CHAPTER 4 Limited Partnership (n)  Saan located ang main office or main

business address.
Article 1843
(d) Names and residences of each member
Limited partnership is a type of partnership na
binubuo ng at least two persons. Pero ang unique  Full name at address ng lahat ng partners.
dito:  Dapat malinaw kung sino ang general
may dalawang klase ng partners: partners at sino ang limited partners.

1. General partner/s – sila ang nagma- (e) Term of existence

manage ng business at personally liable sa
debts and obligations of the partnership.  Gaano katagal tatakbo ang partnership (e.g.,
2. Limited partner/s – investors only, hindi 10 years).
nagma-manage, at liable lang up to the
amount of their contribution. Hindi sila (f) Contributions of limited partners
personally responsible for partnership
obligations.  Magkano ang cash na in-invest ng bawat
limited partner.
In short, a limited partnership has both general and  Kung property ang contribution, dapat may
limited partners, and limited partners are protected description at agreed value.
from personal liability beyond what they invested.
(g) Additional contributions
Article 1844
 Kung may future contributions pa, kailan at
Para makabuo ng limited partnership, may anong circumstances sila dapat ibigay.
dalawang main requirements:
(h) Return of contributions
1. Gumawa ng certificate (signed and sworn).
2. I-file ito sa SEC (Securities and Exchange  If meron silang napag-usapan, kailan
Commission). ibabalik ang contribution ng limited partner.

Kapag substantially compliant in good faith, (i) Share of profits or compensation

considered formed na ang limited partnership.
 Gaano kalaki ang profit share ng bawat
1. Certificate Requirements limited partner or income due to their
contribution.
Dapat ilagay nila sa certificate ang lahat ng info na
’to: (j) Right to substitute an assignee

(a) Name of the partnership  Kung allowed ba na magpalit sila ng ibang

contributor in their place, at ano ang terms.
 Dapat may word na “Limited” sa pangalan.
Para alam agad na may limited partners. (k) Right to admit additional limited partners

(b) Character of the business  Kung pwede pa bang magdagdag ng new

limited partners.
 Ano bang klase ng negosyo ang papasukin
nila. (l) Priority rights

(c) Principal place of business  Kung may limited partner na may priority
over others—either sa:
o return of contributions, or
 o share in profits/compensation. If the limited partner’s surname appears in the
 Dapat malinaw ang nature ng priority. partnership name without meeting these exceptions,
he becomes liable as a general partner to creditors
(m) Continuation of business who gave credit without knowing that he was only a
limited partner.
 Kung may right ang remaining general
partners to continue the business kung may Article 1847
mamatay, mag-retire, ma-declare insane,
ma-civilly interdicted, or ma-insolvent ang If a certificate of limited partnership contains a
isang general partner. false statement, anyone who suffers loss by relying
on it may hold liable any person who signed the
(n) Return of contribution in property certificate and knew the statement was false:

 Kung may right ang limited partner na 1. Either at the time he signed, or
humingi ng property (hindi cash) bilang 2. He learned it later, but still had enough
balik sa kanyang contribution. time to cancel or amend the certificate (or
file for its cancellation/amendment under
Article 1865) and failed to do so.
2. Filing with the SEC
In short, any party who knew about the false
Pagkatapos gawin at permahan ang certificate,
statement and didn’t correct it can be held
kailangan itong i-file sa SEC.
responsible for resulting losses.
Hindi considered “formed” ang limited partnership
kung hindi ito naka-file.
Article 1848
Final Note
A limited partner is not liable as a general partner
as long as he only exercises his rights and powers
A limited partnership exists kung may substantial
as a limited partner.
compliance in good faith sa lahat ng requirements
na ’to.
Ibig sabihin, kahit may minor errors, basta sincere at He becomes liable like a general partner only if he
halos kumpleto, valid na. takes part in controlling or managing the
business.
Article 1845
Key point: Participation in management = loss of
limited liability; mere exercise of limited partner
A limited partner can contribute only cash or
rights = still protected.
property to the limited partnership.
They cannot contribute services, because services
imply participation in management, which is not Article 1849
allowed for limited partners and could affect their
liability. After a limited partnership is formed, additional
limited partners may be admitted.
Article 1846
 To do this, an amendment to the original
A limited partner’s surname cannot appear in the certificate must be filed.
partnership name unless:  The amendment must follow the
requirements of Article 1865.
 Only after proper filing do new limited
1. It is also the surname of a general
partners gain limited liability protection.
partner, or
2. The business was already using that
surname in its name before he became a Article 1850
limited partner.
A general partner in a limited partnership has all A person who contributes to a business thinking he
the rights, powers, and liabilities of a partner in an is a limited partner:
ordinary partnership.
 Is not automatically a general partner.
However, without written consent or ratification  Is not liable for the obligations of the
from all limited partners, a general partner business or partnership.
cannot:  Condition: Upon discovering the mistake,
he must promptly renounce any interest in
1. Act against the partnership certificate. profits or other income from the business.
2. Do anything that makes ordinary business
impossible. Key point: Honest mistake about being a limited
3. Confess a judgment against the partnership. partner does not create liability, as long as the
4. Use or assign partnership property for non- person acts quickly to give up his rights.
partnership purposes.
5. Admit a new general partner. Article 1853
6. Admit a new limited partner (unless allowed
in the certificate). A person can be both a general and a limited
7. Continue the business after a general partner in the same partnership, only if this is stated
partner’s death, retirement, insanity, civil in the certificate (Article 1844).
interdiction, or insolvency (unless allowed
in the certificate).
 As a general partner, he has full
management powers and is liable for
Key point: General partners can manage the partnership obligations.
business, but major acts affecting the partnership  For the portion of his contribution
or limited partners’ rights require written consent designated as a limited partner, he retains
or explicit authorization in the certificate. the rights and protections of a limited
partner against other members.
Article 1851
Key point: Dual role is allowed, but must be
A limited partner has rights similar to a general transparent in the certificate, combining full
partner in the following ways: general partner powers with limited-partner
protections for his contribution.
1. Inspect and copy partnership books at the
principal place of business during Article 1854
reasonable hours.
2. Receive full information and formal A limited partner may loan money or transact
accounts of partnership affairs when other business with the partnership.
reasonable.
3. Request dissolution and winding up of the
partnership by court decree. Rules for claims:

Economic Rights: 1. Claims are shared pro rata with general

creditors (unless the partner is also a general
partner).
 Share of profits or other income from the 2. Cannot receive or hold partnership
partnership. property as collateral for the claim.
 Return of contribution as provided in 3. Cannot get payment, conveyance, or
Articles 1856 and 1857. release if partnership assets are insufficient
to pay non-partner creditors.
Key point: Limited partners are protected,
informed, and financially secured, even without Violation of these rules (taking collateral or early
participating in management. payment) is considered fraud on the creditors.

Article 1852
Key point: Limited partners can transact with the 2. All members consent, unless the certificate
partnership but must not get preferential treatment or law allows the return.
over other creditors, ensuring fairness and legal 3. The certificate is amended or cancelled to
compliance. reflect the withdrawal or reduction.

Article 1855 When the limited partner can demand return:

When there are multiple limited partners, they may  On dissolution of the partnership
agree that one or more has priority over others  On the date specified in the certificate
regarding:  If no date, after 6 months’ written notice to
all members
1. Return of contributions
2. Compensation or income Form of return:
3. Other matters
 Cash only, unless the certificate says
 Such priority must be stated in the otherwise or all members agree.
certificate.
 If no priority is stated, all limited partners Right to dissolve the partnership:
are on equal footing.
 If he rightfully demands his contribution
Key point: Priority among limited partners is but is refused, or
allowed, but must be clearly declared in the  If other liabilities aren’t paid or
certificate to be valid. partnership property is insufficient, he
may seek court dissolution and winding
Article 1856 up.

A limited partner may receive profits or income as Key point: Returns are conditional on settling
stipulated in the certificate, provided that: debts, consent, and certificate amendment, with
cash as the default form, and legal recourse exists if
 After the payment, partnership assets the partner cannot recover his contribution.
exceed all liabilities, except:
1. Liabilities to limited partners for Article 1858
their contributions
2. Liabilities to general partners A limited partner is liable to the partnership for:
 Payment can come from partnership
property or from the property of a general 1. Any difference between the contribution
partner, as long as the condition above is actually made and the amount stated in the
met. certificate.
2. Any unpaid future contribution agreed in
Key point: Limited partners can get their profit share the certificate.
only if it doesn’t jeopardize the partnership’s
ability to pay other obligations. Trustee duties:

Article 1857  Holds as trustee for the partnership:

1. Specific property stated in the
A limited partner may receive the return of his certificate but not contributed or
contribution only if: wrongfully returned.
2. Money or property wrongfully
1. All other liabilities of the partnership paid or conveyed to him on
(except to general partners and limited account of his contribution.
partners for contributions) are paid or there
is sufficient property to pay them. Waiver or compromise of liabilities:
  Can only be done with consent of all Rights and liabilities:
members.
 Creditors’ rights are protected: liability  A substituted limited partner gets all rights,
can still be enforced by creditors whose powers, restrictions, and liabilities ng
claims arose after filing but before original partner.
cancellation or amendment of the  Except those liabilities na hindi niya alam
certificate. at hindi makita sa certificate.

