Final Three Stages of Partnership

Monday, February 13, 2023

1:44 PM
• Introduction to the Final Stages of Partnership
o Dissolution
• Happens when at least one partner leaves the organization
▪ Partner will get his share in the profit
▪ Partner will get back his investment
• This is his capital contribution
• He can get the CC's present value
• His 1M from 10 years ago is no longer 1M now,
especially if the business has been very successful
• If the partnership does not know the true value of the
organization, they will be compelled to liquidate
• Not all dissolutions leads to liquidation
▪ They can enter into a Compromise Agreement
• Compromise Agreement
▪ The partner will receive a fixed amount in lieu of his capital
contribution
▪ This may include the profits
▪ SGV Co. does this kind of agreement
• Marami na umalis sa SGV Co. na partners
o Liquidation
• Winding Up of partnership affairs
• You have to:
▪ Know how much are all the assets
▪ Pay all the liabilities
▪ Determine the net of the partners' equities
▪ Note that hindi pwedeng galawin yung partners' equities without first
paying the liabilities
• Liquidation leads to Termination
o Termination

• Grounds for Dissolution

o Automatic Modes - WISEDIC
• Go to the Security and Exchange Commission directly
• Without Violating Partnership Agreement - ATE2
▪ Expected na nila
▪ Also known as Voluntary Dissolution
▪ Accomplishment of the Purpose of the Partnership
• Plan is to create a 20 story building and then sell it
• Pag natapos na at nabenta na, edi tapos na yung
partnership kasi nafulfill na yung plan
▪ Termination of Period
• Partnership with a fixed term
▪ Express Will by a Partner in Good Faith
• Happens to Partnership at will
▪ Expulsion of a Partner in Good Faith
• In case of imminent loss
• Remember that those who refuse to contribute may be
compelled to share his rights
• In Violation of Partnership Agreement
▪ Also known as Involuntary Dissolution
▪ Sudden Resignation of a Partner in Good Faith
• Bawal in bad faith na sasadyain pag nag-away
 • If done in Bad Faith, can be liable to damages
• Specific property promised by a partner is lost before delivery
▪ The partner contributing will bear the loss
▪ If very important yung property na nawala, it could be as if the partner
nerver contributed
▪ This loss could be ground for dissolution if very material yung property
na yun
• Can the partnership withstand the loss?
• Events that will make the partnership / business unlawful to continue
▪ Ex. New laws from Congress like partnership to plant marijuana to sell
to pharmaceutical companies
• Nung pinagbawal ito, syempre wala na rin yung purpose kasi
bawal na eh
• Death
• Insolvency
• Civil Interdiction of a Partner
▪ General Partner
o Judicial Dissolution - B2I2GO
• Court Decree is required
▪ SEC will ask for the court decree, without it, no BIR clearance
▪ BIR Clearance is needed for tax clearance
• Business can only be continued at a loss
▪ Loss is sure already, not imminent loss
▪ The judge will call on the accountant as a witness to say that the only
way to continue the business is at a loss
• Breach of Partnership Agreement
▪ There are rules and regulations that were violated
• Persistent or Willful Violated
• Ex. The partners have a review center and the rules were that
max of 2 absences lang tas yung isang partner nakaka-5 to 10
absences na
• Insanity of a Partner
▪ This is the General Partner
• Pag nabaliw ang isang GP, may mga pwedeng pumalit, need
muna ng court decree para i-dissolve
▪ In Limited Partner, it can be an automatic mode
• Kung nabaliw ang GP, who will be the managing partner?
• Wala. So automatically, dissolved na
• Incapacity to Perform His Duties
▪ Ex. Due to illness
• Guilty of Conduct Prejudicial to the Company
▪ Ex. Crime committed by a partner
• Other Analogous or Similar Modes
▪ Other stipulated ways or modes
▪ Ex. When an MP refuses to render accounting of his transactions
▪ Ex. When the partnership is illegally operating
• Nagsimulang legal tas naging illegal
• Pwedeng by court decree, i-dissolve siya

• Liquidation Rules
o Under the Civil Code is more on the order of payment of the liabilities
o From the Available Assets
 • Deduct / Pay Obligation to 3rd person or creditors
• Pay obligation to Limited Partners
▪ NOTE: Pay first all claims of a Limited Partner before GP
• Pay the Capital Contribution of General Partners
• Pay the Profits of General Partners
o Ex. ABC Company has 575K Assets, 300K Liabs, 225K Partners' Equity, and 50K
Capital Contribution for Each, and Profits amount to 75K
•
Assets 525

Obligation to 3rd Person (300)

225

Additional CC 0

CC of GP (50x3) (150)

Profits 75

Equal Share of 3 ÷3
Partners

Share of Each Partner 25

• The partnership is now fully liquidated

o Ex. Following the illustration above: There is a 4th partner who is Industrial. Mr.
D has 20% profits are his share
•
Assets 525

Obligation to 3rd Person (300)

225

Additional CC 0

CC of GP (50x3) (150)

Profits 75

Share of D's Share (20%) (15)

Profits for Capitalist P. 60

Equal Share of 3 ÷3
Partners

Share of Each Partner 20