LIMITED PARTNERSHIP (ARTCLE 1843-1867)

Article 1843: Limited Partnership is composed of two or more person having one or more
general partner and one or more limited partner.

The liability of the partners in limited partnership are not bound by the obligation of
partnership.

Characteristics of Limited Partnership

- formed by compliance with law requirements

- one or more general partner to control the business
- one or more limited partner to contribute capital
- can ask for the return of capital contributions
- partnership debts are paid out of common fund

Article 1844: Requirements of a Limited Partnership.

1.) Sign and swear to a certificate

2.) Have the certificated recorded with SEC (Security and Exchange Commission)

Limited partnership is not created by voluntary agreement. It requires statutes to be followed in

order that the public notice may be given to all who wants to know the essential feature of the
partnership.

Limited partnership is formed when there is a compliance in good faith with the requirements in
the article.

Article 1845: Contribution can either be cash or other property but not service.

Article 1846: Surname of the Limited Partner is not put among the partnership name except:

 Surname of a general partner

 Surname is used before the admission of the limited partner

If the surname of the limited partner appears in the partnership, he is liable as a general
partner to the partnership creditor without knowing that he is not a general partner.

Article 1847: If there is a false statement written under the certificate and a third person had
suffer loss, the partner who knew the statement is false is hold liable.
Article 1848: Limited partner is not held liable same us a general partner unless the limited
partner partakes control in the business, he would be liable as a general partner. Since limited
partner has limited liability, he is not liable for any obligations of the partnership.

Article 1849: Once the Limited Partnership is formed, adding another limited partner may be
admitted upon filing amendment to the certificate.

Article 1850: A general partner in limited partnership, his rights, power and restriction are the
same as he would have been in general partnership.

Without the consent from all limited partner, a general partner cannot:

 Do any act of contravention of the certificate

 Do any act which would make it impossible to carry on ordinary business partnership
 Confess a judgement against the partnership
 Possess partnership property
 Admit a person as a general partner
 Admit a person as a limited partner
 Continue the business with partnership property on the death, retirement, insanity, civil
interdiction or insolvency of a general partner

Article 1851: Limited partner have the same rights as a general partner.

Rights of a Limited Partner:

 Have partnership books kept at a principal place of business

 Inspect and copy partnership books
 Demand true and full information regarding the partnership
 Demand for formal account of partnership affairs
 Legal winding up and dissolution
 Share in profits and other compensation
 Receive the return of contribution

Article 1852: If the person who contributed capital was believed to has become a limited
partner and has exercised the liability of a general partner, he shall be exempted from liability
upon learning the error that been done.

Article 1853: A partner can either be general partner or a legal partner at the same time if it
was stated in the certificate provided in article 1844 and he shall have all the rights of a general
partner and is subject to the restrictions of a general partner except that in his contribution he
shall have the right of a limited partner.

A partner is a general partner as to 3 rd persons but among other partners he is seen as a limited
partner.

Article 1854: Limited partner can loan money or transactions other business with the
partnership. He is also entitled to partnership assets pro rata to creditors but he is prohibited to
use such as a collateral.

Article 1855: Limited partners can agree to have priority on one or more limited partner over
other limited partner to return their capital and compensation by way of income. If the
agreement was approved it shall be stated in the certificate provided in article 1844.

Article 1856: Rights of a limited partner when it comes to their profits, share, compensation
and way of income.

A limited partner is entitled to share in payment by way of income provided that the partnership
assets will still be in excess of partnership liabilities after such payment.

Compensation of limited partner by way of income:

1.) Excess of partnership assets over liabilities

2.) Preferential rights of partnership creditors

Article 1857: Requisites for the limited partner to be entitled to the return of his contribution:

 After deducting partnership liabilities, partnership assets are sufficient to do so.

 If he has the consent of all partners unless the right can be demanded.
 The certificate must be amended to reflect the return of his contribution.

Limited partner rightfully demands the return of his contribution:

 During dissolution
 Upon arrival of the date of return of contribution
 After he has given 6 months’ notice and there was no date of return nor dissolution

Limited partner is only entitled to the return of his contribution, except:

 If it was agreed upon

  He has the consent of all the partners

Limited partner asks for dissolution during:

 He rightfully but unsuccessfully demanded the return

 If he was entitled to receive his contribution and the certificate was already amended
but partnership assets are not sufficient to pay off partnership creditors

Article 1858: A limited partner be held as trustee during:

 He promises specific things but does not follow through with the promise of delivery
 In circumstances of wrongful returns
 In cases of money and/or property that is wrongfully conveyed

Article 1859: Interest of a limited partner can be assigned such as his share in profits, other
compensation by way of income or his return.

Substituted limited partner is the person admitted who has all the rights of a limited partner
who had died or has assigned his interest.

Article 1860: If retirement, death, insolvency and insanity the partnership dissolves except if it
is continued by the remaining other members.

General partners can only continue the business if:

 The right was stated in the certificate

 All partners consent to such.

Article 1861: Executor/administrator has the power to settle the dead partner’s estate and
those to constitute his assignee as a substituted limited partner, if the limited partner originally
had the power to do so, or was allowed such.

The estate of a limited partner will pay for all his liabilities as a limited partner.

Article 1862: If a 3rd person files a case against the limited partners for non-payment or non-
compliance with their contract, he can ask for the partners’ interests to be attached. The
attached interest may be redeemed using the separate general partners’ property but not
partnership property unless all partners have agreed to such.
Article 1863: priority over distribution of assets in a limited partnership are:

 Creditors, including limited partners who have claims against the partnership
 Limited partners share in profits
 Limited partners return of capital contribution
 General partners who have claims against the partnership
 General partners share in profits
 General partners return of capital contribution

Article 1864: Amendment of certificate

When certificate shall be cancelled or amended:

1.) The certificate is cancelled but not amended:

- When partnership is dissolved other than by reason of the expiration of the term
- When all the limited partners cease to be such
2.) In all other cases, only an amendment of the certificate is required.

Article 1865: Writings for amendments of certificate:

- Requirements of article 1844

- Signed and sworn by all members

Requisites for amendment and cancellation of certificate:

- It must be in writing
- It must be signed and sworn by all concerned parties
- It must be registered with the SEC (Security and Exchange Commission)

Article 1866: Limited partner is a contributor. This is because he has no participation in

management and control and is only liable to the partnership. (General rule)

Exceptions to this rule:

- To enforce his right against the partnership

- If he refuses to restore his contribution when the partnership assets are not sufficient to
pay creditors

Article 1867: A limited partnership formed under the law prior to the effectivity of this Code,
may become a limited partnership under this Chapter by complying with the provisions of
Article 1844. provided the certificate sets forth:

1.) amount of the original contribution of each limited partner and the time when the
contribution was made
 2.) That the property of the partnership exceeds the amount sufficient to discharge its
liabilities to persons not claiming as general or limited partners by an amount greater
than the sum of the contributions of its limited partners.

A limited partnership formed under the law prior to the effectivity of this Code, until or unless it
becomes a limited partnership under this Chapter, shall continue to be governed by the
provisions of the old law.