BUSINESS ORGANIZATION I – 2ND EXAM

1. Characteristics
Xandredg Sumpt L. Latog As a general rule, the characteristics of a limited
partnership are as follows:
I
LIMITED PARTNERSHIP (a) A limited partnership is formed by compliance with
the statutory requirements (Art. 1844.);
A. CONCEPT OF LIMITED PARTNERSHIP (b) One or more general partners control the business
and are personally liable to creditors (Arts. 1848,
Article 1843. A limited partnership is one formed by two or 1850.);
more persons under the provisions of the following article, having as (c) One or more limited partners contribute to the
members one or more general partners and one or more limited capital and share in the profits but do not participate
partners. The limited partners as such shall not be bound by the in the management of the business and are not
obligations of the partnership. personally liable for partnership obligations beyond
the amount of their capital contributions (Arts.
This article defines a limited partnership. The term is 1845, 1848, 1856.);
sometimes used to designate joint ventures and partnerships limited (d) The limited partners may ask for the return of their
only in respect of the nature and scope of the business to be carried capital contributions under the conditions prescribed
on. The correct usage of the term confines it to the form of business by law (Arts. 1844[h], 1857.); and
association composed of one or more general partners and one or (e) The partnership debts are paid out of common fund
more special partners, the latter not being personally liable for the and the individual properties of the general partners.
partnership debts.
The general partners are treated by the law much like a
General vs. Limited Partner partner in an ordinary partnership. They are typically those who
know how to manage the business. The limited partners are usually
General Partner Limited Partner those who put money for the business. They are only investors.
Personally liable for partnership Liability extends only to his Their limited liability is an exception to the general rule that all
obligations capital contribution partners, including industrial partners, are liable pro rata with all
When the manner of management No share in the management of a
their property for partnership debts. (Art. 1816.) Thus, a limited
has not been agreed upon, all of limited partnership, his rights
the general partners have an equal being limited to those enumerated partner has the same type of liability as stockholder in a
right in the management of the in Article 1851, such that he corporation.
business (Arts. 1803, 1810[3].), renders himself liable to creditors
whether or not the general partner as a general partner if he takes 2. Business Reason and Purpose of Statutes
has made any capital contribution part in the control of the business
(Art. 1848.)
Authorizing Limited Partnerships
May contribute money, property, Must contribute cash or property
or industry to the partnership to the partnership but not services a. Secure capital from others for one’s
(Art. 1845.) business and still retain control.
Not a proper party to proceedings Not a proper party to proceedings The business reason for the adoption of acts making
by or against a partnership by or against a partnership unless
provisions for limited or special partners is that men in business
he is also a general partner (Art.
1853.), or where the object of the often desire to secure capital from others. There are at least three
proceeding is to enforce a limited classes of contracts which can be made with those from whom the
partner’s right against, or liability capital is secured: First, the ordinary loan on interest. Second, the
to, the partnership (Art. 1866.) loan where the lender, in lieu of interest, takes a share in the profi
Name of a general partner may As a general rule, that of a limited
ts of the business. Third, those cases in which the person advancing
appear in the fi rm name (Art. partner must not (Art. 1846.)
1815.) the capital secures, besides a share in the profi ts, some measure of
Prohibited from engaging in a No such prohibition in the case of control over the business.
business which is of the kind of a limited partner who is
business in which the partnership considered as a mere contributor b. Share in profits of a business without risk
is engaged, if he is a capitalist to the partnership
of personal liability
partner (Art. 1808.), or in any
business for himself if he is an The policy of laws authorizing the formation of limited
industrial partner (Art. 1789.) partnerships is to bring into trade and commerce funds of those not
The retirement, death, insanity, or Retirement, etc. of a limited inclined to engage in that business, who are disposed to furnish
insolvency of a general partner partner does not have the same capital upon such limited liability with a view to the share of profi
dissolves the partnership (Arts. effect, for his executor or
ts which might be expected to result to them from its use.”
1860, 1830, 1831.) administrator shall have the rights
of a limited partner for the
purpose of selling his estate. (Art. c. Associate as partners with those having
1861.) business skill.
A general partner’s interest in the A limited partner’s interest is The primary purpose of the statute authorizing the
partnership (Art. 1812.) may not freely assignable, with the
formation of limited partnerships is to encourage those having
be assigned as to make the assignee acquiring all the rights of
assignee a new partner without the the limited partner subject to capital to become partners with those having skill, by limiting the
consent of the other partners (Art. certain qualifications liability of the former to the incidental amount actually contributed
1813.) although he may associate by them. The object of such a statute is to furnish reasonable
a third person with him in his protection to those dealing with the concern by requiring acts to be
share (Art. 1804.)

