LIMITED PARTNERSHIP

(ARTICLE - )
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DEFINITION

ARTICLE . A limited partnership is

one formed by two or more persons under
the provisions of the following article,
having as members 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
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 CHARACTERISTICS

. A limited partnership is formed by compliance with the statutory

requirements (Art. .);
. One or more general partners control the business and are personally
liable to creditors (Arts. , .);
. One or more limited partners contribute to the capital and share in the
profits but do not participate in the management of the business and are
not personally liable for partnership obligations beyond the amount of
their capital contributions (Arts. , , .);
. The limited partners may ask for the return of their capital contributions
under the conditions prescribed by law (Arts. [h], .); and
. -The partnership debts are paid out of common fund and the individual
properties of the general partners.
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DISTINGUISH

GENERAL PARTNER/PSHIP LTD PARTNER/PSHIP

-General partner is personally liable for partnership obligations

-limited partner’s liability extends only to his capital contribution

-When the manner of management has not been agreed upon, all
of the general partners have an equal right in the management of -no share in the management of a limited partnership, his rights
the business being limited to those enumerated in Article 1851

-limited partner must contribute cash or property to the

-general partner may contribute money, property, or industry to
partnership but not services
the partnership

-general partner’s interest in the partnership(Art.1812.) may not

-limited partner’s interest is freely assignable, with the assignee
be assigned as to make the assignee a new partner without the
acquiring all the rights of the limited partner subject to certain
consent of the other partners (Art. 1813.) although he may
qualifications
associate a third person with him in his share
 GENERAL PARTNER/PSHIP LTD PARTNER/PSHIP

-name of a general partner may appear in the firm name -General rule, that of a limited partner must not

-general partner is prohibited from engaging in a business which is

of the kind of business in which the partnership is engaged, if he is -no such prohibition in the case of a limited partner who is
a capitalist partner (Art. 1808.), or in any business for himself if he considered as a mere contributor to the partnership
is an industrial partner

-does not have the same effect, for his executor or administrator
-retirement, death, insanity, or insolvency of a general partner shall have the rights of a limited partner for the purpose of selling
dissolves the partnership his estate. (
 LTD PSHIP NOT CREATED BY
MERE VOLUNTARY AGREEMENT
ARTICLE . Two or more persons desiring to form a
limited partnership shall:
( ) Sign and swear to a certificate, which shall state —
a. The name of the partnership, adding thereto the word
“Limited”;
b. The character of the business;
c. The location of the principal place of business;
d. The name and place of residence of each member, general
and limited partners being respectively designated;
e. The term for which the partnership is to exist;
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cont..

f. The amount of cash and a description of and the agreed value of the
other property contributed by each limited partner;
g.The additional contributions, if any, to be made by each limited partner
and the times at which or events on the happening of which they shall be
made;
h.The time, if agreed upon, when the contribution of each limited partner
is to be returned;
i.The share of the profits or the other compensation by way of income
which each limited partner shall receive by reason of his contribution;
j.The right, if given, of a limited partner to substitute an assignee as
contributor in his place, and the terms and conditions of the substitution;
k. The right, if given, of the partners to admit additional limited partners;
cont..

l. -The right, if given, of one or more of the limited partners to

priority over other limited partners, as to contributions or as to
compensation by way of income, and the nature of such
priority;
m.The right, if given, of the remaining general partner or
partners to continue the business on the death, retirement,
civil interdiction, insanity or insolvency of a general partner;
and
n.The right, if given, of a limited partner to demand and
receive property other than cash in return for his contribution.
 cont..

. File for record the certificate in the

Office of the Securities and Exchange
Commission.
A limited partnership is formed if there
has been substantial compliance in good
faith with the foregoing requirements.
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WHO MAY BECOME LIMITED
PARTNERS
-Under a statute which provides that the
membership of a limited partnership consists of
specified “persons” (see Art. .), a
partnership cannot become a limited partner.
An existing general partnership may be changed
into a limited one, and a partner in the former
general partnership may become a limited
partner in the limited partnership thus formed.
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 REQUIREMENTS FOR
FORMATION OF LTD P’SHIP
Under Article , there are two essential
requirements for the formation of a limited
partnership:
. The certificate or articles of the limited
partnership which states the matters enumerated
in the article, must be signed and sworn to; and
. Such certificate must be filed for record in the
Office of the Securities and Exchange
Commission.
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PURPOSE OF FILING OF
CERTIFICATE
-to give actual or constructive notice to
potential creditors or persons dealing
with the partnership to acquaint them
with its essential features, foremost
among which is the limited liability of
the limited partners so that they may
not be defrauded or misled
WHEN TO FILE

-Article does not specify the time within

which the certificate must be filed with the
Securities and Exchange Commission.

Therefore, a reasonable time is allowed

depending on the circumstances of the
particular case.
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SUBSTANTIAL COMPLIANCE

-strict compliance with the legal requirements

is not necessary. It is sufficient that there is
substantial compliance in good faith. If there
is no substantial compliance, the partnership
becomes a general partnership as far as third
persons are concerned, in which all the
members are liable as general partners.
RULES WHEN NO
SUBSTANTIAL COMPLIANCE
AS TO THIRD PERSONS - there is only a general pship

AS TO PARTNERS - The firm, in form, is a limited

partnership, subject to all the rules applicable to such
partnership; that as between the partners they are bound
by their agreement; and that all the limited partner’s
relations to his co-partners and their obligations to him
growing out of the relation remain unimpaired
PRESUMPTION : GENERAL
PARTNERSHIP
A partnership transacting business is, prima facie, a
general partnership and those who seek to avail
themselves of the protection of laws permitting the
creation of limited partnerships must show due
compliance with such laws.

To obtain the privilege of a limited partnership liability,

one must conform to the statutory requirements
regulating the formation of limited partnerships.
LIMITED PARTNER’S
CONTRIBUTION

ART. . The contributions of a

limited partner may be cash or
other property, but not services.
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WHAT CAN LTD PARTNER
CONTRIBUTE
He can contribute only money or property;
otherwise, he shall be considered an industrial
and general partner, in which case, he shall
not be exempted from personal liability.

Therefore : NOT ALLOWED to contribute

services

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NOTE : A partner 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

BUT a limited partner may not be an industrial

partner without being a general partner in view of
Article which requires that a limited partner
must be a capital contributor.
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EXAMPLE

LTD Pship :
A - cash (ltd partner)
B - cash
C - services

A can also contribute services. In which case, he is a general

partner (services) and a limited partner (cash) at the same time.

C cannot become a limited partner since he contributes his

services only. (Prohibition under Article )
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WHEN TO CONTRIBUTE

Under Article (f), the contribution of

each limited partner must be paid before
the formation of the limited partnership.

Although with respect to the additional

contributions they may be paid after the
limited partnership has been formed.
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 EFFECT OF SURNAME
APPEARING IN P’SHIP NAME
ARTICLE . The surname of a limited partner shall not appear in
the partnership name unless:
. It is also the surname of a general partner, or
. 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.
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VIOLATION OF ARTICLE

G.R : liable as general partner to the

partnership creditors without, however, the
rights of a general partner.

EXCN : not be liable as a general partner

with respect to third persons with actual
knowledge that he is only a limited partner.

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 LIABILITY FOR FALSE
STATEMENT IN CERTIFICATE
ARTICLE . If the certificate contains a false
statement, one who suffers loss by reliance on such
statement may hold liable any party to the certificate who
knew the statement to be false:
. At the time he signed the certificate, or
. Subsequently, but within a sufficient time before the
statement was relied upon to enable him to cancel or
amend the certificate, or to file a petition for its
cancellation or amendment as provided in article .
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 Any partner to the certificate containing a false statement is
liable provided the following requisites are present:
. He knew the statement to be false at the time he signed the
certificate, or subsequently, but having sufficient time to
cancel or amend it or file a petition for its cancellation or
amendment, he failed to do so;
. The person seeking to enforce liability has relied upon the
false statement in transacting business with the partnership;
and
. The person suffered loss as a result of reliance upon such
false statement.
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NOTE: Article does not say that
the guilty partner shall be liable as a
general partner. The liability imposed
by Article is merely a statutory
penalty and does not make the limited
partner a general partner for all
purposes, even as to third persons.
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LIABILITY OF LIMITED PARTNER FOR
PARTICIPATING IN MGT OF P’SHIP

ARTICLE . 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.
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-a limited partner is liable as a general partner for the
firm’s obligations if he takes part or interfere in the
management of the firm’s business. His abstinence from
participation in fact in the transaction of the business of
the firm is essential to his exemption from liability for the
debts of the firm

-Whether the limited partner has participated in the

management is to be determined by whether he has
exercised a controlling power in the firm’s transactions.
 EXAMPLES OF TAKING PART IN
THE MGT OF THE BUSINESS
. By the terms of the contract between the parties, an
appointee of the limited partner becomes the directing
manager of the firm;
. -The limited partner purchases the entire property of
the partnership, taking title in himself and then carries
on the business in his own name and for his own
exclusive benefit; or
. He makes or is a party to a contract with creditors of
an insolvent firm with respect to the disposal of the
firm’s assets in payment of the firm’s debts
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ADMISSION OF ADDITIONAL
LTD PARTNER
ARTICLE . 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 .
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-additional limited partners may be
admitted, provided there is proper
amendment to the certificate which must be
signed and sworn to by all of the partners,
including the new limited partners, and filed
in the Securities and Exchange Commission
pursuant to the requirements of Article .

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 RIGHTS, POWERS AND LIABILITIES
OF A GENERAL PARTNER
ARTICLE . 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:
. Do any act in contravention of the certificate;
. Do any act which would make it impossible to carry on the ordinary business of the
partnership;
. Confess a judgment against the partnership;
. Possess partnership property, or assign their rights in specific partnership property, for
other than a partnership purpose;
. Admit a person as a general partner;
. Admit a person as a limited partner, unless the right so to do is given in the certificate;
. Continue the business with partnership property on the death, retirement, insanity,
civil interdiction or insolvency of a general partner, unless the right so to do is given in
the certificate.
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RIGHT OF CONTROL/UNLIMITED
PERSONAL LIABILITY

-A general partner in a limited

partnership is vested with the entire
control of the firm’s business and has
all the rights and powers and is subject
to all the liabilities and restrictions of a
partner in a partnership without limited
partners
ACTS OF ADMINISTRATION/
ACTS OF STRICT DOMINION
The general partner may bind the
partnership by any act of administration,
but he has no power to do the specific
acts enumerated in Article (even if
agreed to by all the general partners)
without the written consent or at least
ratification of all the limited partners.
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 RIGHTS OF A LIMITED
PARTNER
ARTICLE . A limited partner shall have the same rights as a general
partner to:
. 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;
. 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; and
. 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 and .
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GENERAL RIGHTS

The limited partner is viewed as a partner

only to a certain extent. His powers, actual or
implied, are much more limited than those of
a general partner. As between the members of
the firm, the limited partner, in order to
protect his interest in the firm, has the same
right to compel the partners to account as a
general partner has.
 SPECIFIC RIGHTS (ARTICLE
)
. To require that the partnership books be kept at the principal place of business
of the partnership (see Art. .);
. To inspect and copy at a reasonable hour partnership books or any of them
(Ibid.);
. To demand true and full information of all things affecting the partnership (see
Art. .);
. To demand a formal account of partnership affairs whenever circumstances
render it just and reasonable (see Art. .);
. To ask for dissolution and winding up by decree of court (see Arts. , ,
par. .);
. To receive a share of the profits or other compensation by way of income (Art.
.); and
. To receive the return of his contribution provided the partnership assets are in
excess of all its liabilities.
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 STATUS OF PARTNER WHERE THERE
IS FAILURE TO CREATE LTD P’SHIP

