BUSINESS ORGANIZATION

From the notes of ATTY. ANGOS

Reviewer
CHAPTER 4 3. cases in w/c the person advancing the insanity or etc. doesn’t have the A limited partnership is formed if there has
capital secures, besides a share in the insolvency of GP same effect for his been substantial compliance in good faith
LIMITED PARTNERSHIP profits, some measure of control over the dissolves partnership executor or with the foregoing requirements.
business administrator shall
have the rights of LP LP not created by mere voluntary
Lender who takes a share in the profits does for the purpose of agreement
Art. 1843. A limited partnership is one
not by reason of that fact, run a risk of being selling his estate Limited partnership is formed if there has
formed by two or more persons under the
held as a partner. If however, his contract been substantial compliance in GF w/ the
provisions of the following article, having as Voluntary agreement Formal proceeding
falls w/in the 3rd class mentioned & he has requirements set forth in A1844.
members
any measure of control over the business, he
o one or more general partners and
at once runs serious risk of being liable for Creation of a limited partnership is a formal
o one or more limited partners. the debts of the business as a partner. Art. 1844. Two or more persons desiring to proceeding & isn’t a mere voluntary
form a limited partnership shall: agreement as in general partnership.
The limited partners as such shall not be Purpose: (1) Sign and swear to a certificate, which
bound by the obligations of the partnership. To encourage those having capital to become shall state - The requirements of the statute must
partners w/ those having skill, by limiting (a) The name of the partnership, adding followed, otherwise, the liability of the limited
Concept of limited partnership liability of the former to the incidental thereto the word "Limited"; partners becomes the same as that of
The form of business association composed of amount actually contributed by them. (b) The character of the business; general partners.
1 or more general partners & 1 or more (c) The location of the principal place of
special partners (not being personally liable Object: business; Requirements for formation of LP
for the partnership debts) To furnish reasonable protection to those (d) The name and place of residence of each 1. certificate of articles of LP w/c states the
dealing w/ the concern by requiring acts to be member, general and limited partners matters enumerated in the article, must
The liability to 3rd persons of 1 or more of its done & public notice thereof given so that all being respectively designated; be signed & sworn to; and
members referred to as limited (special) who desire may know the essential features (e) The term for which the partnership is to 2. such certificate must be field for record in
partners is limited to a fixed amount, their of the arrangement. exist; the Office of SEC
capital contributions or the amount they have (f) The amount of cash and a description of
invested in the partnership. General Limited and the agreed value of the other Purpose: give actual or constructive notice to
partner/partnershi partner/partnershi property contributed by each limited potential CRs or persons dealing w/
Characteristics of limited partnership p p partner; partnership
1. formed by compliance w/ the statutory (g) The additional contributions, if any, to be
req’ts Personally liable for Liability extends to made by each limited partner and the
partnership his capital  LP can’t be constituted orally
2. 1 or more general partners control the times at which or events on the
business & are personally liable to CRs obligation contribution happening of which they shall be made; A person who files a false certificate renders
3. 1 or more limited partners contribute to All GP have equal Has no share in the (h) The time, if agreed upon, when the himself liable as GP.
the capital & share in the profits but don’t right in the mgt of mgt contribution of each limited partner is to
participate in the mgt of the business & business; be returned; If there’s no substantial compliance the
aren’t personally liable for partnership (i) The share of the profits or the other
may contribute May contribute cash partnership becomes a GP as far as 3 rd
obligations beyond the amt of their compensation by way of income which
money, property or or property but not persons are concerned.
capital contributions each limited partner shall receive by
4. limited partners may ask for the return of industry services
reason of his contribution; A LP treated as GP as far as 3rd persons are
their capital contributions under the Proper party in a Not a property party (j) The right, if given, of a limited partner to concerned is entitled to reimbursement from
conditions prescribed by law proceeding by or to a proceeding substitute an assignee as contributor in GP for whatever obligations he might have
5. partnership debts are paid out of against partnership his place, and the terms and conditions of paid to partnership CRs beyond his capital
common fund & the individual properties the substitution;
Interest may not be Interest is freely contribution.
