Title IX-PARTNERSHIP

CHAPTER 4

LIMITED PARTNERSHIP

(Article 1850-1855)

Art. 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.

*Refers to the power, liabilities and limitations of general partners in a limited

partnership;

*A general partner has the same rights, powers and limitations in a limited partnership
as when he would have been in a general partnership.

*A limited partnership will continue (not dissolve) even in cases of the death of a limited
partner as long as there is still ONE surviving limited partner in the partnership.

Art. 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;

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(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.

*This Article is important as far as the limited partner is concerned as it shows them
what rights they have.

*A limited partner is given the same rights as the general partner, that is:

a.) They can require that the partnership books be kept at the principal place of
business.

b.) Inspect and copy partnership books.

c.) demand true and full information regarding all matters concerning the
partnership.

d.) Demand for legal winding up or dissolution.

e.) Share in profits, other compensation by way of income and the return of
contributions.

Art. 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.

*Refers to a failure to create a limited partnership

*Suppose A and B and C form a limited partnership, with C being the limited partner
with a contribution of P20, 000.00. The certificate that they sign says that C is a general
partner. What, then, if C, believing himself to be a limited partner, begins to exercise his
rights as such?

Answer: C cannot be held liable, as a general partner, if upon his realization of the error,
he promptly renounces his involvement with the partnership, except:

1.) if he participates in the management of the partnership;

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2.) if his surname is used in the partnership name

Consider the situation above, but this time, Cs name is not mentioned at all. What
happens then?

Answer: If that is the case, then there is no limited partnership because there is no
limited partner mentioned.

*The law anticipates a situation where in the person is a limited partner but his name is
not mentioned as such or not mentioned at all in the certificate.

Art. 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.

*A partner can be a limited and general partner at the same time provided that this fact

is STATED IN THE CERTIFICATE that he signs.

*Who are they to 3rd persons then?

They are general partners as to 3 rd persons but as amongst the partners themselves,
they are seen as limited partners with regards to their contribution.

Art. 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 and 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.

*Provides that a limited partner can extend credit or transact with partnerships that he is
part of.

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*He is also entitled to partnership assets pro rata to creditors but it cannot be used as
collateral from the partnership.

*Suppose X & Co. owes D a sum of P20, 000.00 and C, a limited partner, P20, 000.00.
The total assets of the partnership is P50, 000.00. How shall these be settled?

Answer: Both C and D can simultaneously collect from the partnership as partnership
assets are sufficient to cover BOTH. However, if partnership assets are only P20,
000.00, C cannot share in it because it would prejudice Ds claim.

Art. 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.

*Suppose that there are three limited partners. These partners can agree (because
there are more than 1) that one of them can have priority over the others provided that
such SHOULD BE STATED IN THE CERTIFICATE.

Reported by:

Maria Charise C Leyson