REPORTER: Plarisan, Pamela C.

COURSE, YEAR & SECTION: BS Accountancy 2 – C

TOPICS: Rights, Powers, and Liabilities of General Partner
Rights, in General, of a Limited Partner

Article1850. A general partner shall have all the rights and powers and be subject to all restrictions
and liabilities of 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 a general partner, unless the right to do so is given in the
certificate.

 To formally acknowledge as a general partner, they shall present written consent or ratification
to support claims. The written consent or ratification provides legal validation that one is a
general partner with a right to take charge of managing the business and be responsible for the
liabilities and restrictions. The acts enumerated above (numbers from 1-7) are the things that one
cannot do if he cannot present a written consent or ratification. For example, if there are 10
general partners and 1 dies, the partnership will be dissolved. However, this rule will not apply in
the case of limited partners. If there are 5 limited partners and 1 dies, the partnership will still
continue. It will still continue to work as long as there is still one surviving limited partner in the
partnership. Thus the examples stated have different views in terms of losing one partner. For
general partner, even if there is 1 partner that is dead it would affect the whole partnership
because general partners have all the rights and also is responsible for the liabilities and
restrictions. For short, general partners must do and be responsible of everything in the
 partnership so as the other general partners. And as for the limited partners, as long as there is
this 1 limited partner who is still alive, the partnership will still continue.

RIGHTS, POWERS, AND LIABILITIES OF GENERAL PARTNER.

Before we discuss about the rights, powers, and liabilities of general partner, let us first know
“What is general partner?”

General partner is an owner of partnership. Often, a general partner either plays an active role in
the company’s daily operations or is a managing partner. A general partner for a business can act on the
company’s behalf. While a general partner has important responsibilities and duties in the partnership,
they also have unlimited liability regarding the financial dealings of a partnership. This means, if the
partnership acquires a large amount of financial debt or liability, this liability might pass through to the
general partners.

The essential feature of a limited partnership is the union of two classes of members, the limited
and general partners. The law expressly requires there to be at least one general partner with unlimited
liability.

The rights, powers, and liabilities of general partner are as follows;

1. Right of control / unlimited personal liability - A general partner in a limited partnership is much
like a partner in an ordinary partnership. He 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, i.e., in a general partnership.
 It is in consideration of his unlimited personal liability for the obligation of the
partnership that he is granted the general authority to manage the firm’s business.

2. Acts of administration / acts of strict dominion – As a rule, he may bind the partnership by any
act of administration, but he has no power to do the specific acts enumerated in Article 1850
(even if agreed to by all general partners) without the written consent or at least ratification of all
the limited partners. The said acts are acts to strict dominion or ownership and are, therefore,
beyond the scope of the authority of general partner. (Article 1818.)
 The general partner who violates the requirement imposed by Article 1850 is liable for
damages to the limited partners.
 (a) In No. (1), the act is in violation of the agreement of the partners as contained in the
certificate;
(b) In Nos. (2) and (4), the acts are prejudicial to the interests of the limited partners;
(c) In Nos. (5) and (6), the rule is based on the highly fiduciary nature of the partnership
relation; and
(d) In No. (7), any of the events mentioned results in the dissolution of the partnership. (see
Art. 1860.)

3. Other limitations – The general partners, of course, have no power to bind the limited partners
beyond the latter’s investment in the partnership. Neither do they have the power to act for the
firm beyond the purpose and scope of the partnership nor change the nature of the business
without the consent of the limited partners.
Article1851. A limited partner shall have the same rights as a general partner as 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 a 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 profits or other compensation by
way of income and to the return of his contribution as provided in Articles 1856 and 1857.

 Because limited partner contributes cash or property to the partnership, he is much

concern with how well is it doing to a certain firm. Thus with his concern, the article
above gave him the rights to monitor what he had contributed. Stated above are his rights
same as to general partner.

RIGHTS, IN GENERAL, OF A LIMITED PARTNER.

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.

 The wrongdoing or improper acts on the part of general partners may not give limited
partner greater rights than the law and what his contract grants him.

SPECIFIC RIGHTS OF A LIMITED PARTNER.

Article 1851 enumerates the specific rights of the limited partner in the partnership. They are as follows:

(1) To require that the partnership books be kept at the principal place of business of the
partnership (see Art. 1805.);
(2) To inspect and copy at a reasonable hour partnership books or any of them (Ibid.);
(3) To demand true and full information of all things affecting the partnership (see Art. 1806);
(4) To demand a formal account of partnership affairs whenever circumstances render it just and
reasonable (see Art. 1809.);
(5) To ask for dissolution and winding up by the decree of court (see Arts. 1831, 1857, par. 4.);
(6) To receive a share of the profits or other compensation by way of income (Art. 1856); and
(7) To receive the return of his contribution provided the partnership assets are in excess of all its
liabilities. (Art. 1857).

The rights of a limited partner are necessarily lesser than those of a general partner. He
cannot take part in the control of the business (Art.1848.) which is left to the general partner of
partners.