of the general partner (k) The right, if given, of the partners to admit
assigned as to make assignable, w/
assignee a new assignee acquiring additional limited partners; If attaching CRs recognize & deal w/ a firm as
* LP has the same type of liab as a (l) The right, if given, of one or more of the
partner w/o other all rights of limited LP, they will be estopped from insisting that
stockholder in a corp. limited partners to priority over other
partner’s consent partner subject to there’s no such partnership.
certain qualifications limited partners, as to contributions or as
Business reason & purpose of statutes to compensation by way of income, and
Name may appear in GR: name doesn’t Presumption of general partnership
authorizing limited partnerships the nature of such priority;
firm name appear To obtain the privilege of a limited
(m) The right, if given, of the remaining partnership liability, 1 must conform to the
Reason: men in business often desire to Prohibited from No prohibition to general partner or partners to continue statutory requirements regulating the
secure capital form others engaging in business engage in business the business on the death, retirement, formation of limited partnership.
w/c is of the kind in civil interdiction, insanity or insolvency of
3 classes of contracts w/c can be made w/ w/c the partnership a general partner; and Construction of provisions on LP
those from whom the capital is secured: is engaged (capital (n) The right, if given, of a limited partner to Courts must consider substance rather than
1. ordinary loan on interest partner) or any demand and receive property other than form in construing the law. However, it
2. loan where the lender in lieu of interest, business for himself cash in return for his contribution. should be construed to insure substantial
takes a share in the profits of the (industrial partner) (2) File for record the certificate in the Office compliance w/ all the statutory provisions w/c
business of the Securities and Exchange Commission.
Retirement, death, Retirement, death are designed for the protection of persons

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2018)
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 BUSINESS ORGANIZATION
From the notes of ATTY. ANGOS
Art. 1845. The contributions of a limited
partner may be cash or property, but not
services.
Limited partner’s contribution
LP or special partner is not allowed to
contribute services. He can contribute only
money or property; otherwise, he shall be
considered an industrial & general partner.
A partner may be a GP & LP in the same
partnership at the same time, provided that
this fact shall be stated in the certificate.
A LP may not be an IP w/o being a GP, in view
of A1845 w/c requires that a LP must be a
capital contributor.
The law isn’t satisfied by the limited partner’s
contribution in P/N, checks, particularly if
post-dated, or bonds or by a contribution
partly in cash or property & partly in notes or
checks.
A check may be treated as actual payment in
cash where the LP has money actually in the
bank to his credit, & he gives the GP absolute
& final control of the mount named therein.
Thus a certified check or manager’s check
satisfies the law.
Time – contribution of each LP must be paid
before the formation of LP
Art. 1846. The surname of a limited partner
shall not appear in the partnership name
unless:
(1) It is also the surname of a general
partner, or
(2) Prior to the time when the limited partner
became such, the business has 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.
Effect where surname of LP appears in
partnership name
LP violating this article is liable, as a general
rule, to partnership CRs w/o the rights of GP.
Such LP shall not be liable as GP w/ respect to
3rd persons w/ actual knowledge that he’s
only a LP.
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2018)
Art. 1847. 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:
(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 to file a petition for its
cancellation or amendment as provided in
Article 1865.
Liability for false statement in
certificate
Liable if the ff requisites are present:
1. 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;
2. person seeking to enforce liab has relied
upon the false statement in transacting
business w/ the partnership
3. person suffered loss as a result of
reliance upon such false statement
liability imposed by article is merely statutory
penalty & does not make the LP a GP for all
purposes, even as to 3rd persons.
Art. 1848. A limited partner shall not
become liable as a general partner unless, in
addition to the exercise of his rights and
powers as a limited partner, he takes part in
the control of the business.
Liability of LP for participating in mgt of
partnership
LP is liable as GP for the firm’s obligations if
he takes part or interfere in the mgt of the
firm’s business.
Whether the LP has participated in the mgt is
to be determined by whether he has
exercised a controlling power in the firm’s
transactions.
Active mgt of partnership business
contemplated
Such control contemplates active
participation in the mgt of partnership
business & doesn’t comprehend the mere
giving of advice.