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done and public notice thereof given so that all who desire may
know the essential features of the arrangement.
B. FORMAL REQUIREMENTS
Article 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;
(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.
(2) 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.
A strict compliance with the legal requirements is not
necessary. It is sufficient that there is substantial compliance in
good faith. If there is no substantial compliance, the partnership
becomes a general partnership as far as third persons are
concerned, in which all the members are liable as general partners
[Jo Chung Cang vs. Pacifi c Commercial].
C. LIMITED PARTNER’S CONTRIBUTION
Article 1845. The contributions of a limited partner may be
cash or property, but not services.
A limited partner or special partner is not allowed to
contribute services. He can contribute only money or property;
otherwise, he shall be considered an industrial and general partner,
in which case, he shall not be exempted from personal liability
D. EFFECT WHERE SURNAME OF LIMITED PARTNER
APPEARS IN PARTNERSHIP NAME
Article 1846. The surname of a limited partner shall not
appear in the partnership name unless:
(1) It is also the surname of a general partner, or
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(2) 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.
The limited partner violating this article is liable, as a
general rule, to partnership creditors without, however, the rights of
a general partner. Of course, such limited partner shall not be liable
as a general partner with respect to third persons with actual
knowledge that he is only a limited partner.
E. LIABILITY FOR FALSE STATEMENT IN
CERTIFICATE
Article 1847. If the certificate contains a false statement, one
who suffers loss by reliance on such statement may hold liable any
party to the certificate who knew the statement 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 to file a petition for its cancellation or amendment as
provided in article 1865.
Article 1847 does not say that the guilty partner shall be
liable as a general partner. The liability imposed by Article 1847 is
merely a statutory penalty and does not make the limited partner a
general partner for all purposes, even as to third persons.
F. LIABILITY OF LIMITED PARTNER FOR
PARTICIPATING IN MANAGEMENT OF
PARTNERSHIP
Article 1848. A limited partner shall not become liable as a
general partner unless, in addition to the exercise of his rights and
powers as a limited partner, he takes part in the control of the business.
Under the express provision of Article 1848, a limited
partner is liable as a general partner for the firm’s obligations if he
takes part or interfere in the management of the fi rm’s business.
His abstinence from participation in fact in the transaction of the
business of the firm is essential to his exemption from liability for
the debts of the fi rm. The bare grant of apparent control to a
limited partner is not sufficient to make him liable as a general
partner where he has not actually participated in the control of the
partnership.
1. Control Test
It would seem that such control contemplates active
participation in the management of the partnership business and
does not comprehend the mere giving of advice to general partners
as to specific matters which the latter may follow or not. Being also
interested in the success of the partnership business, a limited
partner does not thereby forfeit his right to make suggestions or
express opinions as to the advisability of certain transactions.
The limited partner takes part in the management of the
business and is liable generally for the fi rm’s obligations where:
(a) The business of the partnership is in fact carried on
by a board of directors chosen by the limited
partners;
 (b) By the terms of the contract between the parties, an
appointee of the limited partner becomes the
directing manager of the firm;
(c) The limited partner purchases the entire property of
the partnership, taking title in himself and then
carries on the business in his own name and for his
own exclusive benefit; or
(d) He makes or is a party to a contract with creditors of
an insolvent firm with respect to the disposal of the
firm’s assets in payment of the firm’s debts.
The interference contemplated by Article 1848 is with
respect to an existing limited partnership. Accordingly, a limited
partner is not subject to general liability for taking part in the
management of the fi rm because he settles its affairs after
dissolution.
2. Reliance Test
The Dutch Supreme Court decided that the extension of
liability does not apply automatically. When having to decide if a
limited partner is to be held liable for the consequences of holding
himself out as a general partner, a court can take into account if a
third party new or was under the impression that the partner
concerned is not a general partner. Secondly, a court needs to take
into account if the limited partner can be blamed for holding
himself out as a general partner.
G. ADMISSION OF ADDITIONAL LIMITED PARTNERS
Article 1849. After the formation of a lifted partnership,
additional limited partners may be admitted upon filing an amendment
to the original certificate in accordance with the requirements of article
1865.
After a limited partnership has been formed, additional
limited partners may be admitted, provided there is proper
amendment to the certificate which must be signed and sworn to by
all of the partners, including the new limited partners, and fi led in
the Securities and Exchange Commission pursuant to the
requirements of Article 1865.
H. RIGHTS, POWERS, AND LIABILITIES OF A
GENERAL PARTNER
Article 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.
I. RIGHTS, IN GENERAL, OF A LIMITED PARTNER
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Article 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 as provided in articles 1856 and 1857.
J. STATUS OF DEFECTIVE LIMITED PARTNERSHIP
Article 1852. Without prejudice to the provisions of article