ARTICLE . Without prejudice to the provisions of article

, 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.
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General rule : if the law is not
complied with, the attempt to limit the
liability of the limited partners will be
ineffective, at least as to creditors who
have not recognized, or dealt with, the
firm as a limited partnership.
EXCEPTION : Article

It grants exemption from liability in favor of one

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, or in a general partnership
thinking that it is a limited partnership
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CONDITIONS FOR EXEMPTION FROM
LIABILITY AS GENERAL PARTNER

a. On ascertaining the mistake, he promptly

renounces his interest in the profits of the
business or other compensation by way of
income (Art. .);
b. His surname does not appear in the
partnership name (Art. .); and
c. He does not participate in the management
of the business.
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ON RENOUNCING INTEREST

He must promptly renounce his interest

before the partnership has become liable to
third persons who cannot be blamed for
considering him a general partner.

Where no partnership creditors are

prejudiced, it would seem that renunciation of
his interest is not necessary.
WHERE ONE IS BOTH A GENERAL
AND LIMITED PARTNER
ARTICLE . 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 .
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.
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A person may be a general and a limited
partner at the same time in the same
partnership provided that:
a. fact is stated in the certificate signed,
b. sworn to, and
c. recorded in the Office of the
Securities and Exchange Commission.
RIGHTS AND POWERS

Generally, his rights and powers are those of a general partner.

a. He is liable with his separate property to third persons. (Art. .)

b. With respect to his contribution as a limited partner, he would have the
right of a limited partner insofar as the other partners are concerned.
(Arts. - .)

This means that while he is not relieved from personal liability to third
persons for partnership debts, he is entitled to recover from the general
partners the amount he has paid to such third persons; and in settling
accounts after dissolution, he shall have priority over general partners in
the return of their respective contributions.
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 LOANS AND OTHER BUSINESS
TRANSACTIONS WITH LTD P’SHIP
ARTICLE . A limited partner also may loan money to and transact other
business 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:
. Receive or hold as collateral security any partnership property, or
. 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 payment, conveyance, or release in
violation of the foregoing provisions is a fraud on the creditors of the
partnership.
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ALLOWABLE TRANSACTIONS

a. Granting loans to the partnership;

b. Transacting other business with it;
and
c. Receiving a pro rata share of the
partnership assets with general
creditors if he is not also a general
partner.
PROHIBITED TRANSACTIONS

a. Receiving or holding as collateral security any

partnership property; or
b. Receiving any payment, conveyance, or release
from liability if it will prejudice the right of third
persons.

Any violation of the prohibition will give rise to the

presumption that it has been made to defraud
partnership creditors.
PREFERRED LIMITED
PARTNERS
ARTICLE . 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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NO AGREEMENT/STATEMENT IN THE
CERTIFICATE (AS TO PREFERENCE)

-all the limited partners shall

stand on equal footing in respect
of these matters.
 IF THERE IS AGREEMENT

-priority or preference may be given to

some limited partners over other limited
partners as to the:

. return of their contributions;

. their compensation by way of income; or
. any other matter.
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COMPENSATION OF LIMITED
PARTNER
ARTICLE . 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.
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-The right of the limited partner to receive his
share of the profits or compensation by way of
income stipulated for in the certificate is
subject to the condition that partnership
assets will still be in excess of partnership
liabilities after such payment. In other words,
third-party creditors have priority over the
limited partner’s rights.
 REQUISITES FOR RETURN OF
CONTRIBUTION OF LIMITED PARTNER

ARTICLE . A limited partner shall not receive from a general

partner or out of partnership property any part of his contributions
until:
. 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;
. The consent of all members is had, unless the return of the
contribution may be rightfully demanded under the provisions of
the second paragraph; and
. The certificate is cancelled or so amended as to set forth the
withdrawal or reduction.
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 CONT..

Subject to the provisions of the first paragraph, a limited

partner may rightfully demand the return of his
contribution:
. On the dissolution of a partnership, or
. When the date specified in the certificate for its return
has arrived, or
. 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.
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 CONT..

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:
. He rightfully but unsuccessfully demands the return of his contribution,
or
. 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. , and the limited partner would otherwise be entitled
to the return of his contribution.
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CONDITIONS BEFORE CONTRIBUTION
OF LTD PARTNER BE RETURNED

a. All liabilities of the partnership have been paid or if they

have not yet been paid, the assets of the partnership are
sufficient to pay such liabilities. As in Article , liabilities
to limited partners on account of their contributions and to
general partnership are not considered;
b. The consent of all the members (general and limited
partners) has been obtained except when the return may be
rightfully demanded; and
c. The certificate is cancelled or so amended as to set forth the
withdrawal or reduction of the contribution.
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WHEN CAN DEMAND RETURN
CONTRIBUTION
a. On the dissolution of the partnership; or
b. Upon the arrival of the date specified in
the certificate for the return; or
c. After the expiration of the months’ notice
in writing given by him to the other
partners if no time is fixed in the certificate
for the return of the contribution or for the
dissolution of the partnership.
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RIGHT OF LIMITED PARTNER TO
CASH IN RETURN FOR CONTRIBUTION

Even if a limited partner has contributed property,

he has only the right to demand and receive cash
for his contribution. The exceptions are:
a. When there is stipulation to the contrary in the
certificate; or
b. Where all the partners (general and limited)
consent to the return other than in the form of
cash.
WHEN LIMITED PARTNER MAY
HAVE P’SHIP DISSOLVED
a. When his demand for the return of his contribution is denied although he
has a right to such return; or
b. When his contribution is not paid although he is entitled to its return
because the other liabilities of the partnership have not been paid or the
partnership property is insufficient for their payment. In other words,
were it not for this first condition in the first paragraph of Article
which is not present, he would have been entitled to the return of his
contribution because of the presence of the second and third conditions.

-the limited partner must first ask the other partners to have the partnership
dissolved; if they refuse, then he can seek the dissolution of the partnership
by judicial decree.

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 LIABILITIES OF A LTD
PARTNER
ARTICLE . A limited partner is liable to the
partnership:
. For the difference between his contribution as
actually made and that stated in the certificate
as having been made, and
. For any unpaid contribution which he agreed in
the certificate to make in the future at the time
and on the conditions stated in the certificate.
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 cont..
A limited partner holds as trustee for the partnership:
. Specific property stated in the certificate as contributed by him, but which was not
contributed or which has been wrongfully returned, and
. 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.
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LIABILITIES OF LTD PARTNER
AS TO:
a. P’SHIP : As limited partners are not
principals in the transaction of a partnership,
their liability, as a rule, is to the partnership,
not to the creditors of the partnership.

The general partners cannot, however, waive

any liability of the limited partners to the
prejudice of such creditors
 b. P’SHIP CREDITORS AND OTHER PARTNERS : liable for
partnership obligations when he
. contributes services instead of only money or property to the
partnership
. allows his surname to appear in the firm name
. fails to have a false statement in the certificate corrected,
knowing it to be false
. takes part in the control of the business
. receives partnership property as collateral security, payment,
conveyance, or release in fraud of partnership creditors and
. there is failure to substantially comply with legal requirements
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c. TO SEPARATE CREDITORS : he
may, in addition to other remedies
allowed under existing laws, apply to the
proper court for a “charging order”
subjecting the interest in the
partnership of the debtor partner for the
payment of his obligation.
 LIABILITY AS TRUSTEE ( nd
par)
A limited partner is considered as trustee for the p’ship
for:
. Specific property stated in the certificate as
contributed by him but which he had not contributed;
. Specific property of the partnership which had been
wrongfully returned to him;
. Money wrongfully paid or conveyed to him on account
of his contribution; and
. Other property wrongfully paid or conveyed to him on
account of his contribution.
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 REQUIREMENTS FOR WAIVER OR
COMPROMISE OF LIABILITIES ( rd par)

. The waiver or compromise is made

with the consent of all the partners; and
. The waiver or compromise does not
prejudice partnership creditors who
extended credit or whose claims arose
before the cancellation or amendment
of the certificate.
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LIABILITY FOR RETURN OF CONTRIBUTION
LAWFULLY RECEIVED ( th par)

-he is liable to the partnership

a. for the return of contribution lawfully received
by him
b. to pay creditors who extended credit or whose
claim arose before such return.

His liability, of course, cannot exceed the sum

received by him
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EFFECT IN CHANGE IN THE
RELATION OF LIMITED PARTNERS
ARTICLE . 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 the 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.
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 CONT..

An assignee becomes a substituted limited partner when the

certificate is appropriately amended in accordance with article .

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 and
.
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RIGHTS OF LTD PARTNER

-he may assign his interest in the partnership to

another person. The assignee is only entitled to
receive the share of the profits or other compensation
by way of income or the return of the contribution to
which the assignor would otherwise be entitled.

The assignee acquires all the rights of the limited

partner only when he becomes a substituted limited
partner.
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
WHEN ASSIGNEE MAY BECOME A
SUBSTITUTED LIMITED PARTNER
a. All the members must consent to the assignee
becoming a substituted limited partner or the
limited partner, being empowered by the
certificate, must give the assignee the right to
become a limited partner;
b. -The certificate must be amended in accordance
with Article ; and
c. The certificate as amended must be registered in
the Securities and Exchange Commission.
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LIABILITY OF SUBSTITUTED
PARTNER AND ASSIGNOR
-the substituted limited partner is liable for all the
liabilities of his assignor except only those of which he
was ignorant at the time he became a limited partner and
which could not be ascertained from the certificate.

Similarly, the assignor is not released from liability to

persons who suffered damage by reliance on a false
statement in the certificate and to creditors who extended
credit or whose claims arose before the substitution.
 EFFECT OF RETIREMENT, DEATH, INSOLVENCY,
INSANITY OR CIVIL INTERDICTION OF
GENERAL PARTNER

ARTICLE . 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:
. Under a right so to do stated in the
certificate, or
. With the consent of all members.
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-it does not result in the
dissolution of the partnership
unless, there is only one limited
partner.
RIGHT OF EXECUTOR ON
DEATH OF LIMITED PARTNER
ARTICLE . On the death of a limited partner
his executor or administrator shall have all 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.
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On the death of a limited partner, his executor or administrator
shall acquire all the rights for purposes of settling the affairs of
the limited partner (see Art. .) and the right to constitute the
deceased’s assignee as substituted limited partner. Note that the
executor or administrator may constitute the assignee as a
substituted limited partner only if the deceased partner was
empowered to do so in the certificate

Under the second paragraph, the estate of the deceased limited

partner is liable for all his liabilities contracted while he was a
limited partner.
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RIGHT OF CREDITORS OF
LIMITED PARTNER
ARTICLE . 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.

The interest may be redeemed with the separate property of any general
partner, but may not be redeemed with partnership property.

The remedies conferred by the first paragraph shall not be deemed exclusive
of others which may exist.

Nothing in this Chapter shall be held to deprive a limited partner of his

statutory exemption.
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-The creditor of a limited partner may apply to the proper court
for an order charging the limited partner’s interest in the
partnership for the payment of any unsatisfied amount of his
claim. The interest so charged may be redeemed with the separate
property of any general partner but not with partnership property.

