338356611-86817756-Partnership-De-Leon-1-pdf

Notes on De Leon Partnership

Rights of assignee of limited partner Right of executor on death of a limited partner
 Assignee is only entitled to receive the share o the  All the rights for purposes of settling the affairs of
profits or other compensation by way of income or the limited partner; and
the return of the contribution to which the assignor  The right to constitute the deceased‟s assignee as
would otherwise be entitled. He has no right to substituted limited partner (if deceased was
require any information or account of the empowered to so assign under the certificate)
partnership transactions or to inspect partnership
books Art. 1862. On due application to a court of competent
 The assignee acquires all the rights of the limited jurisdiction by any creditor of a limited partner, the
partner only when he becomes a substituted court may charge the interest of the indebted limited
limited partner partner with payment of the unsatisfied amount of such
claim, and may appoint a receiver, and make all other
When assignee may become substituted limited partner orders, directions and inquiries which the
(requisites): circumstances of the case may require.

 All the members must consent to the assignee The interest may be redeemed with the
becoming a substituted limited partner or the separate property of any general partner, but may not
limited partner, being empowered by the be redeemed with partnership property.
certificate, must give the assignee the right to
become a limited partner; The remedies conferred by the first paragraph
shall not be deemed exclusive of others which may exist.
 The certificate must be amended;
 The certificate as amended must be registered in Nothing in this Chapter shall be held to deprive
a limited partner of his statutory exemption.
the SEC
Rights of creditors of limited partner
Liability of substituted partner and assignor  Apply to court for charging order on limited
 Substituted limited partner is liable for all the partner‟s interest in the partnership
liabilities of his assignor except only those of
which he was ignorant at the time he became a Art. 1863. In setting accounts after dissolution the
limited partner and which could not be ascertained liabilities of the partnership shall be entitled to payment
from the certificate in the following order:

Art. 1860. The retirement, death, insolvency, insanity or (1) Those to creditors, in the order of priority
civil interdiction of a general partner dissolves the as provided by law, except those to limited
partnership, unless the business is continued by the partners on account of their contributions, and
remaining general partners: to general partners;
(2) Those to limited partners in respect to their
(1) Under a right so to do stated in the share of the profits and other compensation by
certificate, or way of income on their contributions;
(2) With the consent of all members. (3) Those to limited partners in respect to the
capital of their contributions;
Effect of retirement, death, etc. of a general partner (4) Those to general partners other than for
 Dissolution of partnership. If limited partner, capital and profits;
does not dissolve partnership unless he is the only (5) Those to general partners in respect to
limited partner profits;
 If the business is continued by the remaining (6) Those to general partners in respect to
partners under the rights given in the certificate or capital.
with the consent of all members, no dissolution
but the certificate must be amended for limited Subject to any statement in the certificate or to
partners to still avail of limited liability subsequent agreement, limited partners share in the
partnership assets in respect to their claims for capital,
Art. 1861. On the death of a limited partner his and in respect to their claims for profits or for
executor or administrator shall have all the rights of a compensation by way of income on their contribution
limited partner for the purpose of setting his estate, and respectively, in proportion to the respective amounts of
such power as the deceased had to constitute his such claims.
assignee a substituted limited partner.

The estate of a deceased limited partner shall
be liable for all his liabilities as a limited partner.

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Notes on De Leon Partnership

Dissolution of a limited partnership Priority in the distribution of partnership assets
 Causes  The partnership liabilities shall be settled in the
o Misconduct of a general partner following order:
o Fraud practiced on the limited partner by o Those due to creditors, including limited
the general partner partners, except those on account of their
o Retirement, death, etc. of a general contributions, in the order of the priority
partner as provided by law;
o When all the limited partners ceased to o Those due to limited partners in respect
be such to their share of the profits and other
o Expiration of the term for which compensation by way of income on their
partnership was to exist contributions;
o Mutual consent of the partners before the o Those due to limited partners for the
expiration of the firm‟s original term return of the capital contributed;
 Suit for dissolution o Those due to general partners other than
o A limited partner may bring a suit for the that for capital and profits;
dissolution of the firm, an accounting, o Those due to general partners in respect
and the appointment of a receiver when to profits;
the misconduct of a general partner or the o Those due to general partners for the
insolvency of the firm warrants it. return of the capital contributed
Similarly, creditors of a limited  Partnership creditors are entitled to foist
partnership are entitled to such relief distribution, followed by limited partners who
where the firm is insolvent take priority over general partners
o A limited partner may have the  Note that in general partnership, the claims of the
partnership dissolved and its affairs general partners in respect of capital enjoy
wound up when he rightfully but preference over those in respect of profits
unsuccessfully demands the return of his
contribution, or the other liabilities of the Shares of limited partners in partnership assets
partnership, except liabilities to general  In the absence of any statement in the certificate
partners and to limited partners on as to the share of the profits which each partner
account of their contributions, have not shall receive by reason of his contribution and
been paid, or the partnership property is subject to any subsequent agreement, limited
insufficient for their payment, and the partners share in the partnership assets in respect
limited partner would otherwise be to their claims for capital and profits in proportion
entitled to the return of his contribution to the respective amounts of such claims
 Notice of dissolution  This proportional sharing by the limited partners
o When the firm is dissolved by the takes place where the partnership assets are
expiration of the term fixed in the insufficient to pay such claims
certificate, notice of the dissolution need
not be given since the papers filed and Priority of claims of limited partners
recorded in the SEC are notice to all the  The members of a limited partnership, as among
world of the term of the partnership. themselves, may include in the partnership articles
Where, however, the dissolution is by the an agreement for priority of distribution on the
express will of the partners, the winding up of partnership affairs. Such agreement
certificate shall be cancelled, and a ordinarily becomes controlling as between the
dissolution of the partnership is not partners themselves. In the absence of any
effected until there has been compliance contrary agreement, all the limited partners stand
with the requirements in this respect upon equal footing
 Winding up  The claims of limited partners for profits and other
o When a limited partnership has been duly compensation by way of income and return of
dissolved, the general partners have the capital contributions rate ahead with respect to all
right and power to wind up its affairs. It claims of general partners. For claims arising
is not the duty of the limited partner or of from individual loans to, or other business
the representatives of a limited partner to transactions with, the partnership, other than for
care for or collect the assets of the firm capital contributions, the limited partner is placed
in the same category as a non-member creditor. If
C c”,) L L E E N  return is made to a limited partner of his
contribution before creditors are paid, he is under

52

Notes on De Leon Partnership

an obligation to reimburse such payments, with (2) Be signed and sworn to by all members, and
interest, so far as necessary to satisfy claims of an amendment substituting a limited partner
creditors or adding a limited or general partner shall be
 In the event of insolvency of the partnership, its signed also by the member to be substituted or
creditor takes preference over both general and added, and when a limited partner is to be
limited partners substituted, the amendment shall also be signed
by the assigning limited partner.
Art. 1864. The certificate shall be cancelled when the
partnership is dissolved or all limited partners cease to The writing to cancel a certificate shall be
be such. signed by all members.

A certificate shall be amended when: A person desiring the cancellation or
(1) There is a change in the name of the amendment of a certificate, if any person designated in
partnership or in the amount or character of the first and second paragraphs as a person who must
the contribution of any limited partner; execute the writing refuses to do so, may petition the
(2) A person is substituted as a limited partner; court to order a cancellation or amendment thereof.
(3) An additional limited partner is admitted;
(4) A person is admitted as a general partner; If the court finds that the petitioner has a right
(5) A general partner retires, dies, becomes to have the writing executed by a person who refuses to
insolvent or insane, or is sentenced to civil do so, it shall order the Office of the Securities and
interdiction and the business is continued Exchange Commission where the certificate is recorded,
under Article 1860; to record the cancellation or amendment of the
(6) There is a change in the character of the certificate; and when the certificate is to be amended,
business of the partnership; the court shall also cause to be filed for record in said
(7) There is a false or erroneous statement in office a certified copy of its decree setting forth the
the certificate; amendment.
(8) There is a change in the time as stated in the
certificate for the dissolution of the partnership A certificate is amended or cancelled when
or for the return of a contribution; there is filed for record in the Office of the Securities
(9) A time is fixed for the dissolution of the and Exchange Commission, where the certificate is
partnership, or the return of a contribution, no recorded:
time having been specified in the certificate, or
(10) The members desire to make a change in (1) A writing in accordance with the provisions
any other statement in the certificate in order of the first or second paragraph, or
that it shall accurately represent the agreement (2) A certified copy of the order of the court in
among them. accordance with the provisions of the fourth
paragraph;
When certificate shall be cancelled or amended (3) After the certificate is duly amended in
 The certificate shall be cancelled, not merely accordance with this article, the amended
amended: certified shall thereafter be for all purposes the
o When the partnership is dissolved other certificate provided for in this Chapter.
than by reason of the expiration of the
term of the partnership Requirements for amendment and cancellation of
o When all the limited partners cease to be certificate
such. A limited partnership cannot exist
as such if there are no more limited  Requirements to amend
partners (Art. 1843) o Amendment must be in writing;
 In all other cases, only an amendment of the o It must be signed and sworn to by all the
certificate is required (Art. 1864, Nos. 1-10) members; and
o The certificate, as amended, must be filed
Art. 1865. The writing to amend a certificate shall: for record in the SEC