The LP takes part in the mgt of the business
& is liable generally for the firm’s obligations
where:
1. the business of partnership is in
fact carried on by a board of directors
chosen by the LPs
2. the terms of contract b/wt he
parties, an appointee of LP becomes
the directing manager of the firm
3. LP purchasers the entire property
of partnership, taking title in himself &
carries on the business in his own name
& for his own benefit
4. he makes or is a party to a contract
w/ CRs of an insolvent firm w/ respect
to the disposal of the firm’s assets in
the payment of the firm’s debts
Interference in A1848 is w/ respect to an
existing LP. A LP is not subject to general
liability for taking part in the mgt of the firm
‘coz he settles its affairs after dissolution.
Art. 1849. After the formation of a lifted
partnership, additional limited partners may
be admitted upon filing an amendment to the
original certificate in accordance with the
requirements of Article 1865.
Admission of additional LPs
Additional limited partners may be admitted,
provided there’s proper amendment to the
certificate w/c must be signed & sworn to by
all of the partners including the new limited
partners & filed in SEC.
Art. 1850. A general partner shall have all
the rights and powers and be subject to all
the restrictions and liabilities of a partner in a
partnership without limited partners.
However, without the written consent or
ratification of the specific act by all the
limited partners, a general partner or all of
the general partners have no authority to:
(1) Do any act in contravention of the
certificate;
(2) Do any act which would make it
impossible to carry on the ordinary
business of the partnership;
(3) Confess a judgment against the
partnership;
(4) Possess partnership property, or assign
their rights in specific partnership
property, for other than a partnership
purpose;
(5) Admit a person as a general partner;
(6) Admit a person as a limited partner,
unless the right so to do is given in the
certificate;
(7) Continue the business with partnership
property on the death, retirement,
insanity, civil interdiction or insolvency of
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a general partner, unless the right so to
do is given in the certificate.
Rights, powers & liabilities of GP
Right of control/unlimited personal liability
A GP in a LP is vested w/ the entire control of
the firm’s business & has all the rights &
powers & is subject to all the liabilities &
restrictions of a partner in a partnership w/o
LPs
It’s in consideration of his unlimited personal
liability for the obligation of the partnership
that he’s granted the general authority to
manage the firm’s business.
In the absence of an agreement to the
contrary, he’s not entitled to compensation
for his services beyond his share of the
profits.
Acts of administration/acts of strict dominion
He may bind the partnership by any act of
administration, but he has no power to do the
specific acts enumerated w/o the written
consent or at least ratification of all the LPs.
Said acts are of strict dominion or ownership
& are beyond the scope of the authority of GP
Other limitations
- GPs have no power to bind the LP
beyond the latter’s investment
- GPs have no power to act for the firm
beyond the purpose & scope of the
partnership, & they have no authority
to change the nature of the business
w/o the consent of the LPs
Art. 1851. A limited partner shall have the
same rights as a general partner to:
(1) Have the partnership books kept at the
principal place of business of the
partnership, and at a reasonable hour to
inspect and copy any of them;
(2) Have on demand true and full information
of all things affecting the partnership, and a
formal account of partnership affairs
whenever circumstances render it just and
reasonable; and
(3) Have dissolution and winding up by
decree of court.
A limited partner shall have the right to
receive a share of the profits or other
compensation by way of income, and to the
return of his contribution as provided in
Articles 1856 and 1857.
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 BUSINESS ORGANIZATION
From the notes of ATTY. ANGOS
Rights, in general, of LP
Powers, actual or implied, are much more
limited than those of GP. The LP has the
same right to compel the partners to account
as GP has to protect his interest in the firm.
Specific rights of LP
1. require that partnership books be kept
at the principal place or business
2. inspect & copy at reasonable hour
partnership books or any of them
3. demand true & full info of all things
affecting partnership
4. demand a formal account
5. ask for dissolution & winding up by
decree of court
6. receive the return of his contribution
provided the partnership assets are in
excess of all its liab
Art. 1852. Without prejudice to the
provisions of Article 1848, a person who has
contributed to the capital of a business
conducted by a person or partnership
erroneously believing that he has become a
limited partner in a limited partnership, is not,
by reason of his exercise of the rights of a
limited partner, a general partner with the
person or in the partnership carrying on the
business, or bound by the obligations of such
person or partnership, provided that on
ascertaining the mistake he promptly
renounces his interest in the profits of the
business, or other compensation by way of
income
Status of partner where there’s failure
to create LP
If the law isn’t complied w/ the attempt to
limit the liability of the LP will be ineffective,
at least as to CRs who have not recognized or
dealt w/ the firm as LP.
