Northwestern University

College of Law
Laoag City

LIMITED PARTNERSHIP

Submitted by:
Kathrine Jessica G. Calano

Submitted to:
Judge Charles Javier Calapini

October 3, 2017
WHAT IS A LIMITED PARTNERSHIP?
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.

WHAT ARE THE CHARACTERISTICS OF A LIMITED PARTNERSHIP?

1. It is formed by compliance with statutory requirements
2. One or more general partners control the business
3. One or more general 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 their capital contributions
4. The limited partner may ask for the return of their capital contributions under
conditions prescribed by law
5. Partnership debts are paid out of common fund and the individual properties
of general partners
WHAT ARE THE DIFFERENCE BETWEEN A GENERAL PARTNER AND A LIMITED
PARTNER?
GENERAL PARTNER LIMITED PARTNER
As to liability Personally liable for Liability extends only to
partnership obligations his capital contributions
As to management When manner of No participation in
management not agreed management
upon, all general partners
have an equal right in the
management of the
business
As to contribution Contribute cash, property Contribute cash or
or industry property only, not industry
As to involvement in Proper party to Not proper party to
proceedings proceedings by/against proceedings by/against
partnership partnership
As to assignment of Interest not assignable Interest is freely
interest without consent of other assignable
partners Name must appear in fir
As to inclusion of surname Name may appear in firm As a general rule, name
in the firms name name must not appear in firm
name
As to restrictions in Prohibition against No prohibition against
business engagement engaging in business engaging in business
As to dissolution Retirement, death, Does not have same effect;
insolvency, insanity of rights transferred to legal
general partner dissolves representative
partnership
WHAT ARE THE REQUIREMENTS FOR THE FORMATION OF LIMITED
PARTNERSHIP?
1. The certificate or articles of the limited partnership which stated the following:
(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

(n) The right, if given, of a limited partner to demand and receive property other
than cash in return for his contribution.

2. The certificate must be filed for record in the Office of the Securities and Exchange
Commission.

NOTE: A limited partnership cannot be formed orally. If the partnership does not
comply with the requirements, it becomes a general partnership. However, substantial
compliance in good faith is sufficient to form a limited partnership. Strict compliance
with the legal requirements is not necessary.
WHAT ARE THE EFFECTS IF THE SURNAME OF A LIMITED PARTNER APPEARS IN
THE PARTNERSHIP NAME?

1. The surname of the limited partner should not appear except if it is also a
surname of a general partner or if at the time of his admission, it was already
being used.

2. If the limited partner allows his name to be used, then he shall be held liable as
a general partner as to third persons who extended credit not knowing he was a
limited partner.

3. If the creditor has knowledge of his being a limited partner, the latter will not
be liable.

WHAT ARE THE LIABILITIES OF THE PARTNERS IF THERE IS A FALSE STATEMENT

IN THE CERTIFICATE?

Any partner to the certificate containing a false statement is liable provided the
following requisites are present:

(a) He knew the statement to be false at the time he signed the certificate, or
subsequently, but having sufficient time to cancel or amend it or file a petition for
its cancellation or amendment, he failed to do so.

(b) The person seeking to enforce liability has relied upon the false statement in
transacting business with the partnership

(c ) The person suffered loss as a result of the reliance upon such false statement.

WHAT IS THE LIABILITY OF THE LIMITED PARTNER IF HE PARTICIPATES IN THE

MANAGEMENT OF THE PARTNERSHIP?

If the limited partner participates in the management of the partnership, he will

have the same liability as those of the general partners.

WHAT ARE THE RIGHTS AND POWERS OF A GENERAL PARTNER?

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

WHAT ARE THE LIMITATIONS OF A GENERAL PARTNERS POWER?

A general partner, without consent of all limited partners, cannot:

 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 judgement against partnership
4. Possess partnership property/assign rights in specific partnership property
other than for partnership purposes
5. Admit person as general partner
6. Admit person as limited partner - unless authorized in certificate
7. Continue business with partnership property on death, retirement, civil
interdiction, insanity or insolvency of gen partner unless authorized in certificate

NOTE: A limited partnership will continue even when a limited partner dies as
long as there is still one surviving limited partner in the partnership.

WHAT ARE THE RIGHTS AND POWERS OF A LIMITED PARTNER?

1. Right to have partnership books kept at principal place of business

2. Right to inspect/copy books at reasonable hour
3. Right to have on demand true and full info of all things affecting partnership
4. Right to have formal account of partnership affairs whenever circumstances
render it just and reasonable
5. Right to ask for dissolution and winding up by decree of court
6. Right to receive share of profits/other compensation by way of income
7. Right to receive return of contributions provided the partnership assets are in
excess of all its liabilities

WHAT ARE THE RIGHTS OF A PERSON WHO IS BOTH A GENERAL PARTNER AND A
LIMITED PARTNER?

1. Generally, his rights and powers are those of a general partner. Hence he is
liable with his separate property to third persons.

2. 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.

WHEN CAN A LOAN AND OTHER BUSINESS TRANSACTIONS WITH LIMITED

PARTNERSHIP BE ALLOWED AND PROHIBITED?

1. ALLOWED

a. Granting loans to partnership

b. Transacting business with partnership
 c. Receiving pro rata share of partnership assets with general creditors if he is
not also a general partner

2. PROHIBITED

a. Receiving/holding partnership property as collateral security

b. Receiving any payment, conveyance, release from liability if it will prejudice
right of 3rd persons

NOTE: A limited partner is allowed to extend credit to transact with partnerships

that he is part of. He is also entitled to partnership assets pro rata to creditors but it
cannot be used as a collateral from the partnership.

WHAT SHARE DOES THE LIMITED PARTNER IS ENTITLED TO RECEIVE?

The limited partner is entitled to share in payment by share in profits or other

compensation by way of income provided that the partnership assets are sufficient to
meet such.

NOTE: To determine the total liability, do not deduct contributed capital. Also, the
ability of the limited partner to share is based on the total liability, which must be
known.

WHAT ARE THE REQUISITES FOR THE RETURN OF CONTRIBUTION OF LIMITED

PARTNER?

1. All liabilities of partnership have been paid/if not yet paid, at least sufficient to
cover them
2. Consent of all members has been obtained
3. Certificate is cancelled/amended as to set forth withdrawal /reduction of
contribution

WHAT MAY A LIMITED PARTNER RIGHTFULLY DEMAND THE RETURN OF HIS

CONTRIBUTION?

1. During dissolution

2. Upon arrival of the date of return of his contribution

3. After he has given 6 months notice, written and there was no date of return
nor dissolution.
 NOTE: The limited partner is only entitled to the return of his contribution in
cash, except if it was agreed upon and he has the consent of all partners.

WHEN CAN A LIMITED PARTNER ASK FOR A DISSOLUTION?

1. He rightfully but unsuccessfully demanded the return

2. If he was entitled to receive his contribution and the certificate was already
amended but partnership assets are not sufficient to pay off partnership
creditors.

WHEN CAN A LIMITED PARTNER BE HELD AS A TRUSTEE?

1. When he promises specific things but does not follow through with the
promise of delivery

2. In circumstances of wrongful returns

3. In cases of money and/or property that is wrongfully conveyed

WHAT IS A SUBSTITUTED LIMITED PARTNER?

A substituted limited partner is the person admitted and has all the rights of a
limited partner who dies or who has assigned his interest.

WHEN A PERSON IS NOT QUALIFIED TO BE A SUBSTITUTED LIMITED PARTNER, HE

SHALL REMAIN AN ASSIGNEE WITH THE FOLLOWING RIGHTS AND LIMITATIONS:

1. Receive share in profits, other compensation by way of income or return of

contribution

2. Cannot demand information on partnership activities nor inspect partnership

books.

WHEN WILL THE ASSIGNEE BECOME A SUNSTITUTED LIMITED PARTNER?

1. If consent from all other partners was given.

2. If the limited partner is empowered by the certificate to constitute a

substituted limited partner, and the certificate is amended under article 1865.

WHO HAS THE PRIORITY OVER DISTRIBUTION OF ASSETS IN A LIMITED

PARTNERSHIP?
 1. Those due to creditors, including limited partners
2. Those due to limited partners in respect of their share in profits/compensation
3. Those due to limited partners of return of capital contributed
4. Those due to general partner other than capital & profits
5. Those due to general partner in respect to profits
6. Those due to general partner for return of capital contributed

WHEN SHOULD A CERTIFICATE BE CANCELLED?

1. Upon dissolution

2. When all limited partners cease to be such

WHEN SHOULD A CERTIFICATE BE AMENDED?

1. In all cases other than those that will cause the certificate to be cancelled.

AMENDMENT/CANCELLATION OF CERTIFICATE

CANCELLED:

1. Partnership is dissolved other than by reason of expiry of term

2. All limited partners cease to be such

AMENDED:

1. Change in name of partnership, amount/character of contribution of ltd. partner

2. Substitution of ltd. partner
3. Admission of additional ltd. partner
4. Admission of gen. partner
5. Death, insolvency, insanity, civil interdiction of gen. partner & business is continued
6. Change in character of business
7. False/erroneous statement in certificate
8. Change in time as stated in the certificate for dissolution of partnership/return of
contribution
9. Time is fixed for dissolution of partnership. Return of contribution if no orig. time
specified
10. Change in other statement in certificate