Chapter 4

• Article 1843

  Limited partnership is composed of one or more general partners and one or more limited partners. Limited partner is not bound to be a liable on partnership obligations
• Article 1843: Characteristics of Limited Partnership

  1. Compliance with statutory requirements
  2. One or more general partner control business and personally liable to creditors
  3. One or more limited partners contribute capital and share in profits. Do not participate in management and not personally liable to partnerhip obligations beyond their capital contribution.
  4. May ask for return on their capital contribution
  5. Partnership liability paid out to common fund and individual properties of general partner.
• Article 1843

  General rule: All partners including industrial partner are liable pro rata with all their property for partnership debt.

  • Exception: Limited partner liability is limited to the amount of money they put in partnership
• Article 1843: Reason and purpose of statutes authorizing formation of limited partnership


  Secure capital from one business and still retain control ( 3 class of contracts)

  • Ordinary loan in interest
  • Loan lender + interest + share in profits
  • Loan lender + share in profits + control over the business

  Share in profits of business without risk of personal liability

  Associate as partners with those having business skills
• Article 1843: Difference general and limited partner

  • Liability: personally liable/ extend only to capital contribution Manner mngmt: equal right / no share
  • 
    
  • Contribution: money, property or industry / contribute cash or property
  • Interest: may not assign & assignee to be partner need consent on partner / freely assignable
  • Engage other business: prohibit/ not prohibit (mere contributor)
  • Retirements, death, insanity or insolvency: dissolve/ no effect
• Article 1843: Difference between general and Limited Partnership 


  Form: constituted in any form/ compliance requirements

  Members: General partner only/ general & limited partner

  Firm name: Operate under firm name/ followed by limited

  Dissolution & Winding up: governed diff rules/ carried on by general partnership
• Article 1844

  • Creation of limited Partnership is a formal proceeding and not merely voluntary agreement
  • Requirement of statue must be follow so public notice may be given to all who desire essential features of partnership
  • Failure to this lead for partnership automatic to be categorized as general partnership.
• Article 1844: Two essential requirements on formation of limited partnership

  1. Certificate of articles of limited partnership states the matter enumerated in articles, SIGNED and SWORN
  2. Certificate file record in the office of Securities and Exchange Commisions
• Article 1844


  Purpose of filing is to give actual or constructive motive to potential creditors or person dealing with partnerhip of LIMITED LIABILITY of LIMITED PARTNERS. (protection from 3rd person)
• To be prevent presumptions on general partnership

  • To obtain privilege of limited partnership liability, one must conform to the requirements of articles 1844
  • Failure to extend when it expired and register it again on SEC lead to presumptions that it is General partnership
• Article 1845: Contribution of a limited partner may be cash or other property but not services

  • Limited partner are only allowed to contribute money or property and not services otherwise considered to be general or industrial partner lead to exception from personal liability
  • General while limited partner at the same partnerhip and at the same time as long as stated in certificate.
• Article 1845


  Law is not satisfied by limited partner contribution in promissory notes, checks, bond, contribution partly in cash, property and notes.

  • Exception: if the check contributed limited partner has actual money then give general partner absolute and final control of the amount.
• Article 1845


  Contribution of limited partner must be made before the formation of the partnership

  • Exception: Additional capital contribution after formation
• Article 1846 


  Surname of limited partner shall not appear on firm name except:

  • Same surname to general partner
  • Prior to admissions business had been carried on under name which his surname appeared
• Article 1846 


  Effect if surname of limited partner appears in partnerhip name:

  • He will be liable as a general partner to creditor who extend credit without knowledge that he is not a partner
• Article 1847: False statement in certificate 


  Requisite:

  • He knew statement is false at the time he signed it or subsequent
  • have sufficient time but fail to cancel, amend or file petition to cancel or amend it.
  • Person seek to enforce liability relied on false statement in transaction
  • Person suffered loss due to reliance on it.
• Article 1847 (false statement in certificate)

  Nature of liability

  • It is merely statutory penalty and does not make a limited partner to be general partner.
• Article 1848

  • Limited partner become liable as a general partner for the firm obligations if he become involved in the management of firm business
  • Example: BOD is chosen by limited partner

  Exception:

  • Bare grant to apprant control & he didn't participate
  • Purpose is to settle it's affairs after dissolution
  • He make suggestions or express opinion as to advisability of certain transaction
• Article 1849: admissions of new limited partner Law required:

  • proper amendment to certificate must be SIGNED & SWORN by all partner include new limited partner
  • Filled in SEC
• Article 1850: Right, Power and Liabilities of General Partner 


  Right to control/unlimited Personal liability

  • he is vested entire control of the firm business and has all right and powers, subject to liabilities and restrictions of partner in partnerhip without limited partners
  • He may bind the partnership by any act of administration.
• Article 1850: Rights, powers and liabilities of general partner