A1852 grants exemption from liability in favor
of 1 who has contributed to the capital of a
business conducted by a person or
partnership erroneously believing that he has
become LP in a L partnership or GP in a L
partnership.
Status of person erroneously believing
himself to be a LP
Conditions for exemption from liability as GP
1. on ascertaining the mistake, he
promptly renounces his interest in the
profits of the business or other
compensation by way of income
2. his surname doesn’t appear in the
partnership name
3. he doesn’t participate in the mgt of
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2018)
Necessity of renouncing his interest
The person must promptly renounce his
interest before the partnership has become
liable to 3rd persons who can’t be blamed for
considering him as GP.
Q: is it necessary to pay back all past profits
& interest to avoid being held liable as GP
or he need only renounce all further
interest in the profits of the business?
A1: no obligation to return or pay back profits
already received for renounce doesn’t
commonly mean return
A2: intention behind provision must be given
more importance, the statute could have
intended to put partnership CRs in a
position they would have occupied had
there been no LP at the time the
obligations were contracted
Status of heirs of a deceased GP
admitted as
partners
An heir of a deceased GP admitted as partner
under the articles of partnership providing for
such admission, ordinarily becomes LP for his
protection.
1. right to elect to become GP may be
exercised
2. right when given in AP may be waived
Art. 1853. A person may be a general
partner and a limited partner in the same
partnership at the same time, provided that
this fact shall be stated in the certificate
provided for in Article 1844.
A person who is a general, and also at the
same time a limited partner, shall have all
the rights and powers and be subject to all
the restrictions of a general partner;
except that, in respect to his contribution, he
shall have the rights against the other
members which he would have had if he were
not also a general partner.
One person, both a GP & LP
This fact should be stated in the certificate
signed, sworn to & recorded in the office of
SEC.
His rights & powers are those of GP hence
he’s liable w/ his separate property to 3 rd
persons. However w/ respect to his
contribution as LP, he would have the right of
LP insofar as the other partners are
concerned.
While he’s not relieved from personal liab to
3rd persons for partnership debts, he’s
entitled to recover from GPs the amount he
has paid to such 3 rd persons; & in settling
accounts after dissolution, he shall have
priority over GPs in return of their respective
contributions.
Art. 1854. A limited partner also may
1. loan money to and
2. transact other business with the
partnership, and,
unless he is also a general partner,
3. receive on account of resulting claims
against the partnership, with general
creditors, a pro rata share of the assets.
No limited partner shall in respect to any such
claim:
(1) Receive or hold as collateral security and
partnership property, or
(2) Receive from a general partner or the
partnership any payment, conveyance, or
release from liability if at the time the
assets of the partnership are not
sufficient to discharge partnership
liabilities to persons not claiming as
general or limited partners.
The receiving of collateral security, or
payment, conveyance, or release in violation
of the foregoing provisions is a fraud on the
creditors of the partnership.
Loans & other business transactions w/
LP
1. allowable transactions
LP (who’s not a GP) w/o the right to
participate in mgt, is NOT prohibited from:
(a) granting loans to partnership
(b) transacting other business w/ it
(c) receiving pro rata share of the
partnership assets w/ general CRs if
he’s not a GP
2. prohibited transactions
(a) receiving or holding as collateral
security any partnership property
(b) receiving any payment, conveyance,
or release from liability if it will
prejudice the right of 3rd persons
Any violation of the prohibition will give rise
to the presumption that it was made to
defraud partnership CRs.
Preferential right of 3rd person
In transacting business w/ partnership as a
non-member, the LP is considered as non-
partner CR. However, 3rd persons always
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enjoy preferential rights insofar as
partnership assets are concerned.
