1843 - 1867 Flashcards
- It is formed by two or more persons under the provisions of the following article, having as members one or more general partners and one or more limited partners.
- It is formed if there has been substantial compliance in good faith with the foregoing requirements.
Limited Partnership
Shall not be bound by the obligations of the partnership.
Limited Partners
Characteristics of Limited Partnership
- It is formed by compliance in good faith with the statutory requirements
- One or more general partners control the business and are personally liable to creditors
- One or more limited partners (special partner/s) contribute to the capital and share in the profits but do not participate in the management of the business
- The limited partners are not personally liable for partnership obligations beyond their capital contribution
- The limited partners may ask for the return of their capital contributions
- The partnership debts are paid out of the common fund and the separate properties of the general partners.
Essential Requisites in the Formation of a Limited Partnership. Two or more persons desiring to form a limited partnership shall:
- The certificate of limited partnership (Sign and swear to a certificate)
- The certificate of limited partnership must be filed in the Office of the Securities and Exchange Commission
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
(n) The right, if given, of a limited partner to demand and receive property other than cash in return for his contribution.
Contributions of a Limited Partner may be
Money or property, or both, but not services.
Is an Industrial Partner a Limited or General?
General Partner
The surname of a limited partner shall not appear in the partnership name unless:
- It is also the surname of a general partner
- Prior to the time when the limited partner became such, the business had 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 -
- Is liable as a general partner only to the partnership creditors who extend credit to the partnership without actual knowledge that he is not a general partner.
- Will not acquire the rights of a general partner. (1848)
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:
- At the time he signed the certificate
- 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.
After the formation of a limited partnership, additional limited partners -
- may be admitted after the formation.
- The only requirement is amendment of the original certificate of limited partnership which must be signed and sworn to by all of the partners, original partners and the newly admitted limited partners, and filed with the Office of SEC Commission
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.
General Partner
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:
- Do any act in contravention of the certificate
- Do any act which would make it impossible to carry on the ordinary business of the partnership
- Confess a judgment against the partnership
- Possess partnership property, or assign their rights in specific partnership property, for other than a partnership purpose
- Admit a person as a general partner
- Admit a person as a limited partner, unless the right so to do is given in the certificate
- 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.
A limited partner shall have the same rights as a general partner to:
- The right to 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
- The right to 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
- The right to have dissolution and winding up by decree of court
- The right to receive a share of the profits or other compensation by way of income
- The right to receive return of his contribution if the partnership assets are in excess of the partnership liabilities
A contributor who erroneously believes that he has become a limited partner, is not liable as a general partner provided that:
- On ascertaining the mistake, he promptly renounces his interest in the profits of the business, or other compensation by way of income
- He does not take part in the control of the business
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 of limited partnership
General-Limited partner
The rights of a general-limited partner
His rights are those of a general partner
The liabilities of a general-limited partner are those of a general partner.
- As to partnership creditors, he is liable up to the extent of his separate property
- As to his contribution, his rights are those of a limited partner insofar as the other partners are concerned
Allowable Business Transactions of a Limited Partner with the Partnership
- To lend money to the partnership
- To transact business with the partnership
- To receive on account of resulting claims against the partnership, with general creditors, a pro rata share of the assets
Prohibited Business Transactions of a Limited Partner with the Partnership
- Receive or hold as collateral security and partnership property
- Receive from a general partner or the partnership any payment, conveyance, or release from liability if at the same time the assets of the partnership are not sufficient to discharge partnership liabilities to persons not claiming as general or limited partners
Preference to some Limited Partners
- Return of their contributions
- Their compensation by way of income
- 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
Shall stand upon equal footing.
The partnership assets are in excess of all liabilities of the partnership to third persons after payment of the profits or compensation by way of income of a limited partner
Share of the profits or compensation by way of income of a limited partner
Requisites for the return of contributions of a Limited Partner
- 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
- The consent of all members (general and limited partners) is had, unless the return of the contribution may be rightfully demanded under the provisions of the second paragraph
- The certificate is cancelled or so amended as to set forth the withdrawal or reduction
When can the contributions of a Limited Partner be returned?
- On the dissolution of a partnership
- When the date specified in the certificate for its return has arrived
- After he has given 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.
Right of a Limited Partner to demand and receive cash in return for his contribution
A limited partner, irrespective of the nature of his contribution, has only the right to demand and receive cash in return for his contribution.
EXPN: 1. Where there is stipulation to the contrary in the certificate of limited partnership
2. Where all the partners consent to the return of his contribution other than in the form of cash
When may a Limited Partner have the partnership dissolved and liquidated?
- He rightfully but unsuccessfully demands the return of his contribution
- The other liabilities of the partnership have not been paid, or the partnership property is insufficient for their payment and the limited partner would otherwise be entitled to the return of his contribution.
Liability of a Limited Partner for unpaid contributions to the partnership
- For the difference between his contribution as actually made and that stated in the certificate as having been made, and
- 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
Liability of a Limited Partner as a Trustee to the partnership
- Specific property stated in the certificate as contributed by him, but which was not contributed, or which has been wrongfully returned
- Money or other property wrongfully paid or conveyed to him on account of his contribution
Requisites for the liabilities of a Limited Partner to be waived
- With the consent of all other partners
- The waiver or compromise shall not affect the right of partnership creditors who extended credit or whose claim arose after the filing and before a cancellation or amendment of the certificate
Liability of a Limited Partner despite the return of his contribution
- A limited partner is nevertheless liable to the partnership for any sum necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before such return.
- However, the liability of that limited partner is up to the extent of his contribution.
Rights of an assignee of a Limited Partner.
- An assignee is only entitled to receive the share of the profits or other compensation by way of income, or the return of his contributions, to which his assignor would otherwise be entitled
- An assignee acquires all the rights of the limited partner only when he becomes a substituted limited partner
A person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership
Substituted Limited Partner
Requisites for the assignee to become a substituted Limited Partner
- All the partners must consent or if the limited partner-assignor, being empowered in the certificate of limited partnership, gives the assignee that right
- The certificate of limited partnership must be amended
- The certificate of limited partnership must be registered in the SEC
Rights and Liabilities of a substituted Limited Partner
- The substituted limited partner has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor
EXPN: 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 persons who suffered damage by reliance on a false statement in the certificate of limited partnership and to creditors who extended credit or whose claims arose before the substitution
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:
- Under a right so to do stated in the certificate
- With the consent of all members.
On the death of a Limited Partner -
- His executor or administrator shall have all the rights of a limited partner for the purpose of settings 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
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 proper
In settling accounts after dissolution the liabilities of the partnership shall be entitled to payment in the following order:
- 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
- Those to limited partners in respect to their share of the profits and other compensation by way of income on their contributions
- Those to limited partners in respect to the capital of their contributions
- Those to general partners other than for capital and profits
- Those to general partners in respect to profits; 6. Those to general partners in respect to capital.
The certificate shall be cancelled when the partnership is dissolved or all limited partners cease to be such. A certificate shall be amended when:
- There is a change in the name of the partnership or in the amount or character of the contribution of any limited partner
- A person is substituted as a limited partner
- An additional limited partner is admitted
- A person is admitted as a general partner
- A general partner retires, dies, becomes insolvent or insane, or is sentenced to civil interdiction and the business is continued under article 1860
- There is a change in the character of the business of the partnership
- There is a false or erroneous statement in the certificate
- 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
- A time is fixed for the dissolution of the partnership, or the return of a contribution, no time having been specified in the certificate
- 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.
- When the partnership is dissolved
- When all the limited partners cease to be limited partners.
Cancellation of the Certificate of Limited Partnership
Requirements for Amendment
- It must be in writing as far as necessary to set forth clearly the change in the certificate which it is desired to make
- It must 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 certificate of limited partnership, as amended, must be filed for record in the Office of the SEC
Requirements for Cancellation
- It must be in writing
- It must be signed and sworn to by all members
- It must be files for record in the Office of the SEC
Art. 1866. A contributor, unless he is a general partner, is
A limited partner is not a proper party to proceedings by or against a partnership because he does not take control nor participate in the management of the business of the partnership
Art. 1866. Exceptions
Where the object is to enforce a limited partner’s right against or liability to the partnership
A limited partnership formed under the law prior to the effectivity of this Code, may become a limited partnership under this Chapter by complying with the provisions of article 1844, provided the certificate sets forth:
- The amount of the original contribution of each limited partner, and the time when the contribution was made
- That the property of the partnership exceeds the amount sufficient to discharge its liabilities to persons not claiming as general or limited partners by an amount greater than the sum of the contributions of its limited partners.
