3 Rights and Responsibilities of a Partner

Wednesday, February 1, 2023 10:43 AM

- Elements of a Partnership Contract

○ Consent
▪ Meeting of minds of the partners
□ Natural persons
□ Capacitated to enter into a contract
○ Object
▪ Common fund where they will contribute money, property, or industry for a lawful busines or activity or
undertaking
□ If unlawfully activity, it has three effects
 No Partnership in the eyes of law = VOID
 State will confiscate the profits (not the capital contribution, unless it was illegal objects)
 Criminal and civil liability VS the guilty parties
○ Cause / Consideration
▪ Profits to be divided by the partners
▪ BASIC RULE: When a person shares in the profits of a partnership, it is already a PRIMA FACIE
EVIDENCE that he is a partner
□ Prima Facie = Initial Conclusion, unless disproved
 Literally translates to: At first face
▪ Exception to the Basic Rule (na kahit tumanggap siya ng profits, di siya partner): DWAIC Rule
□ When profit is received as payable for Debt Payable in Installments
□ Wages to an employee or rent to a lessor or landlord
□ Annuity to a widow or representative or heirs of a dead partner
□ Interest to a loan
□ Consideration to a sale of goodwill

- Rights of a Partner - PA2DIS

○ Property Rights
▪ Kinds
□ Right to Specific Partnership Property
 Each partner is considered as a co-owner of partnership property
 Co-owner Partnership
 Cannot assign to third persons
□ Right to Share in the Profits (his interest)
 Ito lang yung pwede niyang i-assign sa third person, with or without the consent of the other
partners
◊ Sa kaniya naman kasi yung profits eh
 Sharing in the Profit and Losses
1. Follow the agreement of the partners - Profit / Loss Ratio
 If No Loss Ratio, then use the Profit Ratio for distributing loss
 If No Profit Ratio, go to number 2 for profits
2. Follow the capital contribution
3. If No P/L Ratio and Capital Contribution, profits and losses should be distributed equally
4. For Industrial Partners, follow P/L Ratio
 Without No. 1, give a just and an equitable share for his efforts
– Can be subject to compromise
5. For Capitalist-Industrial Partners and Leonine Partner
 For his capital contribution, follow 1-3
 For his industry, follow no. 4
□ Right to Participate in the Management
 The following are the Management Rules:
 With Agreement in the Articles of Partnership
1. Appointed Managing Partner (AMP) in the Partnership Contract
 Cannot be removed without valid cause
– Ex of valid cause. Violation of company rules
 Decision about administrative matters is superior unless with valid cause
 His powers are irrevocable
 There are AMPs na wala sa Articles of Partnership and these are the AMP na pwedeng
tanggalin by voting
2. If two or more MPs, they can act separately but if one opposes the other, then majority
votes will decide / settle the other
 If there is a tie, then the partner/s with controlling interest will decide =
– Normally, the partner with greatest equity
– Pinakamalaking capital contribution

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 – Pinakamalaking capital contribution
3. All other management rules are allowed if not unlawful
 No Agreement in the Articles of Partnership
1. Apply the Mutual Agency Rule (MA Rule)
 Mutual Agency: Every partner is the agent of the company / organization, hence he can
legally represent the organization in every contract as long as the transaction is in
connection to the organization's regular business
– As if he is also a managing partner
2. Except wherein the consent of all partners are needed = D2CA3WS (dapat lahat magdecide,
hindi lang managing part.)
 Cannot Dispose Partnership Goodwill
 Cannot Discontinue Partnership Operation (whether it is a branch only or temporary
only)
– He cannot shutdown the operations of the company on his own
 Cannot Compromise Partnership Case in Court
– This includes confess judgement
 Cannot enter into Arbitration Partnership Case
– This is for other government offices
 Cannot Admit a new partner
– Again, delectus personae
 Cannot Assign Partnership Property
 Cannot Waiver Partnership Claims
– Similar to Condonation
 All other Strict Dominion Act
– To mortgage or pledge, dapat may consent of all
– Dominion = Domino = Hangga't maari, owner ang gagawa
 Cannot be assigned to third persons
○ Right to Assign to Third Persons His Share in the Profits
▪ He can share his profits to third persons without the consent of the other parties
□ This is because profits naman niya yun
▪ Right to specific property and right to participate in the management cannot be assigned
□ This needs to be consented by the other partners to be able to be approved
▪ Third Person = Assignee = He DOES NOT become a partner
□ Delectus personae is not violated
 No new partner without the consent of the others
□ Asignee is not the same as the Substituted Limited Partner
▪ Substituted Limited Partner (SLP)
□ Becomes a partner when:
 After the consent of all the partner because he took the place of a limited partner who left the
company or the organization
◊ Left because of DIIC
 Death
 Insolvency
 Incapacitated
 Civil Interdiction
 If reserved in the partnership contract
◊ Partnership Contract = Articles of Partnership
◊ Di na need ng consent ng ibang partners (technically, pumayag na sila dati)
□ In essence, SLP is a NAP or a Newly Admitted Partner
 Limited Partner lang sila, hindi pwede maging general partner
○ Right to Demand Formal Accounting of Specific Partnership Transaction
▪ When is this allowed:
□ In case of fraud in the distribution of profits
□ When there is mismanagement
□ When the partners is unlawfully excluded from the company profits or business
□ Secret Profits
 Indirect or other Income accruing to any other partners
 Basta in connection to the company business
 Ex. One of the partners na in charge sa engineering department ay may nahukay na gold bars dun sa
place ng business nila
◊ This partner has to report this as Secret Profit, otherwise pwedeng magdemand yung iba
niyang partner ng Formal Accounting
□ Cases stipulated by the parties and other just and reasonable grounds
▪ This right to demand formal accounting prescribes 10 years after dissolution
□ Kahit na dissolved na yung partnership basta wala pang 10 years after, pwedeng magdemand yung
partners for a formal accounting
○ Right to Demand Dissolution (in good faith)
▪ Take note that this must be made in good faith

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 ▪ Take note that this must be made in good faith
□ If made in bad faith, the partner would be liable for damages
▪ Fiduciary Relationship
□ As partners, they are guided by this
□ There is the element of trust and confidence
 If this si violated, there will be a liability for damages
○ Right to Inspect Partnership Books or Records
▪ Includes the:
□ Financial Statements
□ Records of the Meetings
□ Records of Investment
□ All other financial records
○ Right to Share During Liquidation
▪ For Capitalist Partners after paying the company obligations
□ Basta nabayaran na lahat ng company obligations tapos may natira pa, pwede pa makakuha from the
liquidation
▪ For Industrial Partners, only if there is profit
□ Kung wala profit, edi wala

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