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CHAPTER 4 (m) The right, if given, of the remaining general partner

LIMITED PARTNERSHIP or partners to continue the business on the death,
retirement, civil interdiction, insanity or insolvency of a
ARTICLE 1843. A limited partnership is one formed by two general partner; and
or more persons under the provisions of the following (n) The right, if given, of a limited partner to demand
article, having as members one or more general partners and receive property other than cash in return for his
and one or more limited partners. The limited partners as contribution.
such shall not be bound by the obligations of the
partnership. 2. File for record the certificate in the Office of the
Securities and Exchange Commission.

CHARACTERISTICS OF LIMITED PARTNERSHIP A limited partnership is formed if there has been

1. It is formed by compliance in good faith with the substantial compliance in good faith with the foregoing
statutory requirements requirements.
2. One or more general partners control the business
and are personally liable to creditors ESSENTIAL REQUISITES IN THE FORMATION OF A LIMITED
3. One or more limited partners (special partner/s) PARTNERSHIP
contribute to the capital and share in the profits 1. The certificate of limited partnership
but do not participate in the management of the 2. The certificate of limited partnership must be filed
business in the Office of the Securities and Exchange
4. The limited partners are not personally liable for Commission
partnership obligations beyond their capital
contribution Take note:
5. The limited partners may ask for the return of their A limited partnership must always be in writing
capital contributions (certificate of limited partnership)
6. The partnership debts are paid out of the common A general partnership can be verbal
fund and the separate properties of the general There is no limited partnership in case of non-
partners. compliance with the above requirements.
However, there can be a general partnership.
Take note: A partnership transacting business with third
A universal partnership requires either that the persons is presumed to be a general partnership.
object of the association be all the present
property of the partners, as contributed by them ARTICLE 1845. The contributions of a limited partner may
to the common fund, or else “all that the partners be cash or property, but not services.
may acquire by their industry or work during the
existence of the partnership” Take note:
A limited partner can contribute only money or
ARTICLE 1844. Two or more persons desiring to form a property or both
limited partnership shall: An industrial partner can only become a general
1. Sign and swear to a certificate, which shall state - partner
(a) The name of the partnership, adding thereto the
word “Limited”; ARTICLE 1846. The surname of a limited partner shall not
(b) The character of the business; appear in the partnership name unless:
(c) The location of the principal place of business; 1. It is also the surname of a general partner, or
(d) The name and place of residence of each member, 2. Prior to the time when the limited partner became such,
general and limited partners being respectively the business had been carried on under a name in which
designated; his surname appeared.
(e) The term for which the partnership is to exist;
(f) The amount of cash and a description of and the A limited partner whose surname appears in a partnership
agreed value of the other property contributed by each name contrary to the provisions of the first paragraph is
limited partner; liable as a general partner to partnership creditors who
(g) The additional contributions, if any, to be made by extend credit to the partnership without actual knowledge
each limited partner and the times at which or events on that he is not a general partner.
the happening of which they shall be made;
(h) The time, if agreed upon, when the contribution of Take note:
each limited partner is to be returned; A limited partner violating this article is liable as a
(i) The share of the profits or the other compensation general partner only to the partnership creditors
by way of income which each limited partner shall receive who extend credit to the partnership without
by reason of his contribution; actual knowledge that he is not a general partner
(j) The right, if given, of a limited partner to substitute The said limited partner will not acquire the rights
an assignee as contributor in his place, and the terms and of a general partner
conditions of the substitution;
(k) The right, if given, of the partners to admit ARTICLE 1847. If the certificate contains a false statement,
additional limited partners; one who suffers loss by reliance on such statement may
(l) The right, if given, of one or more of the limited hold liable any party to the certificate who knew the
partners to priority over other limited partners, as to statement to be false:
contributions or as to compensation by way of income, and 1. At the time he signed the certificate, or
the nature of such priority; 2. Subsequently, but within a sufficient time before the
statement was relied upon to enable him to cancel or

