DISSOLUTION

Pointers on Dissolution
1.
2.
3.
4.

Definition
Grounds
Effects on Authority
Manner of Winding Up and Persons
Authorized to wind up Partnership
Affairs
5. Rules in Liquidation and Distribution
of Assets for Dissolved Partnership

Pointers on Dissolution
Definition
PROBLEM: IF THE PARTNERS WISH TO END THEIR RELATIONS WITH
THE OTHER PARTNERS WHAT IS THE SOLUTION?
1828. DISSOLUTION.

change in the relation of the partners caused by any

partner ceasing to be associated in the carrying on as
distinguished from the winding up of the business.
DISTINGUISH THIS FROM:
WINDING-UP PROCESS OF SETTLEMENT OF BUSINESS/AFFAIRS
TERMINATION END OF PARTNERSHIP LIFE.
(POINT IN TIME WHEN ALL PARTNERSHIP AFFAIRS ARE COMPLETELY AND
FINALLY SETTLED OR WOUND-UP)

Pointers on Dissolution

Grounds (WAVE)
With or without violation of terms (1830
1. and 2.)
Automatic or not Automatic (1830 and
1831)
Voluntary or involuntary (1830 1. and
2.) and (1830 3. to 8.)
Extrajudicial or Judicial or (1830 1. to 7.)
and (1830 8./1831)

Grounds
(1)

Without violation of the agreement between the partners:

Termination of the definite term or particular undertaking
Express will of any partner
Express will of all the partners
Expulsion of any partner

(2) In contravention of the agreement between the partners,

(3) By any event which makes the business of the partnership unlawful
(4) Loss of a specific thing
(5) By the death of any partner;
(6) By the insolvency of any partner or of the partnership;
(7) By the civil interdiction of any partner;
(8) By decree of court:
Insanity
Incapability to perform
Guilty of matters prejudicial to the carrying on of the business;
Wilful or persistent commission of a breach of the partnership agreement, or
conducts of matters impracticable to carry on the business in partnership with
him;
Partnership can only be carried on at a loss;
Other circumstances render dissolution equitable.

Pointers on Dissolution
Grounds
Aside from classifying the grounds as WAVE, classify these
grounds as well as to cause:
1.Caused by Act, Insolvency or Death (AID)
2.Not caused by Act, Insolvency or Death

WHY? Because this is important in determining whether a

partners authority to engage for the partnership is immediately
terminated or not. Thus:
. If not by AID Immediate termination of Authority
. If by AID Termination of Authority depends whether or not a
partner who engages for the partnership has knowledge or
notice of the dissolution.

Pointers on Dissolution
Effects on Authority
General Rule : Dissolution terminates all
authority of any partner to act for the
partnership
Exception : Remaining Authority after
dissolution:
(1) Necessary to complete transactions
begun but not then finished.
(2) Necessary to wind-up partnership affairs

Pointers on Dissolution
Manner of Winding Up and Persons Authorized to
wind up Partnership Affairs
1. Judicial or extra-judicial
2. Hierarchy of Authority to Wind- up PA
. Agreement Note the opening statement
Unless otherwise agreed
. Innocent partners Those who have not who
have not wrongfully dissolved the partnership
. legal representative of the last surviving
partner, not insolvent.

Pointers on Dissolution
Rules in Liquidation and Distribution of Assets for Dissolved Partnership
Since you are the master of this topic, Just remind yourselves
about the following:
. What constitute partnership Assets
. Preference in the settlement of Partnership Liabilities
. Compare order of Liquidation between General and Limited
Partnership
- In GP Capital First before Profit
- In LP Profit First before Capital
. Why the Difference : In GP, partners are more concerned in their
investments as owners. In LP, partners are more concerned in the
return of their investments, the Limited partners being mere
contributors/investors.

LIMITED PARTNERSHIP

Pointers on Limited
Partnership
1.
2.
3.
4.
5.

Definition/Characteristics
GP VS LP
Rights, Powers and Obligations
The Special Partners
Rules in Liquidation and Distribution
of Assets for LP

Pointers on Limited
Partnership
Definition/Characteristics
. Characteristics of a Limited Partnership
Formed by compliance with statutory requirements
One or more GP control the business and are personally
liable to TP
One or more LP contribute to the capital and share with the
profits but does not participate in management of business
and not personally liable to TP beyond their contributions.
LP may ask for return of their capital contributions under the
conditions prescribed by law
Partnership debt is paid out of common fund and individual
properties of GPs.

Pointers on Limited
Partnership
GP VS LP

GP

LP

Liability

Personally Liable

Upto Capital
Contributions only

Management

Has right to Manage

No right given

Contribution

MPS

MP, but not S

Standing in a Suit

Proper party

Not a Proper party,

unless in enforcing his
own rights

Pointers on Limited
Partnership
GP VS LP

Name

May appear in a firm

name

GR: Must not appear

EX : 1846

Prohibition to
engage in business

No prohibitions.
Considered as a mere
contributor

Dissolution causes

CP May engage in diff

business
IP May not engage in
any type of Business
DRICI of GP dissolves
the Partnership

Form

GR: Any form

EX: P3k or more/IP

Must Comply with

Requirements

Firm Name

Without Ltd.

With Ltd.

Winding-up rules

Capital First

Profit First

DRICI of LP does not

dissolve the Partnership

Pointers on Limited
Partnership
Rights, Powers and Obligations
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.
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 acts under Art. 1850 (Memorize key words):
A limited partner shall have the same rights as a general partner as to
a. partnership books,
b. demanding true and full information and a formal account of partnership
affairs;
c. have dissolution and winding up by decree of court.
d. receive a share of the profits or other compensation by way of income, and
to the return of his contribution.

Pointers on Limited
Partnership
The Special Partners
1. General-Limited Partner (1853)
2. Preferred Limited Partner (1855)
3. Substituted Limited Partner (1859)

Pointers on Limited
Partnership
The Special Partners
1. General-Limited Partner (1853)
. 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 or IF HE
IS A PURE LIMITED PARTNER (Right of reimbursement).
. T/F: A general-limited partner is liable upto his
personal/separate properties to third persons. Yes, but
subject to reimbursement

Pointers on Limited
Partnership
Rules in Liquidation and Distribution of
Assets
Partnership Creditors, Limited Partners,
General Partners.
Profits are distributed First Before Capital
In GP, partners are more concerned in their
investments as owners. In LP, partners are
more concerned in the return of their
investments, the Limited partners being
mere contributors/investors.