(

(Article 1843-1867)

GROUP 6

MEMBERS:

Sony Lynn L. Cardenas (Art. 1843-1845)

Liza L. Macalisang (Art. 1846-1849)
Marlyn F. Wee (Art. 1850-1853)
Christine Joy Lagas (Art. 1854-1857)
Nielfamae Langaylangay (Art. 1858-1860)
Jiona E. Cavales (Art. 1861-1864)
Laarnie Dragon (Art. 1865-1867)

Art. 1843: A limited partnership is one 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. The limited
partners as such shall not be bound by the obligations of the partnership.
LIMITED PARTNERSHIP (Art. 1843-1867)

CHARACTERISTICS:
1. A limited partnership is formed by compliance with the statutory requirements
(Art. 1844);
2. One or more general partners control the business and are personally liable to
creditors;
3. One or more limited partners contribute to the capital and share in the profits
but do not participate in the management of the business and are not personally
liable for partnership obligations beyond the amount of their capital
contributions;
4. The limited partners may ask for the return of their capital contributions under
the conditions prescribed by law; and
5. The partnership debts are paid out of common fund and the individual
properties of the general partners.

LIMITED PARTNER/PARTNERSHIP vs. GENERAL PARTNER/ PARTNERSHIP:

1. Extent of liability:
 Limited partner’s liability extends only to his capital contribution.
 General partner is personally liable for partnership obligations.
2. Right to participate in the management of partnership:
 Limited partner has no share in the management of a limited partnership
and renders himself liable to partnership creditors as a general partner if
he takes part in the control of the business.
 General partners have an equal right in the management of the business
(when the manner of management has not been agreed upon).
3. Contribution:
 Limited partner must contribute cash or property to the partnership but
not services.
 General partner may contribute money, property or industry to the
partnership.
4. Proper party to proceedings by or against the partnership:
 Limited partner is not a proper party to proceedings by or against a
partnership. Unless: 1. he is also a general partner, or 2. where the object
of the proceeding is to enforce a limited partner’s right against or liability
to the partnership.
 General partner is the proper party to proceedings by or against a
partnership
5. Transferability of interest:
 Limited partner’s interest is freely assignable, with assignee acquiring all
the rights of the limited partner subject to certain qualifications.
 General partner’s interest in the partnership may not be assigned as to
make the assignee a new partner without the consent of the other
partners, although he may associate a third person with him in his share.
6. Inclusion of partner’s name in the firm name:
 As a general rule, name of a limited partner must not appear in the firm
name.
 Name of a general partner may appear in the firm name.
7. Prohibition to engage in other business:
 No such prohibition in the case of a limited partner who is considered a
mere contributor to the partnership.
 General partner is prohibited from engaging in a business which is of the
SAME kind of business in which the partnership is engaged, if he is a
capitalist partner, or in ANY of business for himself if he is an industrial
partner.
8. Effect of retirement, death, insanity or insolvency:
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LIMITED PARTNERSHIP (Art. 1843-1867)

 Retirement, death, insanity or insolvency of a limited partner does not

dissolve the partnership for his executor or administrator shall have the
rights of a limited partner for the purpose of selling his estate.
 Retirement, death, insanity or insolvency of a general partner dissolves
the partnership
9. Creation:
 Limited partnership is created by the members after substantial
compliance in good faith with the requirements set forth by law.
 General partnership, as a general rule, may be constituted in any form by
contract or conduct of the partnership.
10.Members of the partnership:
 Limited Partnership: Composed of one or more general partners and one
or more limited partners.
 General Partnership: Composed only of general partners
11.Firm name:
 Firm name must be followed by the word Limited.
 No such requirement
12.Rules governing dissolution and winding up:
 Governed by Art. 1839
 Governed by Art. 1863

Art. 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;

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LIMITED PARTNERSHIP (Art. 1843-1867)

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.

ESSENTIAL REQUIREMENTS FOR FORMATION OF LIMITED PARTNERSHIP:

1. A certificate or articles of limited partnership which states the matters
enumerated in Article 1844, which must be signed and sworn;
2. Such certificate must be filed for record in the Office of the Securities and
Exchange Commission.

Art. 1845. The contributions of a limited partner may be cash or other

property, but not services.

LIMITED PARTNER’S CONTRIBUTION:

1. Medium. 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.
2. Time. The contribution of each limited partner must be paid before the
formation of the limited partnership (see Art. 1844[f].), although with respect
to the additional contributions they may be paid after the limited partnership
has been formed.

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

(2) 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 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.

Effect where surname of limited partner appears in partnership name:

Generally, the limited partner is liable to partnership creditors without the

right of general partners when this article is violated. Such limited partner
shall not be liable as a general partner with respect to third persons with actual
knowledge that he is only a general partner.

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LIMITED PARTNERSHIP (Art. 1843-1867)

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.

> If there are false statements in the certification and third persons
should suffer the loss then he can hold liable all those who had knowledge of
the false statement at the time certification was signed.

> The same shall apply if the partners concerned had sufficient time to
have the certificate cancelled but did not do so.

ARTICLE 1848. A limited 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.

> The limited partner who, aside from his power, participates in the
management of the partnership becomes liable as general partner.

ARTICLE 1849. After the formation of a limited partnership, additional

limited partners may be admitted upon filing an amendment to the original
certificate in accordance with the requirements of Article 1865.

> Proper amendment to the certificate is mandatory which must be signed

and sworn by all of the partners including the new limited partners and filed in
the Securities and Exchange Commission pursuant to the requirements of
Article 1865.

ARTICLE 1850. A general partner shall havr 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 thr partnership;

3.) Confess a judgment against the partnership;

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LIMITED PARTNERSHIP (Art. 1843-1867)

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 to do so 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.

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.

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.

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.

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 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.

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LIMITED PARTNERSHIP (Art. 1843-1867)

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.
RIGHT TO TRANSACT BUSINESS WITH THE PARTNERSHIP

A limited partner may:

1) Loan money to the partnership;
2) Transact other business with the partnership; and
3) Receive a pro rata share of the partnership assets with general creditors if he is not also a general
partner.

Limitations:
A limited partner, with respect to his transactions with the partnership, cannot:
1) Receive or hold as collateral security any partnership property; or
2) Receive any payment, conveyance, or release from liability if it will prejudice the right of third
persons.

Violation of the prohibition is considered a fraud on the creditors of the partnership.

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.

PREFERENCE OF LIMITED PARTNERS

General Rule:
The limited partners stand on equal footing.

Exception:
By an agreement of all the partners (general and limited) in the certificate, priority or preference may be given
to some limited partners over others with respect to:
1) The return of the contributions;
2) Their compensation by way of income; or
3) Any other matter.
-----

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
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.

RIGHT TO SHARE IN PROFITS

A limited partner may receive from the partnership the share of the profits of the compensation by way of
income stipulated for in the certificate.

This right is subject to the condition that partnership assets will still be in excess of partnership liabilities after
such payment. The partnership liabilities being referred to exclude the liabilities to the limited and general
partners.

Ratio:
Otherwise, he will receive a share to the prejudice of third-party creditors.

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Article 1857
RIGHT TO RETURN OF CONTRIBUTION

A limited partner may have his contributions withdrawn or reduced when:

1) All the 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;
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LIMITED PARTNERSHIP (Art. 1843-1867)

2) The consent of all members is had, unless the return may be demanded as a matter of right; and
3) The certificate is cancelled or so amended as to set forth the withdrawal or reduction.

The return of his contributions may be demanded, as a matter of right (even when not all the other partners
consent), when #1 and #2 above are complied with:
1) On the dissolution of the partnership;
2) Upon the arrival of the date specified in the certificate for the return; or
3) After the expiration of the 6-month notice in writing given by him to the other partners, if no time is
fixed in the certificate for:
a) The return of the contribution; or
b) The dissolution of the partnership.

General Rule:
A limited partner, irrespective of the nature of his contribution has only the right to demand and receive cash in
return for his contribution.

Exceptions:
He may receive his contribution in a form other than cash when:
1) There is a statement in the certificate to the contrary; or
2) All the members of the partnership consent.

Article 1858 A limited partnership.

1) for the difference his contribution as actually made and that stated in the certificate as having
been made and,

2) for the unpaid contribution which he agreed in the certificate to make in the future at the time
and on the condition stated in the certificate.

