed of trust, advance, or discount;
by installments or otherwise.
2. Any conditional sales contract;
3. Any contract to sell, or sale or contract of sale of property or services, either for present or
future delivery, under which part or all of the price is payable subsequent to the making of GENERAL PARTNERSHIP LIMITED PARTNERSHIP
such sale or contract;
1. composed of general partners 1. composed of at least one general partner and one
4. Any rental-purchase contract; limited partner
5. Any contract or arrangement for the hire, bailment, or leasing of property;
2. as a general rule may be constituted in any 2. must be contained in a certificate of limited
6. Any option, demand, lien, pledge, or other claim against, or for the delivery of, property or form partnership
money;
3. must operate under a firm name 3. must operate under a firm name followed by the
7. Any purchase, or other acquisition of, or any credit upon the security of, any obligation of word ‘limited’
claim arising out of any of the foregoing;
8. Any transaction or series of transactions having a similar purpose or effect GENERAL PARTNER LIMITED PARTNER
1. Liable personally for partnership obligations after all 1. Cannot be held liable
EXCLUDED TRANSACTIONS: partnership assets are exhausted
1. Credit transactions which do not involve the payment of any finance charge by the debtor; 2. Can participate in the management of the partnership 2. Cannot participate
2. Credit transactions in which the debtor is the one specifying a definite and fixed set of credit
3. May contribute money, property or industry to 3. Can contribute money or other
terms such as bank deposits, insurance contracts, sale of bonds, etc. common fund property only
4. Name of the general partner may appear in firm name 4. Name of limited partner does not
4. CONSEQUENCES OF NON-COMPLIANCE appear in firm name
5. Limitation on the right to engage in another business 5. No such limitation in limited
UNDER TILA: or in the same kind of business as that of the partnership partnership
a. Failure to disclose information: Php100 or 2x the finance charged max of Php2000
b. Violation of TILA: Php1,000 to Php5,000 or imprisonment of 6 months to 1 year or both. Obligations of the partners with respect to contribution of money or property:
1. Contribute at the beginning of the partnership or at the time stipulated
2. Answer for eviction
3. Answer for the fruits of the property contributed in case of delay in the delivery
4. Exercise diligence over the property pending delivery
5. Indemnify the partnership for any damage or interest in case of money, caused by
the retention of the same or delay in the delivery

Other obligations of a partner:

7. LAW ON. PARTNERSHIPS 1. Pay for interest and damages for any sum of money which he may have taken from
(Art. 1767 – Art. 1867 Civil Code) the partnership coffers;
2. Contribute additional share to the capital in case of imminent loss;
3. Bring to the partnership capital his share of a partnership credit which he received
PARTNERSHIP from a debtor who subsequently became insolvent;
- Two or more persons bind themselves to contribute money, property, or industry to a 4. Indemnify the partnership for damage caused by his fault and he cannot compensate
common fund, with the intention of dividing the profits among themselves. them with the profits or benefits he may have earned for the partnership;
- Two or more persons may also form a partnership for the exercise of a profession. 5. Render true and full information of all things affecting the partnership upon demand
of any partner or his representative;
Essential Characteristics: 6. Account to the partnership and hold as trustee any benefit derived by him without the
a. Consensual e. Principal consent of the other partners form any transaction relating to partnership business;
b. Bilateral f. Nominate 7. Share in the loss of the partnership.
c. Onerous g. Preparatory
d. Commutative Rights of a partner:
1. Receive his share of profits of the partnership
Essential requisites: 2. Participate in the management of the firm
a. There must be a valid contract 3. Associate another person in his share of the profits
b. The parties must have legal capacity to enter into the contract 4. Inspect the partnership books at any reasonable hour
Persons incapacitated to enter into a contract of universal partnership: 5. Demand formal accounting even before dissolution:
1. spouses during the existence of the marriage a. If the partner is wrongfully excluded from the partnership business or
2. between persons who are guilty of adultery or concubinage profession of its property by his co-partners
3. between persons guilty of the commission of the same offense in consideration b. If the right exists under the terms of any agreement
thereof c. If a partner has derived profits from any transaction connected with the
4. between public officer or his wife or some other person by reason of the public formation, conduct, or liquidation of the partnership or from any use by him
office. of its property
d. Whenever other circumstances render it just and reasonable
6. Ask for dissolution of the firm by court decree

PAGE 18 PAGE 20
 1. after the termination of the specified term or particular undertaking
2. at any time if the firm was a partnership at will when the interest was
assigned or when the charging order was issued
WINDING UP
- the process of settling the business or partnership affairs under dissolution.

Judicially – a way of winding up a dissolved partnership under the control and direction
of the proper court upon cause shown by any partner, his legal representative of
his assignee

Extra-judicially – way of winding up by the partners themselves without the intervention

of the court.

Partnership assets:
1. Partnership property including goodwill
2. Contributions of the partners necessary for the payment of all liabilities

Termination
- the point in time when all partnership affairs are wound up or completed and is the end
of the partnership life.

Order of payment in the winding up of partnership liabilities:

a. those owing to creditors other than partners
b. those owing to partners other than for capital or profits
c. those owing to partners in respect of capital
d. those owing to partners in respect of profits

Limited Partnership - formed by two or more persons having as members one or more
general partners and one or more limited partners.

RULES:
- the limited partners shall not be bound by the obligations of the partnership
- the limited partners do not participate in the control or management of the business of
the partnership
- partnership debts shall be paid out of the common fund and the separate properties of
the general partners
- a limited partner can only contribute money or property
- a limited partner’s name cannot appear in the partnership name, otherwise he will be
liable as a general partner, except:
1. the surname of the limited partner is the same as the surname of a general
partner
2. before the limited partner became as such, the business had been carried on
under a name in which his surname appeared
3. third persons extended credit to the partnership with the knowledge that he is
limited partner

Dissolution may be caused by:

1. Retirement of a general partner
2. Death of a general partner
3. Insolvency of a general partner
4. Insanity of a general partner
5. Civil interdiction of a general partner

Order of payment in the winding up of partnership liabilities:

a. those owing to creditors, except those to limited partners on account of their
contribution, and to general partners
b. those to limited partners in respect to their share of the profits and other compensation
by way of income in their contributions
c. those to limited partners in respect of their capital 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

PAGE 22