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amend the certificate, or to file a petition for its partnership affairs whenever circumstances render it just
cancellation or amendment as provided in article 1865. and reasonable; and
(3) Have dissolution and winding up by decree of court.
Take note:
The one who suffers loss by reliance on such false A limited partner shall have the right to receive a share of
statement may hold liable any party in the the profits or other compensation by way of income, and
certificate of limited partnership who is in bad faith to the return of his contribution as provided in articles
1856 and 1857.
ARTICLE 1848. A limited partner shall not become liable as
a general partner unless, in addition to the exercise of his RIGHTS OF A LIMITED PARTNER
rights and powers as a limited partner, he takes part in the 1. The right to have the partnership books kept at the
control of the business. principal place of business of the partnership, and
at a reasonable hour to inspect and copy any of
Take note: them
The limited partner will be liable as a general 2. The right to have on demand true and full
partner however, he does not acquire the rights of information of all things affecting the partnership,
a general partner. and a formal account of partnership affairs
whenever circumstances render it just and
ARTICLE 1849. After the formation of a limited partnership, reasonable
additional limited partners may be admitted upon filing an 3. The right to have dissolution and winding up by
amendment to the original certificate in accordance with decree of court
the requirements of article 1865. 4. The right to receive a share of the profits or other
compensation by way of income
Take note: 5. The right to receive return of his contribution if the
Additional limited partners may be admitted after partnership assets are in excess of the partnership
the formation. liabilities
The only requirement is amendment of the original
certificate of limited partnership which must be ARTICLE 1852. Without prejudice to the provisions of
signed and sworn to by all of the partners, original article 1848, a person who has contributed to the capital
partners and the newly admitted limited partners, of a business conducted by a person or partnership
and filed with the Office of SEC Commission. erroneously believing that he has become a limited
partner in a limited partnership, is not, by reason of his
ARTICLE 1850. A general partner shall have all the rights exercise of the rights of a limited partner, a general
and powers and be subject to all the restrictions and partner with the person or in the partnership carrying on
liabilities of a partner in a partnership without limited the business, or bound by the obligations of such person or
partners. However, without the written consent or partnership; provided that on ascertaining the mistake he
ratification of the specific act by all the limited partners, a promptly renounces his interest in the profits of the
general partner or all of the general partners have no business, or other compensation by way of income.
authority to:
1. Do any act in contravention of the certificate; Take note:
2. Do any act which would make it impossible to carry on A contributor who erroneously believes that he
the ordinary business of the partnership; has become a limited partner, is not liable as a
3. Confess a judgment against the partnership; general partner provided that:
4. Possess partnership property, or assign their rights in o On ascertaining the mistake, he promptly
specific partnership property, for other than a partnership renounces his interest in the profits of the
purpose; business, or other compensation by way
5. Admit a person as a general partner; of income and
6. Admit a person as a limited partner, unless the right so o He does not take part in the control of the
to do is given in the certificate; business
7. Continue the business with partnership property on the
death, retirement, insanity, civil interdiction or insolvency ARTICLE 1853. A person may be a general partner and a
of a general partner, unless the right so to do is given in limited partner in the same partnership at the same time,
the certificate. provided that this fact shall be stated in the certificate
provided for in article 1844.
Take note:
As a rule, the general partners in a limited A person who is a general, and also at the same time a
partnership can do only acts of administration limited partner, shall have all the rights and powers and
The above enumerations pertain to acts of be subject to all the restrictions of a general partner;
ownership except that, in respect to his contribution, he shall have the
The general partners must secure the written rights against the other members which he would have
consent or ratification by all of the limited partners had if he were not also a general partner.

ARTICLE 1851. A limited partner shall have the same rights General-Limited partner
as a general partner to: • A person may be a general partner and a limited
1. Have the partnership books kept at the principal place partner in the same partnership at the same time,
of business of the partnership, and at a reasonable hour to provided that this fact shall be stated in the
inspect and copy any of them; certificate of limited partnership
2. Have on demand true and full information of all things
affecting the partnership, and a formal account of

