Sie sind auf Seite 1von 130

Partnership

Atty. Esmeralda M. Valerio-Morada


PARTNERSHIP

• By the contract of partnership two or more persons


bind themselves to contribute money, property or
industry to a common fund, with the intention of
dividing the profits among themselves
• Two or more persons may also form a partnership
for the exercise of a profession. (Art. 1767)
• A partnership has a juridical personality which
is separate and distinct from that of the
partners.
• A partnership may sue and be sued in its name
or by its duly authorized representatives.
FORM OF PARTNERSHIP CONTRACT

• GENERAL RULE: No special form is required for the


validity or existence of the contract of partnership.
• EXCEPTIONS:
• Where immovable property or real rights are
contributed, the partnership contract shall be void
unless:
a. It is reduced to writing in a public instrument
(Art. 1771).

b. An inventory of the property contributed is


made, signed by the parties and attached to the
public instrument. (Art.1773)
2. Where the contract is by its terms not to be
performed within a year from the making
thereof, such partnership contract is covered by
the statute of frauds and thus requires a written
agreement to be enforceable
3. Where the contract of partnership has a capital of
3,000 pesos or more, in money or property, it shall
appear in a public instrument and must be recorded in
the Office of the Securities and Exchange Commission.
However, a partnership has a juridical personality even
in case of failure to comply with this requirement
Requisites :

1. intention to create a partnership


2. common fund obtained from the
contributions
3. joint interest in the profits
Essential Features
1. there must be a valid contract;

2. the parties must have legal capacity to enter into the


contract
3. there must be mutual contribution of money, property
and industry to a common fund

4. the object must be lawful; and

5. the primary purpose must be to obtain profits


Partnership vs. Co-ownership
Partnership Co-ownership
Creation:
Always created by a contract, either Generally created by law, but may exist
express or implied even without a contract

Juridical personality :
Has a juridical personality separate and Has no juridical personality
distinct from that of each partner

Purpose:
Realization of profits Common enjoyment of a thing or right;
does not necessarily involve sharing of
profits
Duration: An agreement to keep the thing
No limitation upon the duration is set by undivided for more than 10 years is not
law allowed
Partnership vs. Co-ownership
Partnership Co-ownership
Transfer of interests :
A partner may not dispose of his A co-owner can dispose of his share
individual interest in the partnership so as without the consent of the others
to make the assignee a partner without
unanimous consent
Power to act with third persons :
In the absence of stipulation to the A co-owner cannot represent the co-
contrary, a partner may bind the ownership
partnership
Dissolution :
Death or incapacity of a partner results in Death or incapacity of a co-owner does
the dissolution of partnership not necessarily dissolve the co-ownership
Agency or representation : As a rule, there is no mutual
As a rule, there is mutual agency representation (although it is enough for
a co-owner to bring an action for
ejectment against a stranger)
Partnership vs. Corporation
Partnership Corporation
Creation :
Created by mere agreement of the Created by law or by operation of law
parties
Number of incorporators : Requires at least five incorporators
May be organized by at least two persons
Commencement of juridical personality : Acquires juridical personality from the
acquires juridical personality from the date of issuance of the certificate of
moment of execution of the contract of incorporation by the Securities and
partnership Exchange Commission
Powers : Corporation can exercise only the powers
Partnership may exercise any power expressly granted by law or implied from
authorized by the partners those granted or incident to its existence
Management : vested in the board of directors or
When management is not agreed upon, trustees
every partner is an agent of the
partnership
Partnership vs. Corporation
Partnership Corporation
Term of existence : corporation may not be formed for a term
any period of time stipulated by the in excess of 50 years extendible to not
partners more than 50 years in any one instance
JOINT VENTURE

• It is hardly distinguishable from partnership, since their


elements are similar, i.e. community of interest in the business,
sharing of profits and losses, and a mutual right of control.
• The main distinction in common law jurisdiction is that
partnership contemplates a general business with some degree
of continuity, while joint venture is formed for the execution of
a single transaction and is thus of temporary nature
Other Similar Contracts

• 1. Collaboration- the act of working together


in a joint project.
• 2. Association- act of a number of persons
uniting together for some special purpose or
business.
RULES TO DETERMINE EXISTENCE
OF PARTNERSHIP (ART 1769)
1. GENERAL RULE: Persons who are not partners as
to each other are not partners as to third persons.
• EXCEPTION: partnership by estoppel