1848, a person who has contributed to the capital of a business
conducted by a person or partnership erroneously believing that he has
become a limited partner in a limited partnership, is not, by reason of
his exercise of the rights of a limited partner, a general partner with
the person or in the partnership carrying on the business, or bound by
the obligations of such person or partnership, provided that on
ascertaining the mistake he promptly renounces his interest in the
profits of the business, or other compensation by way of income.
In this regard, it is to be noted that the law (Art. 1844,
par. 2.) provides that the limited partnership is formed where there
has been substantial compliance in good faith with the
requirements thereof. If the law is not complied with, the attempt to
limit the liability of the limited partners will be ineffective, at least
as to creditors who have not recognized, or dealt with, the fi rm as
a limited partnership. However, it may be more accurate to say that
sometimes the limited partnership exists in spite of the failure of
the firm to comply with the law, and that the limited partner is
merely made liable for the debts of the firm as if he were a general
partner.
Article 1852 grants exemption from liability in favor of
one who has contributed to the capital of a business conducted by a
person or partnership erroneously believing that he has become a
limited partner in a limited partnership, or in a general partnership
thinking that it is a limited partnership. It introduces a substantial
modification of liability where there has been a failure to create a
limited partnership.
Status of person believing himself to be a limited
partner
A person who has contributed capital to a partnership,
erroneously believing that he has become a limited partner, as
when his name appears in the certificate as a general partner or he
is not designated as a limited partner (see Art. 1844[d].), is not
personally liable as a general partner by reason of his exercise of
the rights of a limited 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 (Art. 1852.);
(b) His surname does not appear in the partnership
name (Art. 1846.); and
(c) He does not participate in the management of the
business. (Art. 1848.)
K. ONE PERSON, BOTH A GENERAL PARTNER AND A
LIMITED PARTNER
 Article 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.
Generally, his rights and powers are those of a general
partner. Hence, he is liable with his separate property to third
persons. (Art. 1816.) However, with respect to his contribution as a
limited partner, he would have the right of a limited partner insofar
as the other partners are concerned. (Arts. 1855-1858.) This means
that while he is not relieved from personal liability to third persons
for partnership debts, he is entitled to recover from the general
partners the amount he has paid to such third persons; and in
settling accounts after dissolution, he shall have priority over
general partners in the return of their respective contributions. (Art.
1863.)
L. LOAN AND OTHER BUSINESS TRANSACTIONS
WITH LIMITED PARTNERSHIP
Article 1854. A limited partner also may loan money to and
transact other business with the partnership, and, unless he is also a
general partner, receive on account of resulting claims against the
partnership, with general creditors, a pro rata share of the assets. No
limited partner shall in respect to any such claim:
(1) Receive or hold as collateral security any partnership
property, or
(2) Receive from a general partner or the partnership any
payment, conveyance, or release from liability if at the time the assets
of the partnership are not sufficient to discharge partnership liabilities
to persons not claiming as general or limited partners.
The receiving of collateral security, or payment, conveyance,
or release in violation of the foregoing provisions is a fraud on the
creditors of the partnership.
M. PREFERRED LIMITED PARTNERS
Article 1855. Where there are several limited partners the
members may agree that one or more of the limited partners shall have
a priority over other limited partners as to the return of their
contributions, as to their compensation by way of income, or as to any
other matter. If such an agreement is made it shall be stated in the
certificate, and in the absence of such a statement all the limited
partners shall stand upon equal footing.
By an agreement of all the members (general and limited
partners) stated in the certificate, priority or preference may be
given to some limited partners over other limited partners as to the:
(1) return of their contributions;
(2) their compensation by way of income; or
(3) any other matter.
In the absence of such statement in the certificate, even if
there is an agreement, all the limited partners shall stand on equal
footing in respect of these matters
N. COMPENSATION OF LIMITED PARTNER
Article 1856. A limited partner may receive from the
partnership the share of the profits or the compensation by way of
income stipulated for in the certificate; provided, that after such
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payment is made, whether from property of the partnership or that of
a general partner, the partnership assets are in excess of all liabilities of
the partnership except liabilities to limited partners on account of their
contributions and to general partners.
In determining the liabilities of the partnership, the
liabilities to the limited partners for their contributions and to
general partners, whether for contributions or not, are not included.
(see Art. 1857.) Liabilities to limited partners other than on account
of their contributions arising from business transactions by them
with the partnership, enjoy protection, subject to the preferential
rights of partnership creditors. (see Art. 1854.)
O. REQUISITES FOR RETURN OF CONTRIBUTION OF
LIMITED PARTNER
Article 1857. 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.
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.
P. LIABILITIES OF LIMITED PARTNER
Article 1858. A limited partner is liable to the partnership:
(1) For the difference between his contribution as actually
made and that stated in the certificate as having been made, and
(2) For any unpaid contribution which he agreed in the
certificate to make in the future at the time and on the conditions
stated in the certificate.
A limited partner holds as trustee for the partnership:
(1) Specific property stated in the certificate as contributed
by him, but which was not contributed or which has been wrongfully
returned, and
(2) Money or other property wrongfully paid or conveyed to
him on account of his contribution.
The liabilities of a limited partner as set forth in this article
can be waived or compromised only by the consent of all members; but
a waiver or compromise shall not affect the right of a creditor of a
partnership who extended credit or whose claim arose after the filing
and before a cancellation or amendment of the certificate, to enforce
such liabilities.
 When a contributor has rightfully received the return in
whole or in part of the capital of his contribution, he is nevertheless
liable to the partnership for any sum, not in excess of such return with
interest, necessary to discharge its liabilities to all creditors who
extended credit or whose claims arose before such return.
Q. RIGHTS OF ASSIGNEE OF LIMITED PARTNER
Article 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.
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 1858.
R. EFFECT OF RETIREMENT, DEATH, ETC. OF A
GENERAL PARTNER
Article 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.
S. RIGHT OF EXECUTOR ON DEATH OF A LIMITED
PARTNER
Article 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.
T. RIGHTS OF CREDITORS OF LIMITED PARTNER
Article 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.
Nothing in this Chapter shall be held to deprive a limited
partner of his statutory exemption.
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The creditor of a limited partner may apply to the proper
court for an order charging the limited partner’s interest in the
partnership for the payment of any unsatisfied amount of his claim.
The interest so charged may be redeemed with the separate
property of any general partner but not with partnership property.
Under Article 1814, paragraph 2, No. (1), the interest of
the debtor partner charged with the payment of the unsatisfied
amount of the judgment debt may be redeemed with partnership
property with the consent of all the partners whose interests are not
so charged.
The limited partner’s right under the exemption laws is
also preserved under this article since his interest in the partnership
(see Art. 1812.) is actually his property.
U. DISSOLUTION OF A LIMITED PARTNERSHIP
Article 1863. In settling accounts after dissolution the
liabilities of the partnership shall be entitled to payment in the
following order:
(1) Those to creditors, in the order of priority as provided by
law, except those to limited partners on account of their contributions,
and to general partners;
(2) Those to limited partners in respect to their share of the
profits and other compensation by way of income on their
contributions;
(3) Those to limited partners in respect to the capital of their
contributions;
(4) Those to general partners other than for capital and
profits;
(5) Those to general partners in respect to profits;
(6) Those to general partners in respect to capital.
Subject to any statement in the certificate or to subsequent
agreement, limited partners share in the partnership assets in respect
to their claims for capital, and in respect to their claims for profits or
for compensation by way of income on their contribution respectively,
in proportion to the respective amounts of such claims.
Partnership creditors are entitled to first distribution,
followed by limited partners who take priority over general
partners.
Note that in a general partnership, the claims of the
general partners in respect of capital enjoy preference over those in
respect of profits. (see Art. 1839[1, c, d].)
V. WHEN CERTIFICATE SHALL BE CANCELLED OR
AMENDED
1. When Cancelled or Amended
Article 1864. The certificate shall be cancelled when the
partnership is dissolved or all limited partners cease to be such.
A certificate shall be amended when:
(1) There is a change in the name of the partnership or in the
amount or character of the contribution of any limited partner;
(2) A person is substituted as a limited partner;
(3) An additional limited partner is admitted;
(4) A person is admitted as a general partner;
(5) A general partner retires, dies, becomes insolvent or
insane, or is sentenced to civil interdiction and the business is
continued under article 1860;
(6) There is a change in the character of the business of the
partnership;
(7) There is a false or erroneous statement in the certificate;
(8) There is a change in the time as stated in the certificate
for the dissolution of the partnership or for the return of a
contribution;
 (9) A time is fixed for the dissolution of the partnership, or
the return of a contribution, no time having been specified in the
certificate, or
(10) The members desire to make a change in any other
statement in the certificate in order that it shall accurately represent
the agreement among them.
The certificate shall be cancelled, not merely amended:
(a) When the partnership is dissolved other than by
reason of the expiration of the term of the
partnership; or
(b) When all the limited partners cease to be such. A
limited partnership cannot exist as such if there are
no more limited partners. (Art. 1843.)
In all other cases, only an amendment of the certificate is
required. (Art. 1864, Nos. 1-10.)
2. Requirements for Amendment and Cancellation
of Certificate
Article 1865. The writing to amend a certificate shall:
(1) Conform to the requirements of article 1844 as far as
necessary to set forth clearly the change in the certificate which it is
desired to make; and
(2) Be signed and sworn to by all members, and an
amendment substituting a limited partner or adding a limited or
general partner shall be signed also by the member to be substituted or