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Take note: ARTICLE 1856. A limited partner may receive from the
The rights of a general-limited partner are those of partnership the share of the profits or the compensation
a general partner by way of income stipulated for in the certificate; provided,
The liabilities of a general-limited partner are that after such payment is made, whether from the
those of a general partner. property of the partnership or that of a general partner,
o As to partnership creditors, he is liable up the partnership assets are in excess of all liabilities of the
to the extent of his separate property partnership except liabilities to limited partners on
o As to his contribution, his rights are those account of their contributions and to general partners.
of a limited partner insofar as the other
partners are concerned Share of the profits or compensation by way of income of
a limited partner
ARTICLE 1854. A limited partner also may loan money to • The requirement here is that the partnership
and transact other business with the partnership, and, assets are in excess of all liabilities of the
unless he is also a general partner, receive on account of partnership to third persons after payment of the
resulting claims against the partnership, with general profits or compensation by way of income of a
creditors, a pro rata share of the assets. No limited partner limited partner
shall in respect to any such claim:
1. Receive or hold as collateral security any partnership ARTICLE 1857. A limited partner shall not receive from a
property, or general partner or out of partnership property any part of
2. Receive from a general partner or the partnership any his contributions until:
payment, conveyance, or release from liability, if at the 1. All liabilities of the partnership, except liabilities to
time the assets of the partnership are not sufficient to general partners and to limited partners on account of
discharge partnership liabilities to persons not claiming as their contributions, have been paid or there remains
general or limited partners. property of the partnership sufficient to pay them;
2. The consent of all members is had, unless the return of
The receiving of collateral security, or payment, the contribution may be rightfully demanded under the
conveyance, or release in violation of the foregoing provisions of the second paragraph; and
provisions is a fraud on the creditors of the partnership. 3. The certificate is cancelled or so amended as to set forth
the withdrawal or reduction.
ALLOWABLE BUSINESS TRANSACTIONS OF A LIMITED
PARTNER WITH THE PARTNERSHIP Subject to the provisions of the first paragraph, a limited
1. To lend money to the partnership partner may rightfully demand the return of his
2. To transact business with the partnership contribution:
3. To receive on account of resulting claims against 1. On the dissolution of a partnership, or
the partnership, with general creditors, a pro rate 2. When the date specified in the certificate for its return
share of the assets has arrived, or
3. After he has given six months’ notice in writing to all
PROHIBITED BUSINESS TRANSACTIONS OF A LIMITED other members, if no time is specified in the certificate,
PARTNER WITH THE PARTNERSHIP either for the return of the contribution or for the
1. Receive or hold as collateral security and dissolution of the partnership.
partnership property
2. Receive from a general partner or the partnership In the absence of any statement in the certificate to the
any payment, conveyance, or release from liability contrary or the consent of all members, a limited partner,
if at the same time the assets of the partnership irrespective of the nature of his contribution, has only the
are not sufficient to discharge partnership right to demand and receive cash in return for his
liabilities to persons not claiming as general or contribution. A limited partner may have the partnership
limited partners dissolved and its affairs wound up when:
1. He rightfully but unsuccessfully demands the return of
Rationale: To prevent illegal competition between the his contribution, or
limited partner and partnership creditors for the assets of 2. The other liabilities of the partnership have not been
the partnership paid, or the partnership property is insufficient for their
payment as required by the first paragraph, No. 1, and the
Take note: limited partner would otherwise be entitled to the return
Violation of the prohibition, as enumerated, will of his contribution.
give rise to the disputable presumption of fraud on
the creditors of the partnership REQUISITES FOR THE RETURN OF CONTRIBUTIONS OF A
LIMITED PARTNER
ARTICLE 1855. Where there are several limited partners 1. All liabilities of the partnership, except liabilities to
the members may agree that one or more of the limited general partners and to limited partners on
partners shall have a priority over other limited partners account of their contributions, have been paid or
as to the return of their contributions, as to their there remains property of the partnership
compensation by way of income, or as to any other matter. sufficient to pay them;
If such an agreement is made it shall be stated in the 2. The consent of all members (general and limited
certificate, and in the absence of such a statement all the partners) is had, unless the return of the
limited partners shall stand upon equal footing. contribution may be rightfully demanded under
the provisions of the second paragraph; and
PREFERENCE TO SOME LIMITED PARTNERS 3. The certificate is cancelled or so amended as to set
1. Return of their contributions forth the withdrawal or reduction.
2. Their compensation by way of income
3. Any other matter

