BUSINESS ORGANI-
ZATIONS
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PARTNERSHIP
MODES OF RETIREMENT AND REQUIREMENTS
DISSOLUTION
is the change in the relation of the partners caused by any partner ceasing to be as-
sociated in the carrying on of business as distinguished from the winding up of the busi-
ness.
WINDING UP - On the other hand, is the process of settling business affairs after disso-
lution.
PARTNERSHIP
MODES OF RETIREMENT AND REQUIREMENTS
TERMINATION
is the point where all the partnership affairs have been wound up.
Until when does a partnership exist as a body corporate?
Until termination, but only for purposes of winding up the affairs only (General Rule)
PARTNERSHIP
CAUSES OF DISSOLUTION
I. WITHOUT NEED OF COURT DECREE
a. Dissolution Effected without violation of the Partnership Agreement:
• By the termination of the definite term or particular undertaking specified in the
agreement;
• By the express will of any partner, who must act in good faith, when no definite
term or particular is specified;
PARTNERSHIP
CAUSES OF DISSOLUTION
I. WITHOUT NEED OF COURT DECREE
a. Dissolution Effected without violation of the Partnership Agreement:
• By the express will of all the partners who have not assigned their interests or
suffered them to be charged for their separate debts, either before or after the
termination of any specified term or particular undertaking;
• By the expulsion of any partner from the business bona fide in accordance with
such a power conferred by the agreement between the partners;
PARTNERSHIP
CAUSES OF DISSOLUTION
I. WITHOUT NEED OF COURT DECREE
b. Dissolution Effected in Contravention of Partnership Agreement:
• By the express will of any partner at any time
• By any event which makes it unlawful for the business of the partnership to be carried
on or for the members to carry it on in partnership.
PARTNERSHIP
CAUSES OF DISSOLUTION
I. WITHOUT NEED OF COURT DECREE
b. Dissolution Effected in Contravention of Partnership Agreement:
• Loss of the specific thing promised to be contributed provided that the Partnership is
not yet the owner of the thing at the time of loss.
• Death, Insolvency, and Civil interdiction of the any partner
(Civil interdiction is a legal restraint upon a person incapable of managing his estate, because of mental incapacity
or conviction of a crime, from signing any deed or doing any act to his own prejudice, without the consent of his cura -
tor or interdictor.)
PARTNERSHIP
CAUSES OF DISSOLUTION
II. Dissolution effected through a Court Decree whenever:
a. A partner has been declared insane in any judicial proceeding or is shown to be of
unsound mind;
b. A partner becomes in any other way incapable of performing his part of the partner-
ship contract;
c. A partner has been guilty of such conduct as tends to affect prejudicially the carrying
on of the business;
PARTNERSHIP
CAUSES OF DISSOLUTION
II. Dissolution effected through a Court Decree whenever:
d. A partner willfully or persistently commits a breach of the partnership agreement, or
otherwise so conducts himself in matters relating to the partnership business that it is not
reasonably practicable to carry on the business in partnership with him;
e. The business of the partnership can only be carried on at a loss;
f. Other circumstances rendering a dissolution equitable.
PARTNERSHIP
EFFECTS OF DISSOLUTION:
Terminates the authority of partners to contract in behalf of the partnership except:
a. For winding-up; and
b. Contracts already entered into.
PARTNERSHIP
WHEN DISSOLUTION IS CAUSED BY THE ACT, DEATH OR INSOL-
VENCY OF A PARTNER
Each partner is liable for any liability created by a partner acting for the partnership as if
the partnership had not been dissolved UNLESS:
a. The partner acting for the partnership had knowledge of the dissolution
b. The partner acting for the partnership had knowledge or notice of the death or insolv-
ency.
PARTNERSHIP
After dissolution, a partner can bind the partnership:
a. By any act appropriate for winding up partnership affairs or completing transactions
unfinished at dissolution
b. By any transaction which would bind the partnership if dissolution had not taken
place, provided the other party to the transaction had no knowledge or notice of the
dissolution of the partnership
PARTNERSHIP
The partnership is in no case bound by any act of a partner after
dissolution:
a. Where the partnership is dissolved because it is unlawful to carry on the business,
unless the act is appropriate for winding up partnership affairs; or
b. Where the partner has become insolvent; or
c. Where the partner has no authority to wind up partnership affairs
PARTNERSHIP
When dissolution is caused in contravention of the partnership
agreement the rights of the partners shall be as follows:
a. Partners who have not caused the dissolution wrongfully shall have (Innocent
Partners):
i. The right to the surplus of the partnership assets after paying all the partnership liab-
ilities
ii. The right to damages against the partner who wrongfully dissolved that partnership
iii. The right to continue the partnership if all the other partners decide to do so provided
the partnership indemnify the guilty partner of his share of the partnership assets
less damages.
PARTNERSHIP
When dissolution is caused in contravention of the partnership
agreement the rights of the partners shall be as follows:
b. Partner who caused the wrongful dissolution shall have (GUILTY PARTNER):
i. The right to the surplus of the partnership assets after paying all the partnership liabilit-
ies subject to liability for damages.
ii. If the business is continued, is entitled to indemnity from the continuing partners.
PARTNERSHIP
Rules in settling accounts between the partners after dissolution:
1. The assets of the partnership are:
a. The partnership property,
b. The contributions of the partners necessary for the payment of all the liabilities speci-
fied in No. 2.
PARTNERSHIP
Rules in settling accounts between the partners after dissolution:
2. Order of Liability:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.
PARTNERSHIP
Rules in settling accounts between the partners after dissolution:
Where a partner has become insolvent or his estate is insolvent, the claims against his
separate property shall rank in the following order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contribution.
PARTNERSHIP
Article 1840
• The Article primarily deals with the exemption from liability in cases of a dissolved
partnership, of the individual property of the deceased partner for debts contracted by
the person or partnership which continues the business using the partnership name or
the name of the deceased partner as part thereof.
• It contemplates hold-over situation preparatory to formal reorganization. (IN THE MATTER OF THE PE-
TITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "OZAETA, ROMULO, DE LEON, MABANTA & REYES." RICARDO
J. ROMULO, BENJAMIN M. DE LEON, ROMAN MABANTA, JR., JOSE MA, REYES, JESUS S. J. SAYOC, EDUARDO DE LOS ANGE-
LES, and JOSE F. BUENAVENTURA, July 30, 1979)