Liability after return of contribution: Important:

 Even after receiving full or partial return,  Kahit may bagong substituted limited
the limited partner is liable for amount partner, hindi nawawala ang liability ng
needed to pay creditors whose claims original limited partner under Articles 1847
arose before the return, with interest, but and 1858.
not exceeding the returned amount.
Article 1860
Key point: Limited partners are responsible for
shortfalls, unpaid contributions, misused Kapag ang general partner ay nag-retire, namatay
funds/property, and residual obligations to (death), naging insolvent (hindi na makabayad ng
creditors, with waivers needing all members’ debts), nabuang/insane, o na-civil interdiction (na-
consent but creditors remain protected. limit ang civil rights niya by court), automatic na
nade-dissolve ang partnership.
Article 1859 Summary (Engalog, Complete but
Simple) BUT hindi ito madedissolve kung magtutuloy ang
business under any of these conditions:
A limited partner can assign or transfer their interest
to another person. 1. May nakasulat na right sa certificate
Pero kapag may assignee, hindi automatic na
partner siya.
Kung nakalagay sa partnership certificate na
puwedeng ituloy ng remaining general partners
Assignee (ordinary recipient): ang business, even if may mamatay or mawala, then
hindi madedissolve.
 Hindi siya considered a partner.
 Wala siyang right to ask for information, 2. Lahat ng members pumayag
magpa-audit, or mag-check ng books.
 Ang makukuha niya lang ay profits,
income, or return of contribution na dapat Kung lahat ng partners (general and limited) ay
makuha ng original limited partner. nag-consent na ipagpatuloy ang negosyo, then the
partnership continues.
Substituted Limited Partner (official
replacement): Quick Engalog Version

 Siya yung assignee na ina-allow maging  Normally, dissolved ang partnership pag
kapalit ng original limited partner. nawala ang general partner (retirement,
 Puwede lang maging substituted limited death, insolvency, insanity, civil
partner kung: interdiction).
1. Pumayag lahat ng partners, OR  Exception:
2. May authority sa certificate ang 1. Kung nakalagay sa certificate na
assignor to give that right, at puwedeng ituloy ng remaining
ibinigay niya ito. general partners.
 Nagiging official lang siya kapag na-amend 2. Kung lahat ng members consent
ang partnership certificate ayon sa Article to continue the business.
1865.
Article 1861
Kapag namatay ang isang limited partner, yung The court may also:
executor or administrator ng estate niya (yung
taong nag-aasikaso ng kanyang ari-arian after death)  Appoint a receiver (tagapamahala) para
will: hawakan o i-manage yung interest;
 Make orders/directions/inquiries
1. Have the rights of the limited partner — pero depending on what the situation needs.
for settling the estate. So the court can take steps para masigurong
mababayaran ang creditor.
Ibig sabihin,
Redemption of the Interest
 puwede niyang gawin lahat ng rights na
puwede gawin ng limited partner,  Yung interest na naka-charge puwedeng
 pero only para maayos at ma-settle ang tubusin (redeem) gamit ang separate
estate ng namatay. property ng ANY general partner.
Hindi siya nagiging “partner” in the normal  Pero hindi puwedeng tubusin gamit ang
sense—temporary lang for estate matters. partnership property.
Partnership assets cannot be used to solve a
2. May kapangyarihan siyang ibigay ang rights na personal debt ng limited partner.
puwede ibigay ng deceased limited partner.
Not the Only Remedy
Kasama dito:
 Yung remedy na binanggit (charging order)
 the deceased partner’s power to make an is not exclusive —
assignee a substituted limited partner. meaning, may iba pang legal remedies
Kung may power dati yung namatay to available to the creditor.
appoint an assignee as substituted limited
partner, Statutory Exemption Still Applies
puwedeng gawin rin ito ng
executor/administrator.  Ang limited partner hindi nawawalan ng
protections under the law.
3. The estate of the deceased limited partner  “Statutory exemption” means may mga
remains liable. assets or rights pa rin siyang hindi
puwedeng basta kunin kahit may utang
Kahit patay na yung partner, siya.