Art. 1855. 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
1. as to the return of their contributions,
2. as to their compensation by way of
income, or
3. 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.
Preferred LPs
By an agreement of all the members (GPs &
LPs) stated in the certificate priority or
preference may be given to some LPs over
other LPs as to the:
1. return of their contributions
2. compensation by way of income, or
3. any other matter
In the absence of such statement in the
certificate, even if there’s an agreement, all
LPs shall stand on equal footing.
Art. 1856. A limited partner may receive
from the partnership
1. the share of the profits or
2. the compensation
by way of income stipulated for in the
certificate;
provided that after such payment is made,
whether from 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.
Compensation of LP
This right of LP is subject to the condition that
partnership assets will still be in excess of
partnership liabilities after such payment. 3rd
party CRs have priority over the LP’s right.
In determining liab of partnership, the liab to
the LPs for their contributions & to GPs,
whether for contributions or not, aren’t
included.
Art. 1857. A limited partner shall not receive
from
1. a general partner or
2. out of partnership property
any part of his contributions until:
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 BUSINESS ORGANIZATION
From the notes of ATTY. ANGOS
(1) All liabilities of the partnership, except
liabilities to general partners and to
limited partners on account of their
contributions, have been paid or there
remains property of the partnership
sufficient to pay them;
(2) The consent of all members is had, unless
the return of the contribution may be
rightfully demanded under the provisions
of the second paragraph; and
(3) The certificate is cancelled or so amended
as to set forth the withdrawal or
reduction.
Subject to the provisions of the first
paragraph, a limited partner may rightfully
demand the return of his contribution:
(1) On the dissolution of a partnership; or
(2) When the date specified in the certificate
for its return has arrived, or
(3) After he has six months' notice in writing
to all other members, if no time is specified in
the certificate, either for the return of the
contribution or for the dissolution of the
partnership.
In the absence of
1. any statement in the certificate to
the contrary or
2. the consent of all members,
a limited partner, irrespective of the nature of
his contribution, has only the right to demand
and receive cash in return for his
contribution.
A limited partner may have the partnership
dissolved and its affairs wound up when:
(1) He rightfully but unsuccessfully demands
the return of his contribution, or
(2) The other liabilities of the partnership
have not been paid, or the partnership
property is insufficient for their payment as
required by the first paragraph, No. 1, and the
limited partner would otherwise be entitled to
the return of his contribution.
Requisites for return of contribution of
LP (1st par)
ff. conditions must exist before the
contribution of Lp can be returned to him:
(1) All liabilities of the partnership, have
been paid or if they have not been paid,
the assets of the partnership are
sufficient to pay such liabilities
(2) The consent of all members (GPs & LPs)
has been obtained except when the
return may be rightfully demanded
(3) The certificate is cancelled or so
amended as to set forth the withdrawal
or reduction.
When return of contribution a matter of
right (2nd par)
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(1) on dissolution of partnership
(2017-
2018)
(2) upon arrival of date specified in
certificate for the return
(3) after expiration of 6 mos notice in
writing given by him to other partners if
no time is fixed in the certificate for the
return of the contribution or for the
dissolution of the partnership
Right of LP to cash in return for
contribution (3rd par)
GR: Even if LP ahs contributed property, he
has only the right to demand & receive
cash for his contribution
E1: when there’s stipulation to the contrary in
the certificate, or
E2: where all partners (GP & LP) consent to
the return other than in the form of cash
When LP may have partnership
dissolved (4th par)
Additional grounds for dissolution of
partnership upon petition of a LP:
1. when his demand for the return of his
contribution is denied although he has
right ot such return, or
2. when his contribution isn’t paid although
he’s entitled to its return coz the other
liab of the partnership have not been
paid or the partnership property is
insufficient for their payment
LP must 1st ask to have partnership dissolved,
if they refuse, then he can seek dissolution by
judicial decree.
Art. 1858. A limited partner is liable to the
partnership:
(1) For the difference between his
contribution as actually made and that
stated in the certificate as having been
made; and
(2) 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.
A limited partner holds as trustee for the
partnership:
(1) Specific property stated in the certificate
as contributed by him, but which was not
contributed or which has been wrongfully
returned, and
(2) Money or other property wrongfully paid
or conveyed to him on account of his
contribution.
