Partnership

Limited Partnership

General Principles

A limited partner is basically just an investor who cannot manage the business of
the corporation. He can lend money to the partnership however, he cannot ask for
security such as a real estate mortgage.

He/she is considered as a mere contributor to the partnership. Hence, his

disappearance will not affect the partnership.

A limited partner is only liable to the partnership and not to creditors. There’s no
limited partnership if there’s no general partner. He/she can only contribute money
and/or property.

There’s a need for Certificate which shall be filed to the SEC. The filing is only for
RECORDING and not for registration. Mere substantial compliance is required.
Hence, not all requirements may be filed.
The limited partner should not interfere in the management of the partnership. If
the limited partner allows his surname to be used by the firm, he shall be liable as
a general partner to creditors who are not aware that he/she is a mere limited
partner. Note: Partnership name need not be the surnames of the partners.

A person who believes in good faith that he/she is a limited partner cannot be held
liable as a general partner — as long as s/he raise this as soon as she finds out.

Some limited partners can be preferred more than the others for as long as this
priority is indicated in the Articles of Limited Partnership.
If a suit is filed against the partnership, the limited partner is not a proper party.

It’s possible to be a general and limited partner at the same time. General partner
as to management but limited partner as to contribution.
A general partner, even if appointed as a manager in the Articles, cannot do any
act which is in contravention to the Articles without the written consent of ALL
limited partners. (Art. 1850)

When a limited partner demands the return of his contribution, it must be returned
in cash — regardless if his contribution was in a form of property.

These liabilities can be waived with the consent of ALL the partners and the
Articles of Partnership must be amended accordingly. Note: The waiver must not
prejudice the right of creditors.

The interest cannot be redeemed using partnership property.

Admission of additional partners must be done by amending the Articles of

Partnership. The Articles get cancelled when the partnership gets dissolved. When
ALL limited partners cease to be such, then the limited partnership is resolved.
This is done either in writing signed by ALL partners or by Board order. In both
case, it must be filed with the SEC.

The amendment must be done if there’s a change in the partnership name,

contribution, new general partner is admitted, change of character in the business,
among others as provided in Art. 1864.

Before, you need to submit either (1) the amendment or the (2) amended article.

The amended Articles of Partnership must be signed by ALL the partners —

including partners who must be substituted or who will substitute.

Any person can file in court a petition for the dissolution of a particular
partnership. If the court finds that the petition is meritorious, it can order the SEC
to cancel the Articles of Partnership or amend it if the partners refuse to do so.

If there is mere assignment, there’s no need to amend the Articles of Partnership.

If a limited partner is substituted by another person, the AOP must be amended to
reflect the new name.

Substitution takes place when ALL members consent or if the power is granted
and the AOP is amended accordingly. The actual substitution takes place only
upon the execution of the amended AOP.

The assignor is not released from his or her liabilities.

All members must consent to the withdrawal of the limited partner and the AOP
must be amended.

Death of a limited partner DOES NOT dissolve the partnership.

However, the estate is liable for the unpaid contribution of the deceased.

Creditors are always paid first. Here, creditors refer to third-party creditors and
limited partner creditors.
doctrine of separate entity
trust fund doctrine
liabilities of directors

exam on Oct 16 (9am)