2. Co-ownership of a property does not itself establish


a partnership, even though the co-owners share in the
profits derived from the incident of joint ownership.
RULES TO DETERMINE EXISTENCE
OF PARTNERSHIP (ART 1769)
• 3. Sharing of gross returns alone does not indicate a
partnership, whether or not the persons sharing them
have a joint or common right or interest in any property
from which the returns are derived.
• 4. Receipt of share in the profits is a strong presumptive
evidence of partnership. However, no such inference
will be drawn if such profits were received in payment:
• (a) as a debt by installments or otherwise;

• (b) as wages of an employee or rent to a

landlord;
• (c) as an annuity to a widow or representative of a deceased partner;
• d) as interest on a loan, though the amount of payment vary with the
profits of the business; and
• (e)as the consideration for the sale of a goodwill of a business or
other property by installments or otherwise
CLASSIFICATION OF PARTNERSHIP

• 1. as to object:

a) universal partnership
i. universal partnership of all present property

ii. universal partnership of profits


b) particular partnership
• 2. as to liability of partners:

a) general partnership
b) limited partnership
CLASSIFICATION OF PARTNERSHIP

3. as to duration:
• a) partnership at will

• b) partnership with a fixed period

4. as to legality of existence:
• a) de jure partnership

• b) de facto partnership
CLASSIFICATION OF PARTNERSHIP

5. as to representation to others:
a) ordinary or real partnership

b) ostensible or partnership by estoppel 


6. as to publicity:

a) secret partnership

b) notorious or open partnership


7. as to purpose:
a) commercial or trading

b) professional or non-trading
UNIVERSAL PARTNERSHIP
1. A universal partnership of all present
property is one wherein the partners contribute
all the property which actually belong to them
to a common fund, with the intention of
dividing the same among themselves, as well as
all the profits which they may acquire therewith
UNIVERSAL PARTNERSHIP

2. A universal partnership of profits is one which


comprises all that the partners may acquire by their
industry or work during the existence of the
partnership and the usufruct of movable or
immovable property which each of the partners may
posses at the time of the celebration of the contract
PARTICULAR PARTNERSHIP

• A particular partnership is one which has for


its object determinate things, their use and
fruits, or a specific undertaking, or the
exercise of a profession or vocation
GENERAL PARTNERSHIP

• A partnership consisting of general partners


who are liable pro rata and subsidiarily and
sometimes solidarily with their separate
property for partnership debts
LIMITED PARTNERSHIP

• One formed by two or more persons having


as members one or more general partners
and one or more limited partners, the latter
not being personally liable for the obligations
of the partnership
PARTNERSHIP AT WILL
• A partnership wherein no time is specified and is not
formed for a particular undertaking or venture and which
may be terminated at anytime by mutual agreement of the
partners, or by the will of anyone partner alone; or one for a
fixed term or particular undertaking but has been continued
by the partners after termination of such term or particular
undertaking without express agreement
PARTNERSHIP WITH A FIXED TERM

• A partnership wherein the term for which the


partnership is to exist is fixed or agreed upon
or one formed for a particular undertaking, and
upon the expiration of the term or completion
or the particular enterprise, the partnership is
dissolved, unless continued by the partners
OTHER KINDS OF PARTNERSHIP

1. De Jure Partnership- one which has complied will all


the legal requirements for its establishment.
2. De Facto Partnership- one which has failed to comply
with all the legal requirements for its establishment.

3. Ordinary or real partnership- one which actually


exists among the partners and also as to third persons
OTHER KINDS OF PARTNERSHIP

4. Open or notorious partnership- one whose existence


is avowed or made known to the public by the members
of the firm.
5. Commercial or trading partnership- one formed for
the transaction of business.
6. Professional or non-trading partnership- one formed
for the exercise of a profession
CLASSIFICATION OF PARTNERS

1. as to CONTRIBUTION:
• a) Capitalist partner- one who contributes
money or property to the common fund.
• b) Industrial partner- one who contributes
only his industry or personal service
CLASSIFICATION OF PARTNERS

2. as to LIABILITY:

a) General partner- one whose liability to third


persons extends to his separate property, he may
either be a capitalist or industrial partner.

b) Limited partner- one whose liability to third


persons is limited to his capital contribution
CLASSIFICATION OF PARTNERS

3. as to MANAGEMENT:

a) Managing partner- one who manages the business or affairs of


the partnership; he may be appointed in the articles of partnership
or after constitution of the partnership.

b) Silent partner- one who does not take any active part in the
business although he may be known to be a partner.

c) Liquidating partner- one who takes charge of the winding up of


the partnership affairs upon dissolution
CLASSIFICATION OF PARTNERS

Miscellaneous:

a) Ostensible partner- one who takes active part and known to the
public as a partner in the business, whether or not he has actual
interest in the firm.
b) Secret partner- one who takes active part in the business by is not
known to be a partner by outside parties nor held out as a partner by
the other partners. c) Dormant partner- one who does not take
active part in the business and is not known or held out as partner
Capitalist Partner vs. Industrial
Capitalist Partner
Partner
Industrial Partner
as to contribution contributes his industry (mental or
contributes money or property physical)

as to prohibition to engage in other


business cannot engage in any business for himself
Cannot generally engage in the same or
similar enterprise as that of his firm
as to profits receives a just and equitable share
shares in the profits according to
agreement thereon;
if none, pro rata to his contribution
Capitalist Partner vs. Industrial
Capitalist Partner
Partner
Industrial Partner
as to losses exempted as to losses (as between
first, the stipulation as to losses; partners); but is liable to third persons,
if none, the agreement as to profits; without prejudice to reimbursement from
if none, pro rata to contribution the capitalist partners
OBLIGATIONS OF PARTNERS
AMONG THEMSELVES:
• I. Obligation with respect to contribution of property
– To contribute what had been promised
– To answer for eviction in case the partnership is deprived of determinate property
contributed
– To answer to the partnership for the fruits of the property the contribution of which is
delayed, from the date they should have been contributed to the time of actual delivery
– To preserve the property with the diligence of a good father of a family pending delivery
to the partnership

- To indemnify the partners for any damages caused to it by the retention of the
same or by delay in its contribution.
Obligations with respect to contribution of
money and money converted to personal use

a. To contribute on the date due the amount he has undertaken to


contribute to the partnership
b. To reimburse any amount he may have taken from the partnership
coffers and converted to his own personal use
c. To pay the agreed or legal interest, if he fails to pay his contribution on
time or in case he takes any amount from the common fund and
converted to his own personal use
d. To indemnify the partnership for the damages caused to it by the delay
in the contribution or the conversion of any sum for his personal benefit
Obligation Not to Engage in Other
Business for Himself
• Industrial partner- cannot engage in any business
for himself unless the partnership expressly permits
him to do so. The other partners have the remedy
of either excluding the erring partner from the firm
or of availing themselves of the benefits which he
may have obtained.
Obligation Not to Engage in Other
Business for Himself
• Capitalist partner- The prohibition extends
only to any operation which is of the same
kind of business in which the partnership is
engaged unless there is a stipulation to the
contrary
Obligation of Managing Partner who
Collects Debt
• Where a person is separately indebted to the
partnership and to the managing partner at the same
time, any sum received by the managing partner shall
be applied to the two credits in proportion to their
amounts, except where he received it entirely for the
account of the partnership, in which case the whole
sum shall be applied to the partnership credit only
Requisites for the application of the
rule
• 1. There exists two debts, one where the
collecting partner is creditor, the other, where
the partnership is creditor
• 2. Both debts are demandable

• 3. The partner who collects is authorized to


manage and actually manages the partnership
Obligation of Partner Who Receives
Share in Partnership Credit
• A partner who receives, in whole or in part, his
share in the partnership, when the others have not
collected theirs, shall be obliged, if the debtor
should thereafter become insolvent, to bring to the
partnership capital what he received even though
he may have given receipt for his share only
Requisites for application of rule

1. A partner has received, in whole or in part, his


share in the partnership credit
2. The other partners have not collected their
shares
3. The partnership debtor has become insolvent
Obligation of Partner for Damages
to Partnership
• Every partner is responsible to the
partnership for damages suffered by it
through his fault. He cannot compensate
them with the profits and benefits which he
may have earned for the partnership by his
industry
Duty to Render Information

• Partners shall render on demand true and full


information of all things affecting the
partnership to any partner or the legal
representative of any deceased partner of any
partner under legal disability
Obligation to account for any benefit and
hold as trustee unauthorized personal profits

• Every partner must account to the partnership for


any benefit, and hold as trustee for it any profits
derived by him without the consent of the other
partners from any transaction connected with the
formation, conduct, liquidation of the partnership
or form any use by him of its property
RIGHTS OF A PARTNER
1. Property rights of a partner
a. His rights in the specific partnership property
b. His interest in the partnership

c. His right to participate in the management


2. Right to reimbursement for amounts advanced to the
partnership and to indemnification for risks in
consequence of management
RIGHTS OF A PARTNER
3. Right to associate with another person in his share

4. Right of access and inspection of partnership books

5. Right to true and full information of all things affecting the


partnership

6.Right to a formal account of partnership affairs under


certain circumstances

7. Right to have partnership dissolved under certain conditions


RULES FOR DISTRIBUTION OF
PROFITS AND LOSSES
1. Distribution of profits
a. According to their agreement (but not inequitously to
defeat Art.1799)
b. If none,
1. Share of capitalist partner shall be in proportion to his
capital contribution

2. Industrial partner shall receive such share as may be just and

equitable under the circumstances


RULES FOR DISTRIBUTION OF
PROFITS AND LOSSES
2. Distribution of losses
a. According to their agreement as to losses (but not
inequitously to defeat Art.1799)
b. If none, according to their agreement as to profits
c. If none, in proportion to his capital contribution, but
the purely industrial partner shall not be liable for
the losses
RULES FOR DISTRIBUTION OF
PROFITS AND LOSSES
• GENERAL RULE: A stipulation excluding a partner from any share
in the profits or losses is VOID (Article 1799)
• EXCEPTION: Article 1797(2) excludes an industrial partner from
losses. Thus, a stipulation excluding an industrial partner from
losses is VALID, but he is NOT exempted from liability insofar as
third persons are concerned. 
• NOTE: In general, LIABILITY refers to responsibility towards third
persons, and LOSSES refers to responsibility as among partners
CONTRACT OF SUB-PARTNERSHIP

• One formed between a member of a partnership and a third person


for a division of profits owing to him from the partnership enterprise
• It is a partnership within a partnership distinct and separate from the
main or principal partnership
• NOTE: In the absence of unanimous consent of all the partners, a
sub-partner does not become a member of the partnership. Hence, a
sub-partner does not acquire the rights of a partner nor is he liable for
its debts
PROPERTY RIGHTS OF A PARTNER

1. Right to specific partnership property


• contemplates tangible property

• The specific partnership property belongs to


the partnership as a separate juridical
personality. The partners have no actual
interest in it until after dissolution
PROPERTY RIGHTS OF A PARTNER

2. Interest in the partnership


• share in the profits and surplus
• A partner actually owns his respective share
Effects of conveyance by a partner of
his interest in the partnership
1. conveyance of his whole interest –partnership may
either remain or be dissolved

2. assignee does not necessarily become a partner


3. assignee cannot interfere in the management or
administration of the partnership business or affairs

4. assignee cannot demand information, accounting and


inspection of the partnership books
Remedies of separate judgment
creditor of a partner

• Application for a charging order after securing


judgment on his credit to subject the interest
of the debtor partner with payment of
unsatisfied amount of the judgment debt
MANAGEMENT OF
PARTNERSHIP
When the manner of management has been
provided for in the partnership agreement
A. When a managing partner has been appointed
1. Appointment in the articles of partnership

a. Power is irrevocable without just or lawful cause


i. to remove him for JUST cause, vote of partners
representing controlling interest is necessary

ii. to remove him without just cause or for an UNJUST


cause, there must be unanimity including his own vote
• b. Extent of power

i. if he acts in good faith, he may do all acts of


ADMINISTRATION, despite opposition of his
partners
ii. if in bad faith, he cannot
2. Appointment other than in the articles of partnership

a. Power to act may be revoked at any time, with or


without just cause

b. Extent of power: as long as he remains manager,


he can perform all acts of administration, but if
others oppose and he persists, he can be removed
When two or more managing partners have been
entrusted with the management of partnership

1) Without specification of their respective duties and


without stipulation requiring unanimity of action

GENERAL RULE: Each managing partner may


execute all acts of administration

EXCEPTION: If any of the managing partners should


oppose
a. Decision of the majority of the managing
partners shall prevail

b. In case of a tie, decision of the partners


representing the controlling interest shall
prevail
2. With stipulation requiring unanimity of action
• GENERAL RULE: Unanimous consent of all the managing
partners shall be necessary for the validity of the acts and
absence or inability of any managing partner cannot be alleged
• EXCEPTION: When there is an imminent danger of grave or
irreparable injury to the partnership, partner may act alone
without the consent of the partner who is absent or under
disability
When manner of management has not
been agreed upon

a) All partners shall be considered managers


and agents
b) Unanimous consent required for alteration of
immovable property
OBLIGATIONS OF PARTNERS TO
THIRD PERSONS
I. Liability for contractual obligations (ART
1816)
1. All partners, including industrial partners, are
personally liable with all their property. Their
individual liability is pro rata and subsidiary,
unless otherwise stipulated
2. Liability of partnership for acts of partners
a) Acts for apparently carrying on in the usual
way the business of the partnership
GENERAL RULE: Act binds the partnership
EXCEPTION: Partnership is bound if:
i. acting partner has in fact no authority and
ii. the third person knows that the acting
partner has no authority
b. Acts of Strict Dominion or Ownership (acts
which are not apparently for carrying on in the
usual way the business of the partnership)

GENERAL RULE: Act does not bind the


partnership
• EXCEPTION: Partnership is bound if:
• the act is authorized by all the partners; or

• they have abandoned the business


c. Acts in contravention of a restriction on
authority
i. Partnership is not liable to third persons
having actual or presumptive knowledge of
the restrictions
Liability arising from partner’s tort (ART
1822) or Breach of Trust (ART 1823)
1. Where, by any wrongful act or omission of
any partner acting in the ordinary course of
business of the partnership or with authority of
his co-partners, loss or injury is caused to any
person, not being a partner in the partnership
(Article 1822)
Liability arising from partner’s tort (ART
1822) or Breach of Trust (ART 1823)
2. Where one partner, acting within the scope of his
apparent authority, receives money or property of a
third person and misapplies it (Article 1823)

3. Where the partnership, in the course of its business,


receives money or property and it is misapplied by any
partner while it is in the custody of the partnership
(Article 1823)
• NOTE: All partners are solidarily liable with
the partnership for any penalty or damage
arising from a partnership tort or breach of
trust
Criminal liability of partnership
• Partnership liability does not extend to
criminal liability where the wrongdoing is
regarded as individual in character. But
where the crime is statutory, especially when
it involves a fine rather than imprisonment,
criminal liability may be imposed
PRINCIPLE OF DELECTUS
PERSONARUM
A rule inherent in every partnership wherein no
one can become a member of the partnership
without the consent of all the partners.
• NOTE: This element of delectus personae is true
only in case of a general partner, but NOT as
regards a limited partner
MUTUAL AGENCY

• Partnership is a contract of “mutual agency”,


each partner acting as a principal on his own
behalf, and as an agent of his co-partners and
the partnership
Requisites When A Partner Binds The
Partnership

1. when he is expressly or impliedly authorized

2. when he acts in behalf and in the name of


the partnership
PARTNERSHIP BY ESTOPPEL

• Arises when a person, by words spoken or written or by


conduct, represents himself or consents to another
representing him to anyone, as partner in an existing
partnership, or with one or more persons not actual partners;
he is liable to any such person to whom such representation
has been made, who has, on the faith of such representation
given credit to the actual or apparent partnership. (Art 1825)
DISSOLUTION
• Change in the relation of the partners caused
by any partner ceasing to be associated in
carrying on the business. (Article 1828)
• It is the point in time when the partners cease
to carry on the business together. It represents
the demise of a partnership
WINDING UP

• Process of settling the partnership business or


affairs after dissolution
TERMINATION

• Point in time when all partnership affairs are


wound up or completed and is the end of the
partnership life
CAUSES OF DISSOLUTION
1. Extrajudicial dissolution (ART 1830) - the parties may agree to
expand the grounds provided under Art 1830 but NOT to delimit
them. The causes enumerated are as follows:
a. Without violation of the agreement between the partners

i. By the termination of the definite term or particular


undertaking specified in the agreement
ii. By the express will of any partner, who must act in good faith,
when no definite term or particular undertaking is specified
iii. By the express will of all the partners who have not
assigned their interest or suffered them to be charged for
their separate debts, either before or after the termination
of any specified term or particular undertaking
iv. By the expulsion of any partner from the business bona
fide in accordance with such power conferred by the
agreement between the partners
b. In contravention of the agreement between
the partners, where the circumstances do nor
permit a dissolution under any other provision
of this article by the express will of any partner
at any time
c. By any event which makes it unlawful for the
business of the partnership to be carried on or
for the members to carry it on in partnership
d. When a specific thing, a partner had
promised to contribute, perishes before its
delivery. Or where the partner only contributed
the use or enjoyment of the thing and has
reserved ownership thereof, its loss, before or
after delivery dissolves the partnership
e. By the death of any partner

f. By the insolvency of any partner or the


partnership

g. By the civil interdiction of any partner


Judicial dissolution (ART 1831)

• when so decreed by the court, the presiding


judge may place the partnership under
receivership and direct an accounting to be
made towards winding up the partnership
affairs
• On application by or for any partner, the court shall
decree a dissolution whenever :
a. A partner has been declared insane in any judicial
proceeding or is shown to be of unsound mind

b. A partner becomes in any other way incapable of


performing his part of the partnership contract
c. A partner has been guilty of such conduct as tend to
affect prejudicially the carrying on of the business
d. A partner willfully or persistently commits a breach
of the partnership agreement, or otherwise so
conducts himself in matters relating to the partnership
business that it is not reasonably practicable to carry
on the business in partnership with him
• e. The business of the partnership can only be
carried on in a loss
• f. Other circumstances render a dissolution
equitable
• On application of the purchaser of a partner’s interest
under Article 1813 or 1814
a. After the termination of the specified term or
particular undertaking
b. At any time if the partnership was a partnership at will
when the interest was assigned or when the charging
order was issued
EFFECTS OF DISSOLUTION
A. As to partner’s authority to act for the
partnership
GENERAL RULE: Dissolution terminates all
authority of any partner to act for the
partnership
• EXCEPTIONS:

1. Acts necessary to wind up partnership affairs

2. Acts necessary to complete transactions begun but not


then finished
• Note: Thus, dissolution terminates the ACTUAL
authority of a partner to undertake NEW business for
the partnership
RIGHTS OF A PARTNER UPON
DISSOLUTION
• 1. Where dissolution is NOT in contravention
of the partnership agreement
• a. To have partnership property applied to
discharge partnership liabilities
• B. To receive in cash his share of the surplus
• 2. Where dissolution is in contravention of the partnership
agreement
a. Rights of a partner who has not caused the dissolution wrongfully
• To have partnership property applied to discharge partnership liabilities
• To receive in cash his share of the surplus
• To be indemnified for damages caused by the partner guilty of the wrongful
dissolution
• To continue the business in the same name during the agreed term of the
partnership, by themselves or jointly with others
• B. Rights of a partner who has wrongfully caused the
dissolution
1. If the business is not continued by the other partners
i. To have partnership property applied to discharge
partnership liabilities

ii. To receive in cash his share of the surplus less


damages caused by his wrongful dissolution
• 2. If the business is continued

• To have the value of his interest in the partnership at the


time of the dissolution, surplus less damages caused by
his wrongful dissolution to his co-partners, ascertained
and paid in cash or secured by a bond approved by the
court; AND
• To be released from all existing and future liabilities
RIGHTS OF A PARTNER WHERE PARTNERSHIP CONTRACT
IS RESCINDED ON THE GROUND OF FRAUD OR
MISREPRESENTATION

1. Right of LIEN on, or RETENTION of, the surplus of


partnership property after satisfying partnership liabilities
for any sum of money paid or contributed by him

2. Right of SUBROGATION in place of the partnership


creditors after payment of partnership liabilities; and

3. Right of INDEMNIFICATION by the guilty partner


against all debts and liabilities of the partnership
MANNER OF WINDING UP
• Extrajudicial – by the partners themselves
without the intervention of the court
• Judicial – under the control and direction of
the court upon proper cause shown by any
partner, his legal representative or his
assignee
PERSONS AUTHORIZED TO WIND
UP
1. partners designated by the agreement

2. in the absence of such agreement, all partners


who have not wrongfully dissolved the
partnership

3. legal representative of last surviving partner


not insolvent
ORDER OF PAYMENT IN WINDING
UP
• General Partnership (ART 1839 (2))
a. those owing to creditors other than partners

b. those owing to partners other than for capital or


profits
c. those owing to partners in respect of capital

d. those owing to partners in respect of profits


• Limited Partnership (ART 1863)
a. those owing to creditors, except those to limited
partners on account of their contribution, and to general
partners

b. those owing to limited partners in respect of


their share of the profits and other compensation by
way of income
c. those owing to limited partners in respect of their capital
contributions
d. those owing to general partners other than for capital
and profits

e. those owing to general partners in respect of profits

f. those owing to general partners in respect of capital 


DOCTRINE OF MARSHALLING OF
ASSETS (Article 1839(8))

1. Partnership creditors have preference in


partnership assets
2. Separate or individual creditors have
preference in separate or individual properties
3. Anything left from either goes to the other
PARTNER’S LIEN
• Right of every partner to have the partnership
property applied to discharge partnership
liabilities AND to have the surplus assets, if
any, distributed in cash to the respective
partners, after deducting what may be due to
the partnership from them as partners
LIMITED PARTNERSHIP

• One formed by two or more persons having


as members one or more general partners
and one or more limited partners, the latter
not being personally liable for partnership
debts
Characteristics of Limited Partnership

1. Limited partnership is formed by substantial


compliance in good faith with the statutory
requirements

2. One or more general partners control the


business and are personally liable to creditors
3. 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
4. The limited partners may ask for the return of their
capital contributions under the conditions prescribed by law
5. The partnership debts are paid out of the
common fund and the individual properties of
the general partners
MANAGEMENT OF LIMITED
PARTNERSHIP

• 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 general partnership
• A general partner in a limited partnership
however has no authority, without written
consent or ratification of all limited partners, 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 judgment against the partnership;

4. Possess partnership property, or assign their


rights in specific partnership property, for other that
a partnership purpose;

5. Admit a person as a general partner


6. Admit a person as a limited partner, unless the right to do
so is given in the certificate
7. Continue the business with the 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
• A limited partner is liable as a general partner
for the firm’s obligations if he takes part or
interferes in the management of the business
RIGHTS OF A LIMITED PARTNER

1. To have the partnership books kept at the


principal place of business of the partnership

2. To inspect, at a reasonable hour, partnership


books and copy any of them

3. To demand true and full information of the


things affecting the partnership
4. To demand a formal account of the partnership affairs
whenever circumstances render it just and reasonable

5. To ask for dissolution and winding up by decree of court


6. To receive a share in the profits or other compensation
by way of income

provided: that the partnership assets are in excess of


partnership liabilities after such payment
7. To receive the return of his contribution provided:
a. All the liabilities of the partnership have been paid OR the
partnership assets are sufficient to pay partnership liabilities

b. The consent of all the members (general and limited


partners) has been obtained

c. The certificate is cancelled or so amended as to set forth


the withdrawal or reduction
• LIABILITIES OF A LIMITED PARTNER
Liability for unpaid contribution

a. For the difference between his contribution as


actually made and that stated in the certificate
as having been made; AND

b. For any unpaid contribution which he has agreed


in the certificate to make in the future at the
time and the conditions stated in the certificate
Liability as trustee
a. Specific property stated in the certificate as
contributed by him, but which was not
contributed or which has been wrongfully
returned; AND
b. Money or other property wrongfully paid or
conveyed to him on account of his contribution
SUBSTITUTED LIMITED PARTNER

• A person admitted to all the rights of a limited


partner who has died of has assigned his
interest in the partnership
• GENERAL RULE: He has all, the rights and powers,
and is subject to all the restrictions and liabilities of
his assignor.
• EXCEPTION: Those liabilities which he was ignorant
at the time he became a limited partner AND which
could not be ascertained from the certificate
REQUISITES IN ORDER THAT THE ASSIGNEE
MAY BECOME A SUBSTITUTED LIMITED
PARTNER
1. 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
2. The certificate must be amended in
accordance with Art.1865

3. The certificate as amended must be


registered in the Securities and Exchange
Commission
ALLOWABLE TRANSACTIONS OF A
LIMITED PARTNER
– Being merely a contributor to the partnership is not
prohibited from:

1. granting loans to the partnership


2. transacting other business with the partnership
3. receiving a pro rata share of the partnership assets
with the general creditors if he is NOT also a general
partner
PROHIBITED TRANSACTIONS OF A
LIMITED PARTNER

1. receiving or holding as collateral security any


partnership property; or

2. receiving any payment, conveyance, or


release from liability if it will prejudice the
partnership creditors
• Violation of the prohibition will give rise to the
presumption that it has been made to defraud
partnership creditors
• The prohibition is NOT ABSOLUTE, there is no such
prohibition if the partnership assets are sufficient to
discharge partnership liabilities to persons not
claiming as general or limited partners