The liabilities of a limited partner as set forth
in this article can be waived or compromised
only by the consent of all members;
but a waiver or compromise shall not affect
the right of a creditor of a partnership who
extended credit or whose claim arose after
the filing and before a cancellation or
amendment of the certificate, to enforce such
liabilities.
When a contributor has rightfully received the
return in whole or in part of the capital of his
contribution, he is nevertheless liable to the
partnership for any sum, not in excess of
such return with interest, necessary to
discharge its liabilities to all creditors who
extended credit or whose claims arose before
such return.
Liabilities of LP
To the partnership
LPs aren’t principals in the transactions, their
liab is to the partnership, not to the CRs of
the partnership.
GPs can’t waive any liability of LP to the
prejudice of such CRs.
To partnership CRs & other partners
A LP is liable for partnership obligations
where:
1. he contributes services instead of money
or property
2. he allows his surname to appear in the
firm name
3. he fails to have false statement in the
certificate corrected, knowing it to be
false
4. he takes part in the control of the
business
5. he receives partnership property as
collateral security, payment, conveyance,
or release in fraud of partnership CRs
6. there’s failure to substantially comply w/
legal requirements governing the
formation of LP
To separate CRs
As in GP, the CR of LP, may apply to the
proper court a “charging order” subjecting
the interest in the partnership of the DR
partner for the payment of his obligation.
Liability for unpaid contribution
LP is liable not only for the difference b/w the
amount of his actual contributions & that
stated in the certificate as having been made
but also for nay unpaid contributions he
agreed to make at future time.
Liability as Trustee
LP is considered trustee for the partnership
for:
1. specific property stated in certificate as
contributed by him but w/c he had not
contributed
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2. specific property of the partnership w/c
had been wrongfully returned to him
3. money wrongfully paid or conveyed to
him on account of his contribution, and
4. other property wrongfully paid or
conveyed to him on account of his
contribution
Requisites for waiver or compromise
1. waiver or compromise is made w/ consent
of all partners; and
2. waiver or compromise doesn’t prejudice
partners
Liability for return of contribution
lawfully received
LPs is liable to partnership for the return of
contribution lawfully received by him to pay
CRs who extended credit to whose claim
arose before such return. His liability can’t
exceed the sum received by him w/ interest.
Art. 1859. A limited partner's interest is
assignable.
A substituted limited partner is a person
admitted to all the rights of a limited partner
who has died or has assigned his interest in a
partnership.
An assignee, who does not become a
substituted limited partner,
has no right to require any information or
account of the partnership transactions or
to inspect the partnership books;
he is only entitled to receive the share of the
profits or other compensation by way of
income, or 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.
An assignee becomes a substituted limited
partner when the certificate is appropriately
amended in accordance with Article 1865.
The substituted limited partner has all the
rights and powers, and is subject to all the
restrictions and liabilities of his assignor,
except those liabilities of which he was
ignorant at the time he became a limited
partner and which could not be ascertained
from the certificate.
The substitution of the assignee as a limited
partner does not release the assignor from
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From the notes of ATTY. ANGOS
Reviewer
liability to the partnership under Articles 1847 of a general partner dissolves the Rights of CRs of a LP
and 1848. partnership, CR of LP may apply to the proper court for an Notice of dissolution
unless the business is continued by the order charging the LP’s interest in the If dissolved by expiration of term in
Effect of change in the relation of LPs remaining general partners: partnership for payment of any unsatisfied certificate, notice not necessary since record
1. substitution of person as LP (1) Under a right so to do stated in the amount of his claim. The interest so charged in SEC is notice to all the world.