(1) Conform to the requirements of Article  Requirements to cancel
1844 as far as necessary to set forth clearly the o The same as the requirements to amend
change in the certificate which it is desired to o If cancellation is ordered by the court,
make; and certified copy of such order shall be filed
with the SEC

 Approval by Commission is not required for either
case

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Notes on De Leon Partnership

Art. 1866. A contributor, unless he is a general partner, Art. 1867. A limited partnership formed under the law
is not a proper party to proceedings by or against a prior to the effectivity of this Code, may become a
partnership, except where the object is to enforce a limited partnership under this Chapter by complying
limited partner's right against or liability to the with the provisions of Article 1844, provided the
partnership. certificate sets forth:

Limited partner, a mere contributor (1) The amount of the original contribution of
 A limited partner is a mere contributor. He is each limited partner, and the time when the
practically a stranger in the limited partnership contribution was made; and
whose liability is limited to his interest in the firm, (2) That the property of the partnership
without any right and power to participate in the exceeds the amount sufficient to discharge its
management and control of the business. liabilities to persons not claiming as general or
Relationship between limited partner and limited partners by an amount greater than the
partnership is not one of trust and confidence sum of the contributions of its limited partners.

Parties to action by or against partnership A limited partnership formed under the law prior to the
 Since limited partners are not principals in effectivity of this Code, until or unless it becomes a
partnership transactions, their liability, as a limited partnership under this Chapter, shall continue
general rule, is to the partnership, not the creditors to be governed by the provisions of the old law.
of the partnership. For the same reason, they have
no right of action against 3rd persons against Provisions for existing limited partnerships
whom the partnership has any enforceable claim  A limited partnership formed under the former
law may become a limited partnership by
When limited partner a proper party complying with the provisions of Art. 1844,
 Where the object to enforce limited partner‟s provided the certificate sets forth the information
individual rights against the partnership, and to required by Art. 1867. until or unless it becomes a
recover damages for violation of such right limited partnership under this chapter, it shall
 When it is a proceeding to enforce his liability to continue to be governed by the provisions of the
the partnership old law
 Creditors may go against him if he had withdrawn
sums from the capital of the firm with outstanding
debts on a voluntary dissolution

Nature of limited partner‟s interest in form
 Limited partner‟s contributions are not a loan and
he is not a creditor of the firm because of such
contribution
 Limited partner‟s contribution is not a mere
investment
 Limited partner is, in a sense, an owner, which in
interest in the capital if the firm and its business as
such, but he has no property right in the firm‟s
assets; but in accordance with statutory
provisions, a limited partner may be a co-owner
with his partners of partnership property, holding
as a tenant in partnership and his interest may be
defined as a tenancy in partnership
 Limited partner‟s interest is in personal property,
and it is immaterial whether the firm‟s assets
consist of realty or tangible or intangible
personality
 The nature of the limited partner‟s interest in the
firm amounts to a share in the partnership assets
after its liabilities have been deducted and a
balance struck. The interest is a chose in action,
and hence intangible personal property

C c”,) L L E E N  54