added, and when a limited partner is to be substituted, the amendment
shall also be signed by the assigning limited partner.
The writing to cancel a certificate shall be signed by all
members.
A person desiring the cancellation or amendment of a
certificate, if any person designated in the first and second paragraphs
as a person who must execute the writing refuses to do so, may petition
the court to order a cancellation or amendment thereof.
If the court finds that the petitioner has a right to have the
writing executed by a person who refuses to do so, it shall order the
Office of the Securities and Exchange Commission where the certificate
is recorded, to record the cancellation or amendment of the certificate;
and when the certificate is to be amended, the court shall also cause to
be filed for record in said office a certified copy of its decree setting
forth the amendment.
A certificate is amended or cancelled when there is filed for
record in the Office of the Securities and Exchange Commission, where
the certificate is recorded:
(1) A writing in accordance with the provisions of the first or
second paragraph, or
(2) A certified copy of the order of the court in accordance
with the provisions of the fourth paragraph;
(3) After the certificate is duly amended in accordance with
this article, the amended certified shall thereafter be for all purposes
the certificate provided for in this Chapter.
The following are the requirements to amend a
certificate:
(a) The amendment must be in writing;
(b) It must be signed and sworn to by all the members
including the new members, and the assigning
limited partner in case of substitution or addition of
a limited or general partner; and
(c) The certificate, as amended, must be filed for record
in the Securities and Exchange Commission.
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From the moment the amended certificate or a certif ed
copy of a court order granting the petition for amendment has been
filed, such amended certificate shall thereafter be for all purposes
the certificate of the partnership under Article 1844.
The cancellation of a certificate must also be in writing
and signed by all the members and fi led with the Office of the
Securities and Exchange Commission. If the cancellation is ordered
by the court, certified copy of such order shall be filed with the
Commission.
The approval by the Commission of the amendment or
cancellation is not required.
W. NATURE OF LIMITED PARTNER’S INTEREST IN
FIRM
Article 1866. A contributor, unless he is a general partner, is
not a proper party to proceedings by or against a partnership, except
where the object is to enforce a limited partner's right against or
liability to the partnership.
The cancellation of a certificate must also be in writing
and signed by all the members and filed with the Office of the
Securities and Exchange Commission. If the cancellation is ordered
by the court, certified copy of such order shall be filed with the
Commission. The approval by the Commission of the amendment
or cancellation is not required.
Unlike in the case of a general partner, the relationship
between a limited partner, on the one hand, and the other partners
and the partnership, on the other hand, is not one of trust and
confidence. A limited partner is, therefore, not prohibited from
engaging in business for himself even in competition with that
conducted by the partnership (see Arts. 1789, 1808.) and may
transact business with the partnership for ordinary purposes as
though he were a stranger. (see Art. 1854.)
II
JOINT VENTURES
A. NATURE OF JOINT VENTURES IN THE PHILIPPINE
SETTING
The legal concept of a joint venture is of common law
origin. It has no precise legal definition, but it has been generally
understood to mean an organization formed for some temporary
purpose. It is in fact hardly distinguishable from the partnership,
since their elements are similar - community of interest in the
business, sharing of profits and losses, and a mutual right of
control. The main distinction cited by most opinions in common
law jurisdictions is that the partnership contemplates a general
business with some degree of continuity, while the joint venture is
formed for the execution of a single transaction, and is thus of a
temporary nature. This observation is not entirely accurate in this
jurisdiction, since under the Civil Code, a partnership may be
particular or universal, and a particular partnership may have for its
object a specific undertaking. (Art. 1783, Civil Code). It would
seem therefore that under Philippine law, a joint venture is a form
of partnership and should thus be governed by the law of
partnerships. [Aurbach v. Sanitary Wares Manufacturing].
B. CHARACTERISTICS
The following are the characteristics of joint ventures:
1. It would have a juridical personality separate and
distinct from that of its joint venturers;
 2. Each of the co-venturers would be liable with their
private property to the creditors of the joint venture,
beyond to the contribution to the joint venture;
3. Even if a co-venturer transfers interest to another,
the transferee does become a co-venturer together
with the others in the joint venture, unless all the
other co-venturers consent. This is in consonance
with the principle of delectus personarum;
4. Generally, the co-venturers acting on behalf of the
joint venturers are agents thereof with capacity to
bind the joint venture; and
5. Death, retirement, insolvency, civil interdiction or
dissolution of any co-venturer dissolves the joint
venture.
Joint ventures projects in Philippine jurisdiction are
financed through a combination of equity infusion and commercial
or special loans.
What has become a very popular scheme of financing
joint ventures covering infrastructure projects is the Build-Operate-
Transfer (B-0- 1) schemes under Rep. Act No 6957. The Act
implements the declared policy of the Philippine Government to
recognize the indispensable role of the private sector as the main
engine for national growth and development and provide the most
appropriate favorable incentives to mobilize private resources for
the purpose.