Under Article , paragraph , No. ( ), the interest of the debtor

partner charged with the payment of the unsatisfied amount of the
judgment debt may be redeemed with partnership property with
the consent of all the partners whose interests are not so charged.
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-The limited partner’s right under
the exemption laws is also
preserved under this article since
his interest in the partnership is
actually his property.
 DISSOLUTION OF LIMITED
P’SHIP
ARTICLE . In settling accounts after dissolution the liabilities of
the partnership shall be entitled to payment in the following order:
. Those to creditors, in the order of priority as provided by law,
except those to limited partners on account of their contributions,
and to general partners;
. Those to limited partners in respect to their share of the profits
and other compensation by way of income on their contributions;
. Those to limited partners in respect to the capital of their
contributions;
. Those to general partners other than for capital and profits;
. Those to general partners in respect to profits;
. Those to general partners in respect to capital.
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CONT..

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.
CAUSES OF DISSOLUTION

It may be dissolved:
a. for the misconduct of a general partner,
b. for fraud practiced on the limited partner by the
general partner
c. on the retirement, death, etc. of a general partner
d. when all the limited partners ceased to be such
e. on the expiration of the term for which it was to exist;
or
f. by mutual consent of the partners before the
expiration of the firm’s original term.
SUIT FOR DISSOLUTION

-a limited partner may bring a suit for the

dissolution of the firm, an accounting, and
the appointment of a receiver when the
misconduct of a general partner or the
insolvency of the firm warrants it. Similarly,
creditors of a limited partnership are entitled
to such relief where the firm is insolvent.
NOTICE OF DISSOLUTION

When the firm is dissolved by the

expiration of the term fixed in the
certificate, notice of the dissolution
need not be given since the papers filed
and recorded in the Securities and
Exchange Commission are notice to all
the world of the term of the partnership
Where it is by the express will of
the partners, the certificate shall be
cancelled, and a dissolution of the
partnership is not effected until
there has been compliance with
the requirement in this respect.
WINDING UP

-the consequences of the dissolution of a general partnership apply

to limited partnership. Therefore, the partnership continues in
operation while winding up.

When a limited partnership has been duly dissolved, the general

partners have the right and power to wind up its affairs, as in a
general partnership. It is not the duty of the limited partner or of the
representative of a deceased limited partner to care for or collect the
assets of the firm.

The representatives of the general partners, not the limited partners,

succeed the general partners.
 PRIORITY IN THE DISTRIBUTION
OF P’SHIP ASSETS
. Those due to creditors, including limited partners, except those on
account of their contributions, in the order of priority as provided
by la
. Those due to limited partners in respect to their share of the profits
and other compensation by way of income on their contributions;
. Those due to limited partners for the return of the capital
contributed;
. Those due to general partners other than for capital and profits;
. Those due to general partners in respect to profits; and
. Those due to general partners for the return of the capital
contributed.
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SHARE OF LIMITED PARTNERS
IN P’SHIP ASSETS
-In the absence of any statement in the
certificate as to the share of the profits which
each partner shall receive by reason of his
contribution and subject to any subsequent
agreement, limited partners share in the
partnership assets in respect to their claims
for capital and profits in proportion to the
respective amounts of such claims.
 WHEN CERTIFICATE SHALL BE
CANCELLED OR AMENDED
ARTICLE . The certificate shall be cancelled when the
partnership is dissolved or all limited partners cease to be such.

A certificate shall be amended when:

. There is a change in the name of the partnership or in the
amount or character of the contribution of any limited
partner;
. A person is substituted as a limited partner;
. An additional limited partner is admitted;
. A person is admitted as a general partner;
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 cont..

. A general partner retires, dies, becomes insolvent or insane, or is

sentenced to civil interdiction and the business is continued under
article ;
.There is a change in the character of the business of the partnership;
.There is a false or erroneous statement in the certificate;
.There is a change in the time as stated in the certificate for the
dissolution of the partnership or for the return of a contribution;
.A time is fixed for the dissolution of the partnership, or the return of
a contribution, no time having been specified in the certificate, or
.The members desire to make a change in any other statement in the
certificate in order that it shall accurately represent the agreement
.
among them.
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 ARTICLE . The writing to amend a certificate shall:
. Conform to the requirements of article as far as necessary to set forth
clearly the change in the certificate which it is desired to make; and
. Be signed and sworn to by all members, and an amendment substituting a
limited partner or adding a limited or general partner shall be signed also by
the member to be substituted or added, and when a limited partner is to be
substituted, the amendment shall also be signed by the assigning limited
partner.

The writing to cancel a certificate shall be signed by all members.

A person desiring the cancellation or amendment of a certificate, if any person
designated in the first and second paragraphs as a person who must execute the
writing refuses to do so, may petition the court to order a cancellation or
amendment thereof.
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cont..

If the court finds that the petitioner has a right to

have the writing executed by a person who refuses
to do so, it shall order the Office of the Securities
and Exchange Commission where the certificate is
recorded to record the cancellation or amendment
of the certificate; and when the certificate is to be
amended, the court shall also cause to be filed for
record in said office a certified copy of its decree
setting forth the amendment.
 cont..

A certificate is amended or cancelled when there is filed for

record in the Office of the Securities and Exchange
Commission, where the certificate is recorded:
. A writing in accordance with the provisions of the first
or second paragraph, or
. A certified copy of the order of court in accordance with
the provisions of the fourth paragraph;
. After the certificate is duly amended in accordance with
this article, the amended certificate shall thereafter be for
all purposes the certificate provided for in this Chapter.
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REQUIREMENTS TO AMEND

a. The amendment must be in writing;

b. It must be signed and sworn to by all the members including
the new members, and the assigning limited partner in case of
substitution or addition of a limited or general partner; and
c. The certificate, as amended, must be filed for record in the
Securities and Exchange Commission.

From the moment the amended certificate or a certified copy

of a court order granting the petition for amendment has been
filed, such amended certificate shall thereafter be for all
purposes the certificate of the partnership under Article .

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REQUIREMENTS FOR
CANCELLATION
-cancellation of a certificate must also be in writing
and signed by all the members and filed with the
Office of the Securities and Exchange Commission.
If the cancellation is ordered by the court, certified
copy of such order shall be filed with the
Commission.

The approval by the Commission of the

amendment or cancellation is not required.
LIMITED PARTNER, A MERE
CONTRIBUTOR
ARTICLE . A contributor, unless
he is a general partner, is not a proper
party to proceedings by or against a
partnership, except where the object
is to enforce a limited partner’s right
against or liability to the partnership.
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-A limited partner is, therefore, not
prohibited from engaging in business
for himself even in competition with that
conducted by the partnership and may
transact business with the partnership
for ordinary purposes as though he were
a stranger.
PARTIES TO ACTION BY OR
AGAINST P’SHIP
Since limited partners are not principals in partnership
transactions, their liability, as a general rule, is to the
partnership, not to the creditors of the partnership. (see
Art. .) For the same reason, they have no right of
action against third persons against whom the
partnership has any enforceable claim.

Hence, unless a limited partner is also a general partner,

or has become liable as a general partner, he is not a
proper party to proceedings by or against the partnership.
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WHEN A PROPER PARTY

a. He may maintain an action in his own name where the

object is to enforce his individual rights against the
partnership (Art. .), and to recover damages for
violation of such right. Similarly, he is a proper party to
a proceeding to enforce his liability to the partnership.
(Art. .)
b. An action at law may be maintained by creditors of a
firm against a limited partner to account for and
restore sums withdrawn by him from the capital of the
firm with outstanding debts on a voluntary dissolution.
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 PROVISIONS FOR EXISTING
LTD P’SHIPS
ARTICLE . A limited partnership formed under the law prior to the
effectivity of this Code, may become a limited partnership under this Chapter by
complying with the provisions of article , provided the certificate sets forth:
. The amount of the original contribution of each limited partner, and the time
when the contribution was made; and
. That the property of the partnership exceeds the amount sufficient to
discharge its liabilities to persons not claiming as general or limited partners
by an amount greater than the sum of the contributions of its limited
partners.

A limited partnership formed under the law prior to the effectivity of this
Code, until or unless it becomes a limited partnership under this Chapter,
shall continue to be governed by the provisions of the old law.
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