2. w/drawal certificate, or may be redeemed w/ the separate property of
3. death (2) With the consent of all members. any GP but not w/ partnership property. Winding up
4. insolvency Not the duty of LP or rep’s of deceased LP to
5. insanity Effect of retirement, death etc. Interest of the DR partner charged w/ the care for or collect the assets of the firm. The
6. civil interdiction These incidents to the GP would dissolve the payment may be redeemed w/ partnership GP have the right & power to wind up its
7. addition of new LPs partnership but any of such incidents to LP property w/ the consent of all partners whose affairs.
 doesn’t necessarily dissolve the does not result in its dissolution unless interest are not so charged.
partnership there’s only 1 LP. Share of LPs in partnership assets
Art. 1863. In setting accounts after LPs share in the partnership assets in respect
Rights of assignee of LP If the business is continued by the remaining dissolution the liabilities of the partnership to their claims for capital & profits in
LP may assign his interest in the partnership partners, the L partnership is not dissolved shall be entitled to payment in the following proportion to the respective amounts of such
to another person. Assignee is only entitled but the certificate must be amended order: claim.
to receive the share of profits or other (1) Those to creditors, in the order of priority
compensation by way of income or return of as provided by law, except those to Proportional sharing by LPs takes place where
Art. 1861. On the death of a limited partner
contribution to w/c the assignor would limited partners on account of their the partnership assets are insufficient to pay
his executor or administrator shall have all
otherwise be entitled contributions, and to general partners; such claims.
the rights of a limited partner for the purpose
of setting his estate, and such power as the (2) Those to limited partners in respect to
He has no right to require any info or account their share of the profits and other Priority of claims of LPs
deceased had to constitute his assignee a
of partnership transactions or to inspect the compensation by way of income on their Members, as among themselves, may include
substituted limited partner.
partnership books contributions; in the partnership articles an agreement for
(3) Those to limited partners in respect to the priority of distribution on the winding up of
The estate of a deceased limited partner shall
When assignee may become substituted capital of their contributions; partnership affairs. In the absence of
be liable for all his liabilities as a limited
LP (4) Those to general partners other than for contrary agreement, all LPs are on equal
partner.
SLP is a person admitted to all the rights of a capital and profits; footing.
LP who has died or has assigned his interest (5) Those to general partners in respect to
Right of executor on death of a LP In the event of insolvency of partnership, its
in a partnership. profits;
The executor or administrator may constitute CRs take preference over both GPs & LPs.
(6) Those to general partners in respect to
the assignee as a SLP only if the deceased
Requisites: capital.
partner was empowered to do so in the
1. all the members must consent to the Subject to any statement in the certificate or Art. 1864. The certificate shall be cancelled
certificate.
assignee becoming SLP or the LP being to subsequent agreement, limited partners when
empowered by the certificate, must give share in the partnership assets o the partnership is dissolved or
Art. 1862. On due application to a court of o in respect to their claims for capital, and o all limited partners cease to be such.
the assignee the right to become LP
competent jurisdiction by any creditor of a in respect to their claims for profits or for
2. certificate must be amended in
limited partner, the court compensation by way of income on their A certificate shall be amended when:
accordance w/ A1865
1. may charge the interest of the indebted contribution respectively, in proportion to the (1) There is a change in the name of the
3. certificate as amended must be
limited partner with payment of the respective amounts of such claims. partnership or in the amount or character
registered in the SEC
unsatisfied amount of such claim, and of the contribution of any limited partner;
2. may appoint a receiver, and (2) A person is substituted as a limited
Liability of substituted partner or Dissolution of a L partnership
3. make all other orders, directions and partner;
assignor
inquiries which the circumstances of the (3) An additional limited partner is admitted;
Causes
case may require. (4) A person is admitted as a general partner;
GR: SLP is liable for all the liabilities of his 1. misconduct of GP
assignor 2. fraud practiced on the LP by GP (5) A general partner retires, dies, becomes
The interest may be redeemed with the insolvent or insane, or is sentenced to
E1. he was ignorant at the time he became a 3. retirement, death, etc. of GP
separate property of any general partner, but civil interdiction and the business is
LP 4. all the LP ceased
may not be redeemed with partnership continued under Article 1860;
E2: could not be ascertained from the 5. expiration of term for w/c it was to exist
property. (6) There is a change in the character of the
certificate 6. mutual consent of partners before
expiration of the firm’s original term business of the partnership;
The remedies conferred by the first (7) There is a false or erroneous statement in
paragraph shall not be deemed exclusive of the certificate;
Suit for dissolution
others which may exist. (8) There is a change in the time as stated in
Art. 1860.
The LP may bring suit for: the certificate for the dissolution of the
Nothing in this Chapter shall be held to partnership or for the return of a
o retirement, 1. dissolution of firm
deprive a limited partner of his statutory contribution;
o death, 2. accounting
exemption. (9) A time is fixed for the dissolution of the
o insolvency, 3. appointment of a receiver when the
misconduct of GP or the insolvency of partnership, or the return of a
o insanity or
o civil interdiction firm warrants (CRs of LP are entitled to

Coquilla609(2017- such relief where firm is insolvent)

2018)
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 BUSINESS ORGANIZATION
From the notes of ATTY. ANGOS
contribution, no time having been
specified in the certificate, or
(10) 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
When certificate shall be cancelled or
amended
Certificate shall be cancelled, not merely
amended when:
1. partnership is dissolved other than by
reason of the expiration of the term of
partnership; or
2. when all LPs cease to be such [L
partnership can’t exist as such if there
are no more LPs]
In all other cases, only an amendment of the
certificate is required.
Art. 1865. The writing to amend a certificate
shall:
(1) Conform to the requirements of Article
1844 as far as necessary to set forth
clearly the change in the certificate which
it is desired to make; and
(2) 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.
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.
A certificate is amended or cancelled when
there is filed for record in the Office of the
Coquilla609(2017-
2018)
Securities and Exchange Commission, where
the certificate is recorded:
(1) A writing in accordance with the
provisions of the first or second
paragraph, or
(2) A certified copy of the order of the court in
accordance with the provisions of the
fourth paragraph;
(3) After the certificate is duly amended in
accordance with this article, the amended
certified shall thereafter be for all
purposes the certificate provided for in
this Chapter.
Requirements for amendment & partnership & to recover damages for
cancellation of certificate
Requirements to amend a certificate:
1. amendment must be in writing
2. it must be signed & sworn by all the
members including new members & SLP
or addition of LP or GP
3. must be filed for record w/ SEC
Requirements for cancellation:
1. in writing
2. signed by all members
3. filed w/ SEC
 if cancellation is by order of the court,
certified copy of such order shall be filed w/
the Commission.
Approval by the Commission of the
amendment or cancellation is not required.
Art. 1866.
GR: A contributor, unless he is a general
partner, is not a proper party to
proceedings by or against a partnership,
E: except where the object is to enforce a
limited partner's right against or liability to
the partnership.
LP, mere contributor
He’s practically a stranger in the L
partnership whose liability is limited to his
interest in the firm w/o any right or power to
participate in the mgt & control of the
business.
Relation of LP w/ other partners or the
partnership is not of trust & confidence hence
he’s not prohibited from engaging in business
for himself even in competition w/ that
conducted by the partnership & may transact
business w/ partnership for ordinary purposes
as though he were a stranger.
Reviewer
Parties to action by or against Provisions for existing L partnerships
partnership L partnership formed under the former law
rd
LPs have no right of action against 3 persons (Code of Commerce)
against whom the partnership has any may become a L
enforceable claim. partnership under Ch 4
by complying w/ the
GR: LP is not a proper party to proceeding by provisions of A1844,
or against the partnership provided the certificate
E1: he’s a LP & a GP at the same time sets forth the info
E2: he has become liable as GP required by A1867.
When LP a proper party
LP may maintain action where the object is to
enforce his individual rights against the
violation of such right.
An action may be maintained by CRs of a firm
against LP to account & restor sums w/drawn
by him. Such is confined to judgment CRs of
the firm w/ unsatisfied executions against
GPs. They must have exhausted their
remedies at law against GPs.
Nature of LP’s interest in the firm
1. not a loan & he’s not a CR of the firm
2. not a mere investment
3. LP is in a sense an owner but has no
property right in the firm’s assets
4. LP’s interest is in personal property
5. nature of LP’s interest in the firm
amounts to a share in the partnership
assets after liab has been deducted
Art. 1867. 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 1844, provided the
certificate sets forth:
(1) The amount of the original contribution of
each limited partner, and the time when
the contribution was made; and
(2) 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.
6