SEATWORK 1

Research on the following topics:

Solution and Winding Up

1.) Dissolution- it is simply a change in the relation of the partners cause by partner ceasing or stopping to
be associated with the carrying on/off the business. It is the point in time when the partners cease to
carry on the business together. The significance of dissolution is that your partnership business should
be undertaken but affairs should be liquidated and distribution of the partnership interest should be
made to those who are entitled there too.
- In other words, the partnership continues until winding up is completed.
2.) Winding Up- it is the settling the business or the partnership affairs after dissolution.
3.) Termination- is that point in time when all the partnership affairs are completely wound up and finally
settled. In other words, terminations makes the end of the partnership’s life.

What are the grounds for dissolution and give examples on each type.

Grounds for Dissolution

1.) Extrajudicial dissolution
Voluntary or it can take place in contravention of Agreement
- First ground, termination of the definite term or completion of particular undertaking which is
specified in the agreement. If that happens, then there’s no violation of the partnership contact.
- Second, in case of a partnership at will, if it dissolved by express will of any partners in good
faith. If there’s no definite term or particular undertaking. However, that if a partner lives in a
bad faith, the partnership will still be dissolved but the partner who dissolves the firm may be
liable for damages because of his bad faith.
- (Many grounds but not stated)
Example:

2.) Dissolution by Agreement

- If all the partners consent to the dissolution, a firm will be dissolved. Even if there’s a contract
concerning the dissolution between the partners, the dissolution will take place in accordance
with it.
Example: BB and XX formed a business called Liparin Co. Before the business starts, they signed
an agreement that whoever want to quit or form a new business, the partnership will take
place.
 3.) Compulsory Dissolution
- The dissolution of a company is compulsory in following cases:
 Insolvency of all the partners or all but one partner as this makes them incompetent to
enter in a contract.
 If, for whatever reason, the firm company becomes illegal.
 If it becomes illegal for the partnership company to carry on its business due to any
cases.
Example: A and C Inc. formed a partnership wherein B participates in transaction that are
prohibited by law for example is the sale of illegal goods, drugs and other contrabands. Thus,
the enterprise that A and C formed is unlawful.
4.) When certain contingencies happen
- The company’s dissolution takes place according to a contact between the parties. If:
 A firm shall be established for a fixed term at the expiry of that term.
 The company is set up to carry out a specific undertaking on the completion of the
undertaking.
 Dies of a partner.
 A partner becomes insolvent.
Example: The partnership of LILA and VIA becomes smooth and the profits are in high and
average. Everything is fine but a fortuitous event happened, LILA dies because of an accident.
5.) Dissolution by Notice
- When the partnership is at will, if one of the partners gives a notice in writing to the other
partners expressing his intention to dissolve the business, the dissolution of a company will take
place.
Example: Giro, Mina, Liz and Paolo are friends they thought business is easy so they formed a
partnership and they named it GMLP Corp. Giro and Mina are assigned in Financial Statement or
in Accounting side while Liz and Paolo are the main partners they establish the business
smoothly. By the end of the year, Mina and Liz fight because of Liz tried to accuse Mina that she
was a scammer and try to (nakawin) the money of the business. After the fight, Mina and Liz
writes a note that they will not continue the partnership that they establish and learn to forget
everything’s happen. Thus, the GMLP Corp. will be unlawful.
6.) Dissolution by court
- When a partner files a complaint in court, the court may grant that the company be dissolved on
the following grounds:
 Insanity- in a legal proceeding, the partner should have been declared insane,
otherwise; the fact that his mind is unreasonable must be properly confirmed. An insane
person is incapable of signing a contract.
 Incapacity- incapacity must be the one that affects a partner’s ability to fulfill his duties
as a partner.
 Misconduct and persistent breach of partnership agreement- like incapacity, conduct
prejudicial to the carrying on of the business and persistent breach of the partnership
agreement are grounds for judicial dissolution, for they defeat and materially affect and
obstruct the purpose of the partnership
  Business can carried on only at loss- since the aim of a partnership is to operate a
business for profit, it can be dissolved by order of court. If it becomes clear that the
company is unprofitable without fair prospects of success or can be carried out at a loss.
 Other conditions: abandonment of the business, fraud in the management, refusal to
render accounting of partnership affairs without justifiable causes, and many more.

LIMITED PARTNERSHIP

What are the differences between a General Partner and a limited Partner as to the ff:

GENERAL PARTNER LIMITED PARTNER

1. Liability -the general partner has
unlimited liability for the
debt
- They share liability for
debts equally.
2. Management Either plays an active role
over partnership in the company's daily
operations or is a
managing partner. A
general partner for a
business can act on the
company's behalf. While a
general partner has
important responsibilities
and duties in the
partnership.
3. Contribution -A general partner may
invest money into the
company. Only a general
partner’s personal assets
(in addition to the business
assets) can come into play
when it comes to paying
off the company’s debts.
4. Retirement, -becomes insolvent or
death and insane, or is sentenced to
insolvency of the civil interdiction and the
partner business is continued
. Insanity or civil
interdiction of a general
partner dissolves the
-at least one general
partner must have
unlimited liability
-any limited partners have
limited liability up to the
amount of their
investment.
-limited partners cannot be
part of management. It
may have some
involvement in
management and advisory
but are usually just
interested in a return on
their investment. The
specific rights and
responsibilities of all
partners are detailed in the
partnership agreement.
-they contribute equity
capital in the form of cash
or other contributions, and
as a result, participate in all
profits generated by the
company.
- his executor or
administrator shall have all
the rights of a limited
partner for the purpose of
settling his estate and such
power the deceased had to
constitute his assignee a
partner-ship, unless the substituted limited partner.
business is continued. The estate of a deceased
limited partner shall be
liable for all his liabilities as
a limited partner