  Exception: He has no power to do specific acts on ff:

  1. Do not act in contravention of the certificate
  2. Do not act make it impossible to carry ordinary business of partnership
  3. Confession judgement against partnership
  4. Posses partnership property or assign interest other than partnerhip purpose
  5. Admit person as a general partner
  6. Admit person as a limited partner unless given right to do so
  7. Continue business with partnerhip property on the death, retirement, insanity, civil interdiction or insolvency of general partner.
• Article 1851: Specific Right of Limited Partner

  1. Require partnership books be kept at principal place of partnership
  2. Inspect & copy at reasonable hour on partnership book
  3. Demand true and full information of all things affecting partnerhip
  4. Demand formal account of partnership affairs
  5. Ask for dissolution and winding up by decree of court
  6. Receive share of profits or other compensation
  7. Receive return of his contribution.
• Article 1852: Status of person erroneously believing himself to be limited partner.


  Exemption from liability liability as a general partner

  • A person contributed a capital erroneously believing that he is a limited partner but into certificate he is general partner or not designated as a limited partner.

  Requisites:

  • Promptly renounces his interest to general partner
  • Surname does not appear to partnerhip name
  • Does not participate partnership management
• Article 1852

  Necessity for renouncing interest if before partnership become liable to 3rd person who cannot be blame in believing he is a general partner


  Exception: Without prejudice 3rd person renounciation of interest is not necessary
• Article 1853: One person, both general partner and limited partner

  • All rights, powers restrictions of a general partner however he is liable with his seperate property to 3rd person
  • Limited partner as to the right in respect to his contribution as other partner concerned
• Article 1854:

  Limiter partner are not prohibited to

  1. Grant loan to partnerhip
  2. Transact other business with it
  3. Receive pro rata share of partnerhip assets with general creditor if he is not general partner.
• Article 1854: Limited Partner are prohibit to:

  1. Receive or holding as collateral security any partnerhip property
  2. Receive payment, conveyance or release from liability prejudice 3rd perso.

  Any violation of the

  prohibition = presumptions defraud partnerhip creditors
• Article 1855:

  An agreement as to this must be stated to the in the certificate. In absence all limited partner stand upon equal footing


  Return to the ff:

  1. capital contribution
  2. Compensation by way of income
  3. Any other matter
• Article 1856: Compensation of limited partner by way of income


  Excess of partnerhip assets over partnerhip liabilities

  • Limited had right to receive share of profits or compensation by way of income stipulated for in certificate
  • In excess of partnerhip assets after partnerhip liabilities is settled.
  • 3rd party creditor priority over limited partnership right.
• Article 1856

  Preferential right of partnerhip creditors

  • Limited partner up to contribution & arising from business transaction by them with partnerhip
  • General partner whether for contribution or not
• Article 1857


  Requisite for return of contribution of limited partner

  • All partnerhip Liabilities settled or asset of partnership are sufficient to pay liabilities
  • Consent of all member obtained except when it is rightfully demanded
  • Certificate is cancelled or amended as to withdrawal or reduction of contribution
• Article 1857

  Right to receive return of contribution of Limited partner

  1. Upon dissolution
  2. Upon arrival of agreed time
  3. After expiration of (6) six months notice in writing given by him to other partner
• Article 1857

  General Rule: Limited partner entitled to receive return of contribution in a cash form only

  Exception:

  • Stipulations contrary to certificate
  • All partner consent return other than in form of cash
• Article 1857: Limited partner demand for dissolution

  By judicial decree

  • When his demand to return contribution is denied
  • When the liability is not yet settled or asset of partnership is insufficient to settle liabilities

  By partner

  • Ask other partner first to have dissolution, In refusal seek through judicial decree
• Article 1858: Liability of Limited Partner

  Liability to partnerhip

  1. Difference between actual contribution and stated in certificate
  2. unpaid contribution agreed make in future time.
• Article 1858: Liability as Trustee of Limited Partner

  1. Specific property stated in certificate contributed by him but not
  2. Specific property wrongfully returned to him
  3. Money / Other property wrongfully paid or conveyed to him as contribution
• Article 1858: Requisite for waiver of compromise liability

  1. Consent on all partner
  2. Does not prejudice partnerhip creditor who extend credit or arose before cancellation or amendment of certificate
• Article 1858: Liability for return contribution lawfully received

  • Limited partner liable to partnerhip for the return of contribution lawfully received by him to pay creditors extend credit or claim arose before such return
• Article 1859

  Effect of changing relation in Limited partner

  • Substitution of person as limited partner
  • Withdrawal, death, insolvency, civil interdiction of limited partner
  • Addition to new limited partner
• Article  1859: Rights of assignee of limited partner

  1. Entitled to receive share of profits or other compensation which assignor is entitled
  2. May require all rights of limited partner if become substituted limited partner.