A Limited partner holds as trustee

1) Specific property stated in the certificate as contributed by him,But which has been wrongfully
returned and,

2) Money or other property wrongfully paid or conveyed to him on account of his

contribution.limedtû

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 a 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.

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.

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LIMITED PARTNERSHIP (Art. 1843-1867)

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 on 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.

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.

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 settling his estate, and such power as the deceased had to constitute
his assignee as substituted limited partner.
The estate of a deceased limited partner shall be liable for all
his liabilities as a limited partner.

RIGHTS OF EXECUTOR ON DEATH OF A LIMITED PARTNER:

1. Keeping of Partnership Books. To require that the partnership books be
kept at the principal place of business of the partnership and a t a
reasonable hour to inspect and copy any of them;
2. Duty to render information. To demand true and full information of all
things affecting the partnership;
3. Right of partner to a formal account. To demand a formal account of
partnership affairs whenever circumstances render just and reasonable;
4. Judicial determination as to dissolution. To ask for dissolution and
winding up by decree of court;
5. Compensation of limited partner. To receive a share of the profits or
other compensation by way of income;
6. Return of contribution. To receive the return of his contribution
provided the partnership assets are in excess of all its liabilities.

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.
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LIMITED PARTNERSHIP (Art. 1843-1867)

Nothing in this Chapter shall be held to deprive a limited

partner of his statutory exemption.

RIGHTS OF CREDITORS OF LIMITED PARTNER:

1. Apply to the proper court of an order charging the limited partner of
unsatisfied amount of his claim;

2. Redeem with separate property by anyone or more of the partners.

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 for 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 claim.

PRIORITY IN THE DISTRIBUTION OF PARTNERSHIP ASSETS:

1. Those due to the creditors;
2. Limited partners in respect to their share of profits and other
compensation;
3. Limited partners for the return of capital contributed;
4. General partners other than for capital and profits;
5. General partners in respect to profits;
6. General partners in respect to capital.

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;

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LIMITED PARTNERSHIP (Art. 1843-1867)

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 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.

WHEN CERTIFICATE SHALL BE CANCELLED OR AMENDED:

1. The certificate shall be cancelled, not merely amended

a. Partnership is dissolved;
b. Limited partners cease to be such.
2. In all other cases, only an amendment of the certificate is required.
( Art. 1864, Nos.1-10)

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

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LIMITED PARTNERSHIP (Art. 1843-1867)

(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 requisites for Certificate to be amended or cancelled are:

a.) it must be in writing
b.) it must be signed AND sworn to by ALL concerned parties
c.) it must be registered with the SEC
From the moment the amended certificate/ writing or a certified copy of
a court order granting the petition for amendment has been filed, such
amended certificate shall thereafter be the Certificate of Partnership.

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.
● A Limited partner is a mere contributor, meaning, he is practically a stranger. This ia
because he has no participation in management and control and is only liable to the partnership, not
to third person and if he is filed against as a general partner, he can file a counterclaim for a
wrongful inclusion.

2 exception to the above rule:

a.) To enforce his right against the partnership

b.) If he refuses to restore his contribution when the partnership assets are not sufficient to
pay creditors.

>a limited partner considered a proper party.

Article 1867. 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:

(1) The amount of the original contribution of each limited partner, and the time when the
contribution was made; and

(2) 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.

A limited partnership formed under the law prior to the effectivity of this Code, until or unless it
becomes a limited partnership under this Chapter, shall continue to be governed by the provisions
of the old law.

> This is a transitory Law.

> Art. 145 to 150 of the Code of Commerce used to govern limited
partnership
> What happens to a limited partnership existing before the Civil Code?
The partnership must first comply with the following requirements
before they can become a limited partnership under the Civil Code:

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LIMITED PARTNERSHIP (Art. 1843-1867)

1.) State the amount of contribution and the time it was

contributed
2.) After paying off all liabilities, the total assets of the
partnership must be greater than the contribution of all limited partners,
otherwise, it will continue to be governed by the Code of Commerce.

REFERENCES

 Comments and Cases On Partnership, Agency and Trusts by Hector De Leon

 Civil Code of the Philippines Annotated, Volume V (Special Contracts) by Edgardo L.
Paras

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