Limited Partnership & Joint Venture

BUSINESS ORGANIZATION-1 || 2nd Exam
From the lectures of Atty. Raymund Ong-Abrantes, CPA
July 28, 2017 be particular or universal, and a particular partnership may

have for its object a specific undertaking.
By Fabe, Betty Belle Irene 😊
It would seem therefore that under Philippine law, a
joint venture is a form of partnership and should thus
JOINT VENTURE be governed by the laws of partnership.
There is no statutory provision directly governing joint
ventures in the Philippines because the prevailing school
of thought in our jurisdiction is that it is a specie of Joint Venture
partnership. Unlike in other jurisdictions, like the US,  defined as an association of persons or companies
some states of the United States, they have particular jointly undertaking some commercial enterprise
codes, or particular provisions on joint venture. Although generally all contribute assets and share risks.
it is a specie of partnership, there is a thin line distinction  It requires a community of interest in the
between a general partnership and a joint venture. performance of the subject matter, a right to
direct and govern the policy connected therewith,
Why is this important for us to know? and duty, which may be altered by agreement to
Joint venture has become a tool nowadays, a particular share both in profit and losses; the acts of working
business effort for businessmen to conduct business. together in a joint project. [Black’s Dictionary]
EXAMPLE— condominium; it’s not really a corporation, it Essentially it is very similar with partnership. There’s
is a joint venture between the developer and the community of interest.
landowner.
The problem with that business agreement is, what are Characteristics of a Joint Venture
the rights and obligations of the parties? We have
discussed the rights and obligations when it comes to  It would have a juridical personality separate and
partnership. In a joint venture, do we have the same rights distinct from that of each of the joint-venturers;
and obligations it being a specie of partnership. That is our
goal in discussing Joint Venture. Similar to Partnership— it being a specie of
partnership
AURBACH V. SANITARY WARES MANUFACTURING
CORPORATION  Each of the co-venturers would be liable with their
private property to the creditors of the joint venture
The main distinction cited by most opinions in common beyond their contributions to the joint venture;
law jurisdiction is that the partnership contemplates a
general business with some degree of continuity, while Again, same with partnership.
the joint venture is formed for the execution of a single
transaction, and is thus of a temporary nature. . .
 Even if a co-venturer transfers his interest to another,
Q: What is common law jurisdiction? They give the transferee does not become a co-venturer to the
emphasis on what? others in the joint venture unless all the other co-
A: Jurisprudence. venturers consent
“degree of continuity”— there is habituality Similar with partnership
Hence, