BUSINESS LAWS

AND
REGULATIONS
LAW 012

Atty. Charisma G. Frades-Mulawin

 PARTNERSHIPS
Articles 1767 to 1867, Civil Code of the Philippines
Concept

• A partnership is a contract of two or more persons who

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)
Concept

• It is both:
• A contract; and
• A business organization
• It is a juridical personality separate and distinct from that
of each of the partners. (Art. 1768)
Characteristics of a Contract of Partnership

1. Consensual
2. Principal
3. Bilateral or Multilateral
4. Nominate
5. Preparatory
6. Onerous
Essential Requisites of Partnership

1. There must be a valid contract.

2. There must be a mutual contribution of money, property,
or industry to a common fund.
3. It must have a lawful object or purpose.
4. The partnership must be established for the common
benefit or interest of the partners which is to obtain
profits and to divide the profits among the partners.
Form of a Partnership Contract

• A partnership contract may be constituted in any form, i.e., oral or

written, except as follows:
1. Where immovable property or real rights are contributed to the partnership
(regardless of the amount thereof)
a. The partnership contract must be in a public instrument; and
b. An inventory of the said property must be made, signed by the parties and
attached to the public instrument. (Art. 1773)
2. Where the capital of the partnership is Php 3,000.00 or more, in money or
property
a. The partnership contract must be in a public instrument; and
b. Registered with the Securities and Exchange Commission (SEC). (Art. 1771)
Form of a Partnership Contract

3. If the partnership is a limited partnership, a certificate signed under oath by

the partners and recorded wit the SEC is required.
Who may become partners

• Any natural person who is capacitated may become a partner

• Artificial persons like partnerships and corporations may likewise
form a partnership with individuals or other partnerships or
corporations
Rules Applied in Determining Whether a Partnership
Exists
1. Persons who are not partners as to each other are not partners as
to third persons, except when a persons represents himself or
consents to another representing him to anyone, as a partner in
an existing partnership or with one or more persons not actual
partners. (Art. 1769, 1825)

2. Co-ownership or co-possession does not itself establish a

partnership, whether such co-owners or co-possessors do or do not
share any profits made by the use of the property.
Rules Applied in Determining Whether a Partnership
Exists
3. The sharing of gross returns does not itself establish 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. The receipt by a person of a share of the profits of a business is a

prima facie evidence that he is a partner in the business. However,
no such inference shall 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
Rules Applied in Determining Whether a Partnership
Exists
c. As annuity to a widow or representative of a deceased partner;
d. As interest on loan, though the amount of payment vary with the profits of
the business;
e. As the consideration for the sale of goodwill of a business or other property
by installment or otherwise. (Art. 1769)
Kinds of Partnership

1. As to object
• Universal Partnership – a universal partnership may either be a universal
partnership of all present property or a universal partnership of profits. (Art. 1777)
• Particular Partnership – a particular partnership ahs for its object determinate
things, their use or fruits, or a specific undertaking, or the exercise of a profession.
(Art. 1783)
2. As to liability
• General Partnership – a partnership where all partners are general members who
are liable to the extent of their separate property after the partnership assets have
been exhausted.
• Limited Partnership – a partnership where there is at least one general partner and
at least one limited partner. The general partners are liable to the extent of their
separate property, while the limited partners are liable only to the extent of their
investment to the partnership.
Kinds of Partnership

3. As to duration
• Partnership for a fixed term – one for which a period for its duration is fixed by the
partners. (Art. 1785)
• Partnership for a particular undertaking – one which is organized for a certain
undertaking, which when attained, will cause the termination of the partnership.
(Art. 1785)
• Partnership at will – one where no period is fixed by the parties for its duration;
hence, may be terminated at will by the partners.
4. As to representation to others
• Ordinary Partnership – one which actually exists among the partners as well as to
third persons.
• Partnership by estoppel – one which in reality is not a partnership but is considered
as one with respect to those who, by reason of their conduct or admission, are
precluded from denying its existence. (Art. 1825)
Kinds of Partners

1. As to liability
• General Partner – one who is liable for partnership debts to the extent of his
separate property after all the assets of the partnership have been exhausted.
(Art. 1816)
• Limited Partner – one who is liable for partnership debts to the extent of his
capital contribution only.
• General-Limited Partner – one who has all the rights and powers and is 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. (Art. 1853)
Kinds of Partners

2. As to contribution
• Capitalist Partner – one who contributes money or property to the common fund.
(Art. 1767)
• Industrial Partner – one who contributes his services, or industry to the partnership.
(Art. 1767, 1789)
• Capitalist-Industrial Partner – one who contributes not only money or property but
also his/her services to the partnership. (Art. 1797)
3. Other classifications
• Managing Partner – one who manages the business or the affairs of the
partnership. (Art. 1800)
• Liquidating Partner – one who takes charge of the winding up of the affairs of the
partnership after it is dissolved. (Art. 1836)
• Nominal Partner – one who is not actually a partner but who may become liable
as such to third persons.
Kinds of Partners

• Nominal Partner – one who is not actually a partner but who may become
liable as such to third persons.
• Ostensible Partner – one who is active and known to the public as a partner,
such as, by allowing his name to be included in the firm name.
• Secret Partner – one whose connection with the partnership is kept from the
public.
• Silent Partner – one who has no voice in the management of the business
(though he shares in the profits or losses).
• Dormant Partner – a partner who does not participate in the management of
the business and not known to the public as a partner.
Obligations of the Partners

• Rules on division of profit and loss (Art. 1797)

1. If all are capitalist partners
a. Profits and losses shall be divided according to their agreement.
b. If only the sharing of the partners in the profits has been agreed upon, the share
of each partner in the losses shall be in the same proportion as the share of each
in the profits.
c. In the absence of both, the share of each partner in the profits and losses shall
be in proportion to his capital contribution.
Obligations of the Partners

• Rules on division of profit and loss (Art. 1797)

2. If aside from the capitalist partners, there is also an industrial partner (or there
are industrial partners)
a. Profits
1) The profits shall be divided according to their agreement
2) In the absence of any agreement thereon, the industrial partner shall first receive a just and
equitable share of the profits, and thereafter, each capitalist partner shall share in the profits
in proportion to his capital contribution.
b. Loss
1) The industrial partner shall not share in the losses.
2) The capitalist partners shall share in the losses as follows:
a) According to their agreement.
b) In the absence of any agreement thereon, each capitalist partner shall share in the
same proportion as the share of each in the profits.
c) In the absence of both, each capitalist partner shall share in the losses in proportion to
his capital contribution.
Obligations of the Partners

• Rules on division of profit and loss (Art. 1797)

3. If aside from capitalist partners, there is also a capitalist-industrial partner (or there are
capitalist-industrial partners)
a. Profits
1) The profits shall be divided according to their agreement
2) In the absence of any agreement thereon, the profits shall be divided as follows:
a) The capitalist-industrial partner shall first receive a just and equitable share of the profits in his
capacity as an industrial partner;
b) Thereafter, each capitalist partner, including the capitalist-industrial partner in his capacity as
a capitalist partner, shall share in the profits in proportion to his capital contribution.
b. Losses
1) The industrial partner shall not share in the losses.
2) The capitalist partners shall share in the losses as follows:
a) According to their agreement.
b) In the absence of any agreement thereon, each capitalist partner shall share in the same
proportion as the share of each in the profits.
c) In the absence of both, each capitalist partner shall share in the losses in proportion to his
capital contribution.
Obligations of the Partners

• Rules on division of profit and loss (Art. 1797)

3. If aside from capitalist partners, there is also a capitalist-industrial partner (or
there are capitalist-industrial partners)
b. Losses
1) Losses shall be divided among the partners, including the capitalist-industrial partner in
his capacity as capitalist partner, according to their agreement.
2) In the absence of any agreement thereon, losses shall be divided among the partners
including the capitalist-partner, in his capacity as capitalist partner, according to the
ratio of their capital contribution.
3) In both of the above cases, the capitalist-industrial partner shall not share in the losses
in his capacity as industrial partner.
Obligations of the Partners

• Rules on Management

1. When a partner has been appointed manager in the articles of partnership

a) Scope of Authority – the managing partner may execute all acts of administration
despite the opposition of his partners unless he acts in bad faith.
b) Revocation of appointment as managing partner
1) With just or lawful cause – his appointment can be revoked by the vote of the partners
owning the controlling interest
2) Without just or lawful cause – his appointment can be revoked only with the consent of
all the partners including the managing partner.
Obligations of the Partners

• Rules on Management

2. When a partner has been appointed manager after the partnership has
been constituted
a) Scope of Authority – he may execute all acts of administration but in case of
opposition by the other partners, the partners owning the controlling interest may
resort to voting for his removal as manager.
b) Revocation of appointment as managing partner – he may be removed with or
without just or lawful cause by the vote of the partners owning the controlling
interest. (Art. 1800)
Obligations of the Partners

• Rules on Management

3. When two or more partners have been appointed as managers

a) When there is specification of their respective duties
1) Scope of Authority – each managing partner shall perform only the duties specified in his
appointment.
b) When there is no specification of their respective duties or there is no stipulation that
one shall not act without the consent of the others
1) Scope of Authority – each one may separately execute all acts of administration
2) Rule in case of opposition of the other managers
• The decision of the majority of the managing partners shall prevail
• In case of a tie, the decision of the managing partner/s owning the controlling interest
shall prevail
c) When there is stipulation that none of the managing partners shall act without the
consent of the others
1) The concurrence of all of them shall be necessary for the validity of the acts
Obligations of the Partners

• Rules on Management

4. When the manner of management has not been agreed upon

a) All the partners shall be considered agents of the partnership
b) Whatever any one of them may do alone shall bind the partnership
c) In case of opposition of the other partners, the decision of the majority shall
prevail
Obligations of the Partners

• Rights of Partners to engage in business

1. Industrial Partner
• An industrial partner cannot engage in business for himself unless the partnership
expressly permits him to do so. (Art. 1789)

2. Capitalist Partner
• A capitalist partner may engage in business for his own account in the following:
a. The business he will engage in is of a kind different from the partnership business
b. The business he will engage in is of the same kind as the partnership business, but there
is a stipulation allowing him to engage in that business (Art. 1808)
Obligations of the Partners

• Rules on sharing of partnership liabilities to third persons

1. Nature of liability
a. Pro rata
b. Subsidiary
2. Partners liable
• All general partners whether capitalist or industrial
Obligations of the Partners

• Requirement to operate under firm name

A partnership shall operate under a firm name, which may or may not include
the name of one or more of the partners.
Obligations of the Partners

1. Contribution of capital
2. Obligations with respect to contribution of property
3. Obligations with respect to contribution of money
4. Obligations with respect to amount appropriated
5. Obligation to contribute additional capital
6. Obligation of a partner who has received his share of the partnership
credit
7. Obligation to pay damages to the partnership
8. Obligation to bear risk for property contributed
9. Obligation to render information
10. Obligation to account
Rights of the Partners

1. To associate another person with him in his share

2. To have access to and inspect and copy the partnership books at
reasonable hours
3. To have a formal account of the partnership affairs
4. Property rights of a partner
A. His rights in specific partnership property
B. His interest in the partnership
C. His right to participate in management
Obligations of the partnership to the partners

1. To pay the partner any amounts he may have disbursed for the
partnership with interest from the time the expenses were made.
2. To pay for the obligations which a partner may have contracted in
good faith in the interest of the partnership business.
3. To answer for risks in consequence of its management
Obligations of the partnership for wrongful acts of
partners
• The partnership shall be solidarily liable with all the partners in the
following cases:
1. For loss or injury caused to a third person or any penalty is incurred by reason
of the wrongful act of or omission of any partner acting in the ordinary
course of the business of the partnership or with the authority of his co-
partners.
2. Where on partner acting within the scope of his apparent authority receives
money or property of a third person and misapplies it.
3. Where the partnership in the course of business receives money or property
of a third person and such money or property is misapplied by any partner
while it is in the custody of the partnership
Liability of partnership to third persons for acts of
partners
• When partnership is bound:
1. If the partner is authorized to act for the partnership, the partnership is
bound whether or not the act is apparently carrying on in the usual way the
business of the partnership
2. If the partner is not authorized to act for the partnership, the partnership is
bound if (a) the act is for apparently carrying on in the usual way the
business of the partnership, and (b) the third person has no knowledge of t
• When partnership is NOT bound:
1. The partner is not authorized to act for the partnership and the third person
has knowledge of the partner’s lack of authority.
DISSOLUTION AND
WINDING UP
• Dissolution
➢ This refers to the change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on of the business.
• Winding up
➢ This is the process of settling the business or affairs of the partnership after the
dissolution.
• Termination
➢ This refers to the point when all the business or affairs of the partnership are
completely wound up.
Causes of Dissolution

EXTRAJUDICIAL DISSOLUTION
• Without violation of the agreement of the partners
1. By the termination of the definite term or particular undertaking specified in
the agreement
2. By the express will: (a) of any partner who must act in good faith, when no
definite term or particular undertaking is specified; or (b) of all the partners
who have not assigned interests or suffered them to be charged for their
separate debts, either before or after the termination of any specified term
or undertaking
3. By the expulsion of any partner from the business bona fide in accordance
with such a power conferred by the agreement between the partners
Causes of Dissolution

• In contravention of the agreement between the partners, by the

express will of any partner anytime.
• When any event makes it unlawful for the business of the partnership
to be carried on or for the members to carry it on in partnership.
• In the following cases of loss:
1. Loss before or after delivery of property where the partner contributed only
its use or enjoyment, he having reserved the ownership thereof.
2. Loss before delivery of specific thing, which a partner had promised to
contribute to the partnership.
• By the death of any partner.
• By the insolvency of any partner of the partnership.
• By the civil interdiction of any partner. (Article 1930)
• By decree of court
JUDICIAL DISSOLUTION
Grounds
1. Any partner commits misconduct or persistent breach of
partnership agreement
2. A partner has been declared insane in any judicial proceeding or
is shown to be of unsound mind
3. A partner becomes in any other way incapable of performing his
part of the partnership contract
4. The business of the partnership can only be carried at a loss
5. Other circumstances render that dissolution equitable.
Effect of dissolution on authority of a partner

• Dissolution terminates all authority of any partner to act for the

partnership, except with respect to the following:
➢ Acts to wind up partnership affairs
➢ Acts to complete transactions begun before dissolution
Liability of partners and the partnership for acts of
partners after dissolution
2. If a partner’s authority is not terminated among the partners and
the partnership is bound by the transaction:
a. Third persons can go after the assets of the partnership
b. If the assets of the partnership are not sufficient, the third person can go
after the separate assets of each partner
c. Thereafter, the other partners cannot go after the acting partner to recover
the amount they paid out of their separate assets and to demand the return
of the amount paid out of the partnership assets.
Liability of partners and the partnership for acts of
partners after dissolution
3. If a partner’s authority is terminated among the partners, and the
partnership is not bound by the transaction:
a. The partnership assets cannot be held to answer for the liability to the third
person
b. The acting partner alone is liable to the third person with whom he
contracted and he cannot call on the other partners to share in the
payment.
Liability of partners and the partnership for acts of
partners after dissolution
4. If a partner’s authority is not terminated among the partners, but
the partnership is not bound by the transaction.
Rules on existing liability of a partner upon
dissolution (Art. 1835)
• The dissolution does not of itself discharge the partner’s liability.
• A partner is discharged from any existing liability upon dissolution by
the agreement of the following: (a) the partner himself; (b) the
partnership creditor; and (c) the person continuing the business.
• The individual property of a deceased partner shall be liable for
obligations of the partnership while he was a partner, subject to the
prior payment of his separate debts.
Who may wind up the partnership affairs?

• Extra-judicial
➢ The partner or partners designated by the agreement
➢ If none was designated: (a) the partner or partners who have not wrongfully
dissolved the partnership; or (b) if all the partners are dead, the legal
representative of the last surviving partner who was not insolvent

• Judicial
➢ Under the direction and control of the court, upon proper cause shown by
any partner, his legal representative or assignee
Application of partnership property and other rights
of partners on dissolution
• When dissolution is caused in any way, except in contravention of
the partnership agreement, each partner, as against his co-partners
and all persons claiming through them in respect of their interests in
the partnership, unless otherwise agreed, may have the partnership
property applied to discharge its liabilities, and the surplus applied
to pay in cash the net amount owing to the respective partners.
• But if dissolution is caused by expulsion of a partner, bona fide under
the partnership agreement and if the expelled partner is discharged
from all partnership liabilities, either by payment or agreement under
the second paragraph of Article 1835, he shall receive in cash only
the net amount due him from the partnership.
Application of partnership property and other rights
of partners on dissolution
When dissolution is caused in contravention of the partnership agreement
the rights of the partners shall be as follows:
1. Each partner who has not caused dissolution wrongfully shall have:
a. All the rights specified in the first paragraph of this article, and
b. The right, as against each partner who has caused the dissolution wrongfully, to
damages breach of the agreement.
2. The partners who have not caused the dissolution wrongfully, if they all desire to
continue the business in the same name either by themselves or jointly with
others, may do so, during the agreed term for the partnership and for that
purpose may possess the partnership property, provided they secure the
payment by bond approved by the court, or pay any partner who has caused
the dissolution wrongfully, the value of his interest in the partnership at the
dissolution, less any damages recoverable under the second paragraph, No. 1
(b) of this article, and in like manner indemnify him against all present or future
partnership liabilities.
Application of partnership property and other rights
of partners on dissolution
3. A partner who has caused the dissolution wrongfully shall have:
a. If the business is not continued under the provisions of the second paragraph,
No. 2, all the rights of a partner under the first paragraph, subject to liability for
damages in the second paragraph, No. 1 (b), of this article.
b. If the business is continued under the second paragraph, No. 2, of this article, the
right as against his co-partners and all claiming through them in respect of their
interests in the partnership, to have the value of his interest in the partnership, less
any damage caused to his co-partners by the dissolution, ascertained and paid
to him in cash, or the payment secured by a bond approved by the court, and
to be released from all existing liabilities of the partnership; but in ascertaining
the value of the partner's interest the value of the good-will of the business shall
not be considered.
Rescission of partnership contract (Art. 1838)

• Where a partnership contract is rescinded on the ground of the fraud or

misrepresentation of one of the parties thereto, the party entitled to
rescind is, without prejudice to any other right, entitled:
1. To a lien on, or right of retention of, the surplus of the partnership property after
satisfying the partnership liabilities to third persons for any sum of money paid by
him for the purchase of an interest in the partnership and for any capital or
advances contributed by him;

2. To stand, after all liabilities to third persons have been satisfied, in the place of
the creditors of the partnership for any payments made by him in respect of the
partnership liabilities; and

3. To be indemnified by the person guilty of the fraud or making the representation

against all debts and liabilities of the partnership.
Liquidation of dissolved partnership (Art. 1839)

• Art. 1839. In settling accounts between the partners after dissolution,

the following rules shall be observed, subject to any agreement to
the contrary:
1. The assets of the partnership are:
a. The partnership property,
b. The contributions of the partners necessary for the payment of all the liabilities
specified in No. 2.
2. The liabilities of the partnership shall rank in order of payment, as follows:
a. Those owing to creditors other than partners,
b. Those owing to partners other than for capital and profits,
c. Those owing to partners in respect of capital,
d. Those owing to partners in respect of profits.
Liquidation of dissolved partnership (Art. 1839)

3. The assets shall be applied in the order of their declaration in No. 1 of this article
to the satisfaction of the liabilities.
4. The partners shall contribute, as provided by article 1797, the amount necessary
to satisfy the liabilities.
5. An assignee for the benefit of creditors or any person appointed by the court
shall have the right to enforce the contributions specified in the preceding
number.
6. Any partner or his legal representative shall have the right to enforce the
contributions specified in No. 4, to the extent of the amount which he has paid
in excess of his share of the liability.
7. The individual property of a deceased partner shall be liable for the
contributions specified in No. 4.
8. When partnership property and the individual properties of the partners are in
possession of a court for distribution, partnership creditors shall have priority on
partnership property and separate creditors on individual property, saving the
rights of lien or secured creditors.
Liquidation of dissolved partnership (Art. 1839)

9. Where a partner has become insolvent or his estate is insolvent, the claims
against his separate property shall rank in the following order:
a. Those owing to separate creditors;
b. Those owing to partnership creditors;
c. Those owing to partners by way of contribution.
Rights of partner who retires or the legal representative of
a deceased partner if business is continued without
settlement of accounts
• Art. 1841. When any partner retires or dies, and the business is continued
under any of the conditions set forth in the preceding article, or in Article
1837, second paragraph, No. 2, without any settlement of accounts as
between him or his estate and the person or partnership continuing the
business, unless otherwise agreed, he or his legal representative as against
such person or partnership may have the value of his interest at the date
of dissolution ascertained, and shall receive as an ordinary creditor an
amount equal to the value of his interest in the dissolved partnership with
interest, or, at his option or at the option of his legal representative, in lieu
of interest, the profits attributable to the use of his right in the property of
the dissolved partnership; provided that the creditors of the dissolved
partnership as against the separate creditors, or the representative of the
retired or deceased partner, shall have priority on any claim arising under
this article.
Right to accounting (Art. 1842)

• The right to an account of his interest shall accrue to any partner, or

his legal representative as against the winding up partners or the
surviving partners or the person or partnership continuing the
business, at the date of dissolution, in the absence of any
agreement to the contrary.
LIMITED PARTNERSHIP
Limited Partnership

Art. 1843. A limited partnership is one formed by two or more persons

under the provisions of the following article, having as members one
or more general partners and one or more limited partners. The
limited partners as such shall not be bound by the obligations of the
partnership.
Requirements for formation

Art. 1844. Two or more persons desiring to form a limited partnership

shall:
1. Sign and swear to a certificate, which shall state –
a. The name of the partnership, adding thereto the word "Limited";
b. The character of the business;
c. The location of the principal place of business;
d. The name and place of residence of each member, general and limited
partners being respectively designated;
e. The term for which the partnership is to exist;
f. The amount of cash and a description of and the agreed value of the other
property contributed by each limited partner;
g. The additional contributions, if any, to be made by each limited partner and the
times at which or events on the happening of which they shall be made;
Requirements for formation

h. The time, if agreed upon, when the contribution of each limited partner is to be
returned;
i. The share of the profits or the other compensation by way of income which each
limited partner shall receive by reason of his contribution;
j. The right, if given, of a limited partner to substitute an assignee as contributor in his
place, and the terms and conditions of the substitution;
k. The right, if given, of the partners to admit additional limited partners;
l. The right, if given, of one or more of the limited partners to priority over other limited
partners, as to contributions or as to compensation by way of income, and the
nature of such priority;
m. The right, if given, of the remaining general partner or partners to continue the
business on the death, retirement, civil interdiction, insanity or insolvency of a general
partner; and
n. The right, if given, of a limited partner to demand and receive property other than
cash in return for his contribution.
Requirements for formation

1. File for record the certificate in the Office of the Securities and Exchange
Commission.

A limited partnership is formed if there has been substantial

compliance in good faith with the foregoing requirements.
• Art. 1845. The contributions of a limited partner may be cash or property,
but not services.

• Art. 1846. The surname of a limited partner shall not appear in the
partnership name unless:
a. It is also the surname of a general partner, or
b. 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.
Liability for false statement

• One who suffers loss by reason of a false statement in the certificate

may hold liable any party to the certificate who knew the same 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 petition for its
cancellation or amendment.
Rights and liabilities of a general partner in a limited
partnership
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 a general partner, unless the right so to do is given in the
certificate.
Rights of a limited partner

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.
Status of a person who has contributed to the capital of
the partnership erroneously believing that he has
become a limited partner

• Such person is NOT, by reason of his exercise of the rights of a limited

partner, a general partner provided: (a) on ascertaining the
mistake, he promptly renounces his interest in the profits of the
business or other compensation by way of income, and (b) he does
not take part in the control of the business. (Art. 1848, 1852)
General-Limited Partner

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.
Return of limited partner’s contribution

A limited partner shall not receive from a general partner or out of partnership
property any part of his contributions until:
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.
Return of limited partner’s contribution

In the absence of any statement in the certificate to the contrary or 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.
Assignment of limited partner’s 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.
Assignment of limited partner’s interest

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 liability to the partnership under Articles 1847 and
1848.
Retirement, death, civil interdiction, insanity or
insolvency of a partner

Art. 1860. The retirement, death, insolvency, insanity or civil interdiction

of a general partner dissolves the partnership, unless the business is
continued by the remaining general partners:

1. Under a right so to do stated in the certificate, or

2. With the consent of all members.
Rights of executor/administrator on the death of a
limited partner

Art. 1861. On the death of a limited partner his executor or

administrator shall have all the rights of a limited partner for the
purpose of setting his estate, and such power as the deceased had
to constitute his assignee a substituted limited partner.

The estate of a deceased limited partner shall be liable for all his
liabilities as a limited partner.
Charging of limited partner’s interest

Art. 1862. On due application to a court of competent jurisdiction by any

creditor of a limited partner, the court may charge the interest of the
indebted limited partner with payment of the unsatisfied amount of such
claim, and may appoint a receiver, and make all other orders, directions
and inquiries which the circumstances of the case may require.

The interest may be redeemed with the separate property of any general
partner, but may not be redeemed with partnership property.

The remedies conferred by the first paragraph shall not be deemed

exclusive of others which may exist.
Charging of limited partner’s interest

Art. 1862. On due application to a court of competent jurisdiction by any

creditor of a limited partner, the court may charge the interest of the
indebted limited partner with payment of the unsatisfied amount of such
claim, and may appoint a receiver, and make all other orders, directions
and inquiries which the circumstances of the case may require.

The interest may be redeemed with the separate property of any general
partner, but may not be redeemed with partnership property.

The remedies conferred by the first paragraph shall not be deemed

exclusive of others which may exist.
THANK YOU!