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WHEN CAN THE CONTRIBUTIONS OF A LIMITED PARTNER LIABILITY OF A LIMITED PARTNER AS A TRUSTEE TO THE
BE RETURNED? PARTNERSHIP
1. On the dissolution of a partnership 1. Specific property stated in the certificate as
2. When the date specified in the certificate for its contributed by him, but which was not
return has arrived contributed, or which has been wrongfully
3. After he has given six months’ notice in writing to returned
all other members, if no time is specified in the 2. Money or other property wrongfully paid or
certificate, either for the return of the contribution conveyed to him on account of his contribution
or for the dissolution of the partnership.
REQUISTIES FOR THE LIABILITIES OF A LIMITED PARTNER
RIGHT OF A LIMITED PARTNER TO DEMAND AND RECEIVE TO BE WAIVED
CASH IN RETURN FOR HIS CONTRIBUTION 1. With the consent of all other partners
A limited partner, irrespective of the nature of his 2. The waiver or compromise shall not affect the right
contribution, has only the right to demand and receive cash of partnership creditors who extended credit or
in return for his contribution. The exceptions are: whose claim arose after the filing and before a
1. Where there is stipulation to the contrary in the cancellation or amendment of the certificate
certificate of limited partnership
2. Where all the partners consent to the return of his LIABILITY OF A LIMITED PARTNER DESPITE THE REUTN OF
contribution other than in the form of cash HIS CONTRIBUTION
• A limited partner is nevertheless liable to the
WHEN MAY A LIMITED PARTNER HAVE THE PARTNERSHIP partnership for any sum necessary to discharge its
DISSOLVED AND LIQUIDATED? liabilities to all creditors who extended credit or
1. He rightfully but unsuccessfully demands the whose claims arose before such return.
return of his contribution • However, the liability of that limited partner is up
2. The other liabilities of the partnership have not to the extent of his contribution
been paid, or the partnership property is
insufficient for their payment and the limited ARTICLE 1859. A limited partner’s interest is assignable.
partner would otherwise be entitled to the return
of his contribution. A substituted limited partner is a person admitted to all
the rights of a limited partner who has died or has assigned
ARTICLE 1858. A limited partner is liable to the his interest in a partnership.
partnership:
1. For the difference between his contribution as actually An assignee, who does not become a substituted limited
made and that stated in the certificate as having been partner, has no right to require any information or account
made, and of the partnership transactions or to inspect the
2. For any unpaid contribution which he agreed in the partnership books; he is only entitled to receive the share
certificate to make in the future at the time and on the of the profits or other compensation by way of income, or
conditions stated in the certificate. the return of his contribution, to which his assignor would
otherwise be entitled.
A limited partner holds as trustee for the partnership:
1. Specific property stated in the certificate as contributed An assignee shall have the right to become a substituted
by him, but which was not contributed or which has been limited partner if all the members consent thereto or if the
wrongfully returned, and assignor, being thereunto empowered by the certificate,
2. Money or other property wrongfully paid or conveyed to gives the assignee that right.
him on account of his contribution.
An assignee becomes a substituted limited partner when
The liabilities of a limited partner as set forth in this article the certificate is appropriately amended in accordance
can be waived or compromised only by the consent of all with article 1865. The substituted limited partner has all
members; but a waiver or compromise shall not affect the the rights and powers, and is subject to all the restrictions
right of a creditor of a partnership who extended credit or and liabilities of his assignor, except those liabilities of
whose claim arose after the filing and before a which he was ignorant at the time he became a limited
cancellation or amendment of the certificate, to enforce partner and which could not be ascertained from the
such liabilities. certificate. The substitution of the assignee as a limited
partner does not release the assignor from liability to the
When a contributor has rightfully received the return in partnership under articles 1847 and 1858.
whole or in part of the capital of his contribution, he is
nevertheless liable to the partnership for any sum, not in RIGHTS OF AN ASSIGNEE OF A LIMITED PARTNER
excess of such return with interest, necessary to discharge 1. An assignee is only entitled to receive the share of
its liabilities to all creditors who extended credit or whose the profits or other compensation by way of
claims arose before such return. income, or the return of his contributions, to which
his assignor would otherwise be entitled
LIABILITY OF A LIMITED PARTNER FOR UNPAID 2. An assignee acquires all the rights of the limited
CONTRIBUTION TO THE PARTNERSHIP partner only when he becomes a substituted
1. For the difference between his contribution as limited partner
actually made and that stated in the certificate as
having been made, and Take note:
2. For any unpaid contribution which he agreed in the An assignee, who does not become a substituted
certificate to make in the future at the time and on limited partner, has no right to require any
the conditions stated in the certificate. information or account of the partnership
transactions or to inspect the partnership books

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Substituted limited partner with payment of the unsatisfied amount of such claim, and
• A person admitted to all the rights of a limited may appoint a receiver, and make all other orders,
partner who has died or has assigned his interest directions, and inquiries which the circumstances of the
in a partnership case may require.

REQUISITES FOR THE ASSIGNEE TO BECOME A The interest may be redeemed with the separate property
SUBSTITUTED LIMITED PARTNER of any general partner, but may not be redeemed with
1. All the partners must consent or if the limited partnership property.
partner-assignor, being empowered in the
certificate of limited partnership, gives the The remedies conferred by the first paragraph shall not be
assignee that right deemed exclusive of others which may exist.
2. The certificate of limited partnership must be
amended Nothing in this Chapter shall be held to deprive a limited
3. The certificate of limited partnership must be partner of his statutory exemption.
registered in the SEC
Take note:
RIGHTS AND LIABILITIES OF A SUBSTITUTED LIMITED The court may charge the interest of the indebted
PARTNER limited partner with payment of the unsatisfied
1. The substituted limited partner has all the rights amount of such claim, and may appoint a receiver,
and powers, and is subject to all the restrictions and make all other orders, directions and inquiries
and liabilities of his assignor which the circumstances of the case may require
The interest may be redeemed with the separate
Exception: Those liabilities of which he was property of any general partner, but may not be
ignorant at the time he became a limited partner redeemed with partnership property
and which could not be ascertained from the
certificate ARTICLE 1863. In settling accounts after dissolution the
liabilities of the partnership shall be entitled to payment in
2. The substitution of the assignee as a limited the following order:
partner does not release the assignor from liability 1. Those to creditors, in the order of priority as provided by
to persons who suffered damage by reliance on a law, except those to limited partners on account of their
false statement in the certificate of limited contributions, and to general partners;
partnership and to creditors who extended credit 2. Those to limited partners in respect to their share of the
or whose claims arose before the substitution profits and other compensation by way of income on their
contributions;
ARTICLE 1860. The retirement, death, insolvency, insanity 3. Those to limited partners in respect to the capital of their
or civil interdiction of a general partner dissolves the contributions;
partnership, unless the business is continued by the 4. Those to general partners other than for capital and
remaining general partners: profits;
1. Under a right so to do stated in the certificate, or 5. Those to general partners in respect to profits;
2. With the consent of all members. 6. Those to general partners in respect to capital.

Take note: Subject to any statement in the certificate or to

The retirement, death, insolvency, insanity, or civil subsequent agreement, limited partners share in the
interdiction of a general partner dissolves the partnership assets in respect to their claims for capital, and
partnership unless the business is continued by the in respect to their claims for profits or for compensation by
remaining general partners as stated in the way of income on their contribution respectively, in
certificate of limited partnership or with the proportion to the respective amounts of such claims.
consent of all the partners
Take note:
ARTICLE 1861. On the death of a limited partner his The above article provides for the order of
executor or administrator shall have all the rights of a payment in case of liquidation of a limited
limited partner for the purpose of settling his estate, and partnership
such power as the deceased had to constitute his assignee Limited partners are given priority over general
a substituted limited partner. partners
Profits are given priority over capital
The estate of a deceased limited partner shall be liable for
all his liabilities as a limited partner. ARTICLE 1864. The certificate shall be cancelled when the
partnership is dissolved or all limited partners cease to be
Take note: such.
On the death of a limited partner, his executor or
administrator shall have all the rights of a limited A certificate shall be amended when:
partner for the purpose of settings his estate, and 1. There is a change in the name of the partnership or in
such power as the deceased had to constitute his the amount or character of the
assignee a substituted limited partner contribution of any limited partner;
The estate of a deceased limited partner shall be 2. A person is substituted as a limited partner;
liable for all his liabilities as a limited partner 3. An additional limited partner is admitted;
4. A person is admitted as a general partner;
ARTICLE 1862. On due application to a court of competent 5. A general partner retires, dies, becomes insolvent or
jurisdiction by any creditor of a limited partner, the court insane, or is sentenced to civil interdiction and the business
may charge the interest of the indebted limited partner is continued under article 1860;

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6. There is a change in the character of the business of the REQUIREMENTS FOR AMENDMENT
partnership; 1. It must be in writing as far as necessary to set forth
7. There is a false or erroneous statement in the certificate; clearly the change in the certificate which it is
8. There is a change in the time as stated in the certificate desired to make
for the dissolution of the partnership or for the return of a 2. It must be signed and sworn to by all members,
contribution; and an amendment substituting a limited partner
9. A time is fixed for the dissolution of the partnership, or or adding a limited or general partner shall be
the return of a contribution, no time having been specified signed also by the member to be substituted or
in the certificate, or added, and when a limited partner is to be
10. The members desire to make a change in any other substituted, the amendment shall also be signed
statement in the certificate in order that it shall accurately by the assigning limited partner
represent the agreement among them. 3. The certificate of limited partnership, as amended,
must be filed for record in the Office of the SEC
CANCELLATION OF THE CERTIFICATE OF LIMITED
PARTNERSHIP REQUIREMENTS FOR CANCELLATION
1. When the partnership is dissolved 1. It must be in writing
2. When all the limited partners cease to be limited 2. It must be signed and sworn to by all members
partners 3. It must be files for record in the Office of the SEC

Take note: ARTICLE 1866. A contributor, unless he is a general

The composition of a limited partnership is that partner, is not a proper party to proceedings by or against
there should be at least one general partner and at a partnership, except where the object is to enforce a
least one limited partner limited partner’s right against or liability to the
In all other cases, only amendment of the partnership.
certificate of limited partnership is required
General rule: A limited partner is not a proper party to
ARTICLE 1865. The writing to amend a certificate shall: proceedings by or against a partnership because he does
1. Conform to the requirements of article 1844 as far as not take control nor participate in the management of the
necessary to set forth clearly the change in the certificate business of the partnership
which it is desired to make; and
2. Be signed and sworn to by all members, and an Exception: Where the object is to enforce a limited
amendment substituting a limited partner or adding a partner’s right against or liability to the partnership
limited or general partner shall be signed also by the
member to be substituted or added, and when a limited ARTICLE 1867. A limited partnership formed under the law
partner is to be substituted, the amendment shall also be prior to the effectivity of this Code, may become a limited
signed by the assigning limited partner. partnership under this Chapter by complying with the
provisions of article 1844, provided the certificate sets
The writing to cancel a certificate shall be signed by all forth:
members. 1. The amount of the original contribution of each limited
partner, and the time when the contribution was made;
A person desiring the cancellation or amendment of a and
certificate, if any person designated in the first and second 2. That the property of the partnership exceeds the
paragraphs as a person who must execute the writing amount sufficient to discharge its liabilities to persons not
refuses to do so, may petition the court to order a claiming as general or limited partners by an amount
cancellation or amendment thereof. greater than the sum of the contributions of its limited
partners.
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 A limited partnership formed under the law prior to the
order the Office of the Securities and Exchange effectivity of this Code, until or unless it becomes a limited
Commission where the certificate is recorded to record the partnership under this Chapter, shall continue to be
cancellation or amendment of the certificate; and when governed by the provisions of the old law.
the certificate is to be amended, the court shall also cause
to be filed for record in said office a certified copy of its Take note:
decree setting forth the amendment. The above stated article is a transitional provision
on limited partnership
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 court in accordance with
the provisions of the fourth paragraph;
3. After the certificate is duly amended in accordance with
this article, the amended certificate shall thereafter be for
all purposes the certificate provided for in this Chapter.

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