 lahat ng liabilities niya as a limited Article 1863 — Summary (Engalog Version)

partner
 dadalhin ng estate niya (meaning, assets na Topic: Order of Payment When a Limited
iniwan niya can be used to pay these Partnership Is Dissolved
obligations).
Kapag dissolved na ang partnership, kailangan i-
So the partnership can still claim from the estate for settle ang accounts — meaning bayaran lahat ng
obligations the partner had before he died. kailangang bayaran.
May specific na order kung sino ang mauuna, at
Article 1862 – Summary (Engalog, All Important sino ang susunod.
Details)
Order of Payment (Pinaka-importante)
Kapag may utang ang isang limited partner,
puwedeng mag-file ang creditor sa court para i- 1. Creditors (una lagi)
charge (i-attach) ang interest ng limited partner sa
partnership.  Lahat ng outside creditors muna, ayon sa
Meaning, yung share niya sa partnership priority ng law.
puwedeng gamitin pambayad sa utang niya.
  EXCEPT: Hindi kasama dito yung dapat sa 1. Change in the name of the
limited partners (capital) o para sa general partnership or in the
partners. amount/character of contribution
of a limited partner.
2. Limited partners — share of profits / income 2. Substitution of a limited partner.
3. Admission of an additional
 Sunod, babayaran ang limited partners ng limited partner.
profits o income na dapat sa kanila. 4. Admission of a general partner.
5. A general partner retires, dies,
becomes insolvent or insane, or is
3. Limited partners — return of capital civilly interdicted, while the
business continues.
 After income, bibigyan sila ng capital 6. Change in the nature or character
contributions nila. of the business.
7. Correction of any false or
4. General partners — claims other than capital erroneous statement in the
and profits certificate.
8. Change in the time for dissolution
 Ito yung mga reimbursements or special or return of contribution.
claims aside from capital/profit. 9. Fixing a time for dissolution or
return of contribution when none
was previously specified.
5. General partners — share of profits
10. Any other changes necessary to
accurately reflect the agreement
6. General partners — return of capital among the members.

Bottom line: Limited partners are paid before Key Point:

general partners, both in income and capital.
 Cancellation = partnership ends or no
Proportion of Sharing limited partners remain.
 Amendment = updates needed to reflect
Kung ilang percent ang claim ng bawat limited changes in partners, contributions,
partner: business, or agreements.

 They get their share proportionally (hati Article 1865 Summary

ayon sa amount ng claim nila).
 Applies to both capital and profit/income 1. Amending a Certificate
claims.
 Unless may ibang agreement sa certificate.
 The amendment must:
1. Conform to Article 1844 to
Article 1864 Summary clearly state the intended change.
2. Be signed and sworn to by all
1. Cancellation of Certificate members.
 If substituting a limited
 The certificate must be cancelled when: partner: also signed by
o The partnership is dissolved, or the assigning limited
o All limited partners cease to be partner and the
part of the partnership. substituted limited
partner.
 If adding a new limited
2. Amendment of Certificate
or general partner: also
signed by the new
 The certificate must be amended whenever partner.
there is any significant change in the
partnership, including:
2. Cancelling a Certificate  A limited partner (contributor) can be a
party only if the legal case is:
 Cancellation must be signed by all 1. To enforce a limited partner’s
members. rights against the partnership, or
2. To hold a limited partner liable to
3. Court Intervention the partnership.

 If any required person refuses to sign, a Key Points:

member may petition the court to order the
cancellation or amendment.  Limited partners are generally passive in
 If the court finds the petitioner’s request partnership legal matters.
valid, it will order the SEC to record:  They only get involved if the case directly
o The cancellation or amendment, affects their rights or liabilities.
and  This protects limited partners from being
o If amended, a certified copy of the dragged into unrelated legal issues of the
court decree. partnership.

4. When a Certificate is Officially Amended or Article 1867 Summary

Cancelled
1. Transition of Old Limited Partnerships
 A certificate is considered amended or
cancelled when filed for record at the  A limited partnership formed before the
SEC: new Code can become a limited
1. Through a properly executed partnership under this Chapter.
writing, or  To do so, it must comply with Article 1844
2. Through a certified copy of the and update its certificate.
court order.
 Once amended, the amended certificate 2. Requirements for the Certificate
becomes the official certificate for all legal The certificate must show:
purposes under this chapter.
1. Original contributions of each limited
Key Points: partner and the date they were made.
2. That the partnership’s property exceeds
 Amendment requires signatures of all liabilities to non-partners by an amount
affected parties, depending on the change. greater than the total contributions of
 Cancellation requires signatures of all limited partners.
members. o This ensures the partnership can
 Court can enforce amendment or pay creditors and still protect
cancellation if someone refuses. limited partners’ contributions.
 Filing with SEC makes it official.
3. Effect Before Compliance
Article 1866 Summary
 Until the partnership updates its certificate
1. Contributors vs. General Partners and complies with the new Chapter, it
remains governed by the old law.
 A contributor (usually a limited partner) is
not a proper party in legal proceedings by Key Points:
or against the partnership.
 General partners are exceptions—they can  Old partnerships can transition to the new
participate in legal proceedings because they law if they update their certificate properly.
actively manage the partnership.  The certificate must clearly reflect
contributions and financial sufficiency.
2. Exception for Limited Partners
 Until compliance, the old law continues to
apply.