C. LEGAL FORMS IN JOINT VENTURE STRUCTURE

The list below is not exclusive especially since business
organizations evolve. There is often some form of restructuring
happening in which companies become no longer cookie-cutter
types of business structures. The study of commercial law is one of
those studies which are constantly evolving to adapt to current
needs of different types of business ventures.

1. Joint Venture Corporation

a. Two parties form a corporation and these two

parties act as stockholders.
b. In that case, the Corporation law will govern.

2. Equity Joint Venture

a. One venturer will just invent in shares of equity.

b. The governing law is the Corporation Code.

3. Partnership Arrangement
The Civil Code provisions on Partnership apply.

4. Contractual Joint Venture

a. Usually, what governs is the Law on Contracts.

b. The provisions on Partnership apply suppletorily.

D. FACTORS IN SELECTING A FORM OF JOINT

VENTURE STRUCTURE

1. Limited Liability
They want to distribute or apportion the amount of
liability that is only applicable to them.

2. Tax Consequences
Most business structures are tax driven. There are a lot
business owners trying to structure their companies in a way that
would make them tax-efficient.

3. Limitation of Foreign Equity

The different equity restrictions and the case of Rappler
which destroys the concept of PDRs (Philippine Depository
Receipts). PDRs have been here since time immemorial. It is a way
of getting investments without violating the law. However, with
what happed with Rappler, PDRs were changed.

E. FINANCING JOINT VENTURES

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