SALIENT POINTS FOR DISCUSSION

This module will focus on limited partnership. Particularly, it will discuss the
essential requisites of a limited partnership and its characteristics. It will
cover the rights of limited partners, as well as, the liabilities of every limited
partner. Lastly, it will differentiate a limited partnership from a general
partnership.

 What is a limited partnership?

Article 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- It is a partnership that one or more is general partner
and one or more is limited partner kase kapag walang limited partner
hindi siya limited partnership, because if walang limited partners, that is a
general partnership and take note The limited partners as such shall not
be bound by the obligations of the partnership. For short of the liability of
the limited partner, they are not liable to the creditors. In general rule
their liability is in partnership.

Characteristics of a limited partnership

1. It is formed by compliance in good faith with the statutory

requirements;
2. One or more general partners control the business and are
personally liable to creditors;
3. One or more limited partners (also called as special partner/s)
contribute to the capital and share in the profits but do not
participate in the management of the business;
4. The limited partners are not personally liable for partnership
obligations beyond their capital contributions;
5. The limited partners may ask for the return of their capital
contributions; and
6. The partnership debts are paid out of the common fund and the
separate properties of the general partners.

For example, Mina, Momo, and Sana formed a partnership. The partners
agreed that Mina and Momo are general partners and Sana is a limited
partner. Here, general partners Mina and Momo are liable up to the extent
of their separate property while limited partner Sana is liable up to the
extent of her contribution only.

Limited Liability lang si Limited partner, kung ano lang ang contribution
niya yon lang ang puwedeng habulin sakanya, not unlike kay general
partner na hanggang sa personal property niya ay pwedeng habulin
kapag hindi na masatisfy ng company assets ang kanyang obligations to
the outside creditors. Hindi puwedeng mahabol ang personal or outise
property ni Limited Partner, that is why it’s a Limited Partnership.

Since there are also certain restrictions ang general partner and an
industrial partner in engaging in a business. Kapag general partner pwede
syang magenagage sa ibang business basta not the same business,
kapag nagengage siya meron sisyang liability either yung kanyang profit
sa other venture is mapupunta sa partnership, sa industrial partner bawal
na bawal siyang magventure out, kahit other business pa sita since
service and kinocontribute niya, dapat yung devotion niya is nandon
dapat sa partnership at pwedeng magkaroon ng problema when it comes
to information, since service ang kinokontribute niya is pwedeng ma-
invade ang privacy ng operation at pwedeng dahil ganon ang mangyare
maapektuhan ang mismong business or partnership but those rules is
hindi applicable sa limited partner, no prohibition ang mag engage si
limited partner sa kahit anong business himself walang limitation since
ang tingin kase sa limited partner if sa corporation parang stockholder
lang siya contributor lang ng pera kaya yung restriction niya is up to
contribution lang, pwede siyang magengage sa kahit anong business,
pero bawal siyang magengage sa management or operations.

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Ang purpose kase po ng limited partner is they are investor or contributor
sa isang partnership is you are giving a choice to other person na ang
contribution niya lang is money or property, you are giving a choice na
mag invest lang, gusto nila ng direct not unlike kapag sa corporation
madami pang need na gawin, sige invest kalang without the hassle and
liabilities, limited partner na wala siyang gagawin sa management at hindi
siya hahabulin hanggang sa personal asset niya not unlike sa general
partner na magiging liable up to personal asset and siya pa sa
management. In giving a choice where they will just contribute money
and there will be no hassle. Meron siyang direct contribution to
partnership.

Article 1844. Two or more persons desiring to form a limited

partnership shall: (kailangang gawin)

(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;

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(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; 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.

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A limited partnership is formed if there has been substantial
compliance in good faith with the foregoing requirements.

Dapat nakalagay sa isang certificate na ganto ang gagawin.

- Limited partnership not created by mere voluntary agreement. Since
we know sa general partnership is oral lang puwede na, nagkakaroon
lang ng addidition kapag nag contribute ng property or 3,000 above
yung capital, those are just procedure and wala silang effect sa validity
ng partnership. Limited partnership, istirikto na.
- Requirements of the statues must be followed so that public notice
may be given to all who desire to know the essential features of the
partnership. Kase if you will file it in SEC informing the public this
partnership is limited partnership, bakit kailangan na mainform ang
public because it is limited partnership, that has limited partner, since
sa general partnership is pwedeng habulin hanngang personal
pproperties. Kasei tong mga limited partners is hindi pwedeng habulin
yung personal properties na hindi sila pwedeng habulin it is a
protection for the third persons. Kailangang masatisfy ang mga
requirements.
- Formed when there is substantial compliance in good faith with the
requirements set in this article. Kapag hindi sinunod, hindi mo sinunod
yung compliance then kapag wala siyang substantial in good faith
magiging general partnership lang siya. Since kapag ganyan ang
nangyare is magiging general partners na yung mga limited partners
na pwedeng habulin up to their personal assets. Kaya its very
important to follow the statutory requirements.

I. Certificate of articles of the limited partnership must state the ff:

- Name of the partnership + word “ltd”
- Character of the business = like buy and sell ba ito or what,
merchandise manufactured
- Location of principal place of business
- Name/place of residence of members
- Term for partnership is to exist
- Amount of cash/value of property contributed
- Additional contributions
- Time agreed upon to return contribution of limited partner
II. Certificate must be filed in SEC

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Essential Requisites

1. The certificate of limited partnership – it must be signed and sworn

to. It must contain all the enumerated items in the above-stated
article.
2. The certificate of limited partnership must be filed in the Office of
the Security and Exchange Commission.

Take Note: As compared to a general partnership which can be verbal,

a limited partnership must always be in writing. There is no limited
partnership in case of non-compliance with the above requirements.
However, there can be a general partnership. A partnership transacting
business with third persons is disputably presumed to be a general
partnership.

Article 1845. The contributions of a limited partner may be cash

or property, but not services.

A limited partner can only contribute money or property or both. Thus, an

industrial partner can only become a general partner.

- Pero a partner can be a limited and a general partner at the same time
but it should be stated in the certificate
- Contribution ng limited partner must be made before formation,
additional contribution is later on pa.

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 has 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

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partnership without actual knowledge that he is not a general
partner.
- Kapag may actual knowledge yung partnership creditors, you can
escape to the liability.
A limited partner violating this article 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. However, the said
limited partner will not acquire the rights of a general partner.

Following our previous example, if Sana, who is a limited partner,

represented to a third person that she is a general partner as her name
appeared in the partnership name and such third person dealt with Sana
and issued a P1,000,000 loan to the partnership. Sana, as to the third
person, will be liable as a general partner due to her representation. But
as to her partners, she remains as a limited partner. This means that, in
favor of third person creditors, her separate property can be subject of
collection.

Article 1847. If the certificate contains a false statement (article

1844), one who suffers loss by reliance on such statement may
hold liable any party to the certificate who knew the statement to
be false:
- One of the partners, yung nagsufer ng lost is relied sa false statements
he suffered the lost magigig liability ito mga may alam.

(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.

- Talks about na hindi moa lam na may false statement later on alam
muna na may false statement imbes na ayusin mo siya hinayaan mo
lang so you will be held liable

The one who suffers loss by relying on false statements in the certificate
may hold liable any party in the certificate of limited partnership that is in
bad faith.

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Liability for false statement in certificate (by the partner) – pwedemh
maging liable

1. Requisites
a. The partner 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 in cancellation or amendment he
failed to do so = yung dalawa, nung time na sinigned mo yug
certificate is alam muna or yung panagalawa is yung sinigned mo
yung certificate wala kapang alam but latern on may false
statement pero wala kang ginawa its negligence, you will be held
laible.
b. The person seeking to enforce the liability has relied upon the false
statement in transacting business with the partnership
c. The person suffered loss as a result of reliance upon such false
statement
2. Nature of Liability – merely statutory penalty, no conversion of limited
partners to general

Article 1848. A limited partner 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.

Here, the limited partner can be held liable as a general partner.

However, the limited partner does not acquire the rights of a general
partner.
- Limited partner ka, limited liability Kadin, limited din ang say mo sa
business, isa kalang investor wala kang masyadong say sa business,
pero the moment na nakielam ka sa operation ng business is magiging
liable kana as general partner kase nakielaam kana sa operation ng
business. Limited partner kalang pero nakielam ka sa operation, dahil
doon pwede kanang habulin nung mga third persons.

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.

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Additional limited partners may be admitted to the partnership by
amending the certificate of partnership signed and sworn to by the
original and new partners.
- Kase pwede since sa 1844, pwedeng magadmit ng limited partners
kung stated sa certificate, hindi sya masyadong istrikto, since limited
partners is like and investor.

Article 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:
- Basically ang general partner is kahit general partnership or limited
partnership same lang yung power, liabilities and restrictions niya.
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 7 things.

(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.

As a rule, just like the general partners in a general partnership, the

general partners in a limited partnership can do only acts of

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administration. The enumeration above pertains to acts of ownership.
Thus, the general partners must secure the written consent or ratification
of all the limited partners.
- Rights, power, and liabilities of the general partners.
1. Rights of control/unlimited personal liability – as if general partner
siya sa isang general partnership.
2. Acts of administration/acts of strict dominion – general partner as a
rule may bind the partnership by any act of administration,
maraming pwedeng gawin ang mga general partner, general
partner merong mga strict. Meron silang rights to restrictions
however acts of dominion, kailangan ng consent ng lahat ng
partners including the limited partner.

E – delectus personae, the right to choose who you want to be associated

with.
Tals about the rights, powe and liabilities, kailangan na ng consent or
opinion sa acts.

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;

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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.

Rights of a limited partner

1. 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;
2. 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;
3. The right to have dissolution and winding up by decree of court;
4. The right to have a share of the profits or other compensation by
way of income; and
5. The right to receive a return of his contribution if the partnership
assets are in excess of the partnership liabilities.

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.

A contributor who erroneously believes that he has become a limited

partner is not liable as general partner provided that:

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 1. On ascertaining the mistake, he promptly renounces his interest in
the profits of the business, or other compensation by way of
income; and
2. He does not take part in the control of the business.

- Magulo talaga siya, maraming coma, ito ang mga instances, partners
naguusap usap at gumawa ng partnership, at nalaman niyo is hindi pla
limited partnership ang nagawa niyo rather ang nagawa nyo is general
partnership, thinking na partner ka nagging general partner kappa,
Nagkaroon ng pagkakamali sa formation, akala mo limited partner kay
un pala nagging general partner ka because of the defect of the
formation. Kapag consider kana as general partner ka liable kana up to
personal asset.
- Sttaus of partner where there is failure to create limited partnership-
with that this article provides a modification of liability(diba
assumption is kapag failed to create a limited partnership, general
partnership ang trato. So yung suppose na limited partner is
considered as general partners na may rights and obligations. Hindi na
limited ang liability niya but take note pwedeng maayos.

Renounce- is binenta niya yung ownership niya sa ibang partners.

Inosente ka dapat para hindi ka maging liable, kapag nangyari yon is
renounce.
If may defect lang, at dapat inosente ka.

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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.

General-Limited Partner – a person may be a general partner and a

limited partner at the same time in the same partnership provided that
this fact is stated in the certificate of limited partnership. His rights are
those of a general partner. His liability to partnership creditors is a
general partner (meaning his liability is up to the extent of his separate
property) but his liability to the other partners is that of a limited partner.

Rights and power – General partner

Laibility – Limited 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:

- A limited partner is considered as investor and can loan money from

the partnership and can transact with the partnership, dapat isa siya.
Dapat isa siyang limited partner in receiving an account hindi siya
pwedeng limited and general partner at the same time. Pag limited
lang is pwede siya or my right siya to receive an account resulting
claims against the partnership with general creditors, a pro rata shares
kase kung titignan this loaning money it is an act of third person when
you loan money to the partnership or where you transact with the
partnership kaya sabi is with general creditors with pro rata.

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(1) Receive or hold as collateral security any 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.

Allowable business transactions of a limited partner with the partnership

(pure limited partner lang)

1. To lend money to the partnership; (this is not act of ownership but

acts of needs of outside, merong preferencesal rights.)
2. To transact business with the partnership; and
3. To receive on account of resulting claims against the partnership,
with general creditors, a pro rate share in the assets.

Prohibited business transactions of a limited partner with the partnership

(presumption it has been made defraud to the partnership or para lokohin
ang partnership)

1. Receive or hold as collateral security partnership property;

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 claiming as general or limited partners. – you are
disregarding the preferential of the third persons.

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

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 be stated in the certificate, and in the absence of such a
statement all the limited partners shall stand upon equal footing.

Preference is given to some limited partners over other limited partners

as to:

1. Return of their 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.

- Basically talks about the right of the limited partner in regards to their
shares or contributions or compensation.
- Before mareceive ng mga limited partners ang kanilang shares sa
compensation dapat yung partnership assets is enough para macover
yung liabilities- it must not prejudiced of the right of the third persons.
preesidual lang ang matatanggap ng mga partners. Kailangan
masatisfy muna ang liabilities ng partnership, tapos yung excess is
pwede ng mabigay ang shares nila.

Compensation of limited partner by way of income

1. Excess of partnership assets over partnership liabilities (third party
creditors have priority over the limited partner rights)
2. Preferential rights of partnership creditors

The requirement here is that partnership assets are in excess of all the
liabilities of the partnership to third persons after payment of the profits
or compensation by way of income of a limited partner.

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Article 1857. A limited partner shall not receive from a general
partner or out of partnership property any part of his
contributions until:

(1) 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;

(2) The consent of all members is had, unless the return of the
contribution may be rightfully demanded under the provisions of
the second paragraph; and

(3) The certificate is cancelled or so amended as to set forth the

withdrawal or reduction.

Subject to the provisions of the first paragraph, a limited partner

may rightfully demand the return of his contribution:

(1) On the dissolution of a partnership; or

(2) When the date specified in the certificate for its return has
arrived, or

(3) After he has 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.

In the absence of any statement in the certificate to the contrary

or the consent of all members, a limited partner, irrespective of
the nature of his contribution, has only the right to demand and
receive cash in return for his contribution.

A limited partner may have the partnership dissolved and its

affairs wound up when:

(1) He rightfully but unsuccessfully demands the return of his

contribution, or

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(2) The other liabilities of the partnership have not been paid, or
the partnership property is insufficient for their payment as
required by the first paragraph, No. 1, and the limited partner
would otherwise be entitled to the return of his contribution.

Requisites for the return of contribution of a limited partner

1. All liabilities of the partnership, except to general partners and

limited partners on account of their contributions, have been paid or
there remains property of the partnership sufficient to pay them. –
Dapat mabayad muna lahat ng liabilities ng partnership, or may
enough assets para macover yung mga liabilities. Dapat enough
yung partnership assets dapat sobra or may excess na babayaran
sa third persons.
2. The consent of all members is had, unless the return of the
contribution may be rightfully demanded; and – kapag nadissolve or
stipulated sa fixed term ay rightfully demanded.
3. The certificate is cancelled or so amended as to set forth the
withdrawal or reduction of the contribution. – Limited partner can
rightfully demand merong amended sa certificate nila informing the
limited partner, can rightfully receive his contribution.

When can the contributions of a limited partner be returned? – matter of

rights 1 and 3 of paragraph 1.

1. On the dissolution of the partnership;

2. When the date specified in the certificate for its return has arrived;
and
3. 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.

A limited partner, irrespective of the nature of his contribution, has only

the right to demand and receive cash in return for his contribution. The
exceptions are:
(cash lang dapat, kahit na property ang binigay niya or yung mga non-
cash assets. Since ginagamit yon sa business, they can only demand cash
in general rules)

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 1. Where there is stipulation to the contrary in the certificate of limited
partnership; or
2. Where all the partners consent to the return of his contribution
other than in the form of cash.

A limited partner may have the partnership dissolved if its affairs wound
up when he rightfully but unsuccessfully demands the return of his
contribution or 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.

Article 1858. A limited partner is liable to the partnership:

(1) For the difference between his contribution as actually made

and that stated in the certificate as having been made, and

(2) 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.

A limited partner holds as trustee for the partnership:

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(1) Specific property stated in the certificate as contributed by
him, but which was not contributed or which has been wrongfully
returned, and

(2) Money or other property wrongfully paid or conveyed to him

on account of his contribution.

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 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.

Liability of a limited partner for unpaid contribution

1. For the difference between his contribution as actually made and

that stated in the certificate as having been made; and
2. 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. (this are the additional contributions)- The future the
obligation of the partner to the partnership

Liability of a limited partner as trustee to the partnership (trustee-

pinagkatiwala)

1. Specific property stated in the certificate as contributed by him, but

which was not contributed or which was wrongfully returned, and
2. Money or other property wrongfully paid or conveyed to him on
account of his contribution. (solution indebiti yung unlawful yung
ano, so you need to ibalik.

Requisites so that liabilities of a limited partner may be waived

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 1. With the consent of all the other partners; and
2. The waiver or compromise shall not affect the right of the
partnership creditors who extended credit or whose claim arose
after the filing and before a cancellation or amendment of the
certificate.

Take Note: 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 claim arose before such return. However, the liability of
that limited partners is up the extent of his contribution.

Article 1859. A limited partner's interest is assignable. (talks

about two people, the assignee of limited partner and the
substitute of limited partner)

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.

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 of his contribution,
to which his assignor would otherwise be entitled.
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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.

An assignee becomes a substituted limited partner when the

certificate is appropriately amended in accordance with article
1865.

The substituted limited partner has all the rights and powers, and
is subject to all the restrictions and liabilities of his assignor,
except 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 the partnership under
articles 1847 and 1858.

Rights of an assignee of a limited partner

1. An assignee is only entitled to receive the share of the profits or

other compensation by way of income, or the return of his
contribution, to which his assignor would otherwise be entitled; and

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 2. An assignee acquired all the rights of the limited partner only when
he becomes a substituted limited partner.

Substituted limited partner – is a person entitled to all the rights of a

limited partner who has died or has assigned his interest in a partnership.

Requisites for an assignee to become a substituted limited partner

1. All the partners must consent or if the limited partner-assignor,

being empowered in the certificate, gives the assignee the right;
2. The certificate of limited partnership must be amended; and
3. The certificate of limited partnership must be registered with the
SEC.

Rights and liabilities of substituted limited partner

1. The substituted limited partner has all the rights and powers and is
subject to all the restrictions and liabilities of his assignor;
2. 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 claim
arose before substitution.

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Assignee- pwedeng maging substituted limited partner
Substituted limited partner – assign or empowered
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:
civil interdiction- basically means civil death, merong civil rights na
nawala sayo parental rights, despose your property.
The business will continue if the partners will continue it.
(1) Under a right so to do stated in the certificate, or
(kapag nasa certificate nila sa stipulation nila yung mga yan is continue
ang business or by the consent of the members)
(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 setting his estate, and such power as the deceased
had to constitute his assignee a substituted limited partner.
Estate- juridical personality by left of the dead persons and manage by his
will or by the law, upon the death of the persons lahat ng assets and
liabilities yung juridical persons.
The estate of a deceased limited partner shall be liable for all his
liabilities as a limited partner.

The executor or administrator of the deceased limited partner shall have

all the rights of a limited partner for the purpose of settling his estate, and

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such power as the deceased had to constitute his assignee a substituted
limited partner.

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.

Nothing in this Chapter shall be held to deprive a limited partner

of his statutory exemption.

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 require.

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This pertains to the personal creditors, but the personal creditor kay
limited partner, pwedeng habulin ni personal creditor of limited partner
yung interest sa partnership, for the unsatisfied payment. But there are
preferential rights.

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 of 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 claims.

This article refers to the order of payment in case of liquidation of a

limited partnership.

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:

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(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;

(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 a 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.

Cancellation of the certificate of limited partnership

1. When the partnership is dissolved; and

2. When all the limited partners cease to be limited partners.

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Take note: In all other cases, only amendment of the certificate of limited
partnership is required.

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.

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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

(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.

Requirements for amendment

1. It must be in writing as far as necessary to set forth clearly the

change in the certificate which it is desired to make;
2. 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 the substituted or added, and
when a limited partner is substituted, the amendment shall also be
signed by the assigning limited partner;
3. The certificate of limited partnership, as amended, must be filed for
record in the SEC.

Requirements for cancellation

1. It must be in writing;
2. It must be signed and sworn to by all members; and
3. It must be filed for record in the SEC.

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.

General Rule: 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.

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Exception: Where the object is to enforce a limited partner’s right against
or liability to the partnership.

Nadididsmissed siya kung hindi ka proper party. Kapag proper party na

siya pwede na siyang magenforce.

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

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 (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 article is a transitional provision on limited partnership.

LEARNING ACTIVITIES
To summarize, the table below shows the distinction between a general and
limited partnership.
General Partnership Limited Partnership
Creation As a rule, it may be constituted in Created by the partners
any form. after compliance with
requisites.
Contribution The general partners contribute The limited partners
money, property, or industry. contribute money,
property or both but not
industry.
Membership All are general partners. At least 1 general and 1
limited partner.
Extent of The partners are liable for The limited partners are
liability partnership obligations. liable only to the extent
of their capital
contribution.
Managemen All are managers unless there is The limited partner
t right stipulation to the contrary. does not participate in

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 the management.
Prohibition The capitalist partner cannot No prohibition against
to engage in any operation which of engaging in business.
engage in the kind of business in which the
other partnership is engaged, unless
business there is a stipulation to the
contrary. The industrial partner is
absolutely prohibited to engage
other business.
Assignment Interest is not assignable unless Interest is assignable.
of consented by all of the other
interest members.
Effect of It dissolves the partnership. As a rule, it will not
death, dissolve the
insolvency, partnership.
retirement,
and insanity
of partner
Firm Name It may or may not include the The firm name must be
name of one or more of the followed by the word
partners. “Limited.” The surname
of a limited partner
shall not appear in the
partnership name.

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