Limited partnership

Question 1

What is limited partnership?

Answer 1

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.

Question 2

Characteristics of Limited partnership

Answer 2

1. statutory reqs/ formal reqs
2. GP personally liable
3. LP - no acts of administration
4. LP - can ask for return of contribution [3 conditions]
5. Partnership debts paid out of partnership props + sep props of GPs
6. no prohibition to engage in business
7. contribution
8. party to a suit - LP cannot file?
9. assignability of interest - substituted limited partner
10. name in firm name - not included ang LP, otherwise may liability as GP
11. Effect of DRICI - death retirement insolvency (judicial sya sa LP) civil interdiction insanity
    - GP - dissolved
    - LP - not dissolved because of substituted LP

Question 3

1844

Answer 3

Formal requirements
1. PI / Cert must be signed/sworn to
2. Registered in SEC

If not complied - GP

Mandatory:

• “Limited”
• contribution
• additional contribution
• substituteed LP

Substantial compliance only

Question 4

Limited partners’ contribution

Answer 4

1845.

Only money and property, no services

Question 5

Firm name

Answer 5

GR: not allowed, otherwise ma liable as GP
XPN:

• same surname of a GP
• prior to his entry, existing na ang partner na ka -name

Question 6

Liability for false statement

Answer 6

1847.

Remedy
- cancel OR amend LP
- 1852 promptly renounce his interest

Question 7

Liability for participating in mgt

Answer 7

1848

• acts of administration - X
• acts of ownership - LP can participate

Question 8

Admission of addtl LP

Answer 8

1849

Requirements

• amendment in writing
• certificate must be signed / sworn to
• certificate must be filed in SEC

Question 9

Acts of administration
and acts of alteration

Answer 9

Acts of administration - NO
acts of alteration - YES

1850 INSTANCES (no authorit if no written consent)
(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; cd i
(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.

LPs written consent is required

Question 10

Rights of Limited partner

Answer 10

1851

Unique to LP- last par
6. receive share in profits or other compensation by way of income
7. receive return of contribution

Question 11

1852

Answer 11

Specific, compared to 1847 na broad (false statement)

Remedy: Renounce

Limited partner “erroneously believing promptly renounces his interest”

Question 12

1853 A person may be a general partner and a limited partner in the same partnership at
the same time,

Answer 12

Disadvantages

• liable separate prop

Advantages
1. return of contribution
2. liable to pay partnership creditor out of separate prop, BUT CAN DEMAND REIMBURSEMENT

Question 13

Allowable transactions of LP

Answer 13

1854
1. Granting loans to partnership
2. transacting business with partnership
3. receive pro-rata share
4. partnership assets w creditors

Question 14

Prohibited transactions

Answer 14

1854
1. receiving or holding collateral security w any partnership prop
2. receiving payment or release from liability if it will prejudice the rights of TPs

Question 15

Preferred limited partners

Answer 15

1855
GR: Equal footing ang LPs
XPn: stipulation

preference – return of contribution, income

Question 16

Compensation of LPs

Answer 16

1856

requirement:
in excess of all liabilities of partnership

note

• liabilities owed to GPs are not considered as part of partnership total liabilities

Question 17

Effect of DRICI

Answer 17

1860

• GP dissolved
• LP not dissolved

Question 18

Right of executor on death of LP

Answer 18

1861

Executor = Substituted LP

Question 19

Rights of creditors of LP v 1814 v 1811

Answer 19

1862 - interest of LP ang chinarge, because of its limited liability
- only separate property

Question 20

Requisite for return of contribution without dissolving partnership

Answer 20

1857

1. ALL liabilities are paid
2. Consent of all partners
3. Cer is cancelled or amended

Question 21

Instance for return of contribution

Answer 21

1. dissolution of partnership
2. date specified
3. no date specified, but after 6 months notice in writing

Question 22

If LP contributed a property, what will be returned?

Answer 22

GR: Cash
XPN: actual contributed
1. stipulation
2. no stipulation, but with consent of all

Question 23

Instances of right to demand dissolution

Answer 23

1. rightfully but unsuccessfully demands the return of contribution
2. other liabilities of partnership is NOT YET PAID

Question 24

Liability of LP

Answer 24

1858

if kulang
– liable sa kulang
– unpaid contribution liable

Question 25

Liability as trustee

Answer 25

1858 1. wrongfully returned 2. wrongfully paid

Question 26

Waiver or compromise of liabilities

Answer 26

1. consent of all 2. does not prejudice creditors

Question 27

liability for return of contribution lawfully received

Answer 27

STILL LIABLE, kay naa pay wala nabayaran ang tanan liabilities?

Question 28

Assignee v SLP

Answer 28

- only SLP is a partner *how is SLP a partner?* - all members' consent - empowered by certificate of LP *assignee becomes substituted LP* - after amendment of cert + SEC registration *liability of assignee and SLP* - still liable

Question 29

Right of executor

Answer 29

in case of death 1861

Question 30

Priority of distribution of assets

Answer 30

Art. 1863. In setting accounts after dissolution the liabilities of the partnership shall be entitled to payment in the following order: aisa dc (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.

Question 31

Instances of cancellation and amendment

Answer 31

1864 **1. dissolution 2. all LPs ceased to be as such** *Amendment of cert* (1) There is a charge 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; cdasia (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.

Question 32

Requirements for amendment and cancellation

Answer 32

1865 1. writing 2. signed and sworn to 3. filed in SEC

Question 33

Can a LP sue?

Answer 33

1866 _GR_: NO, cannot sue and be sued _XPN_: if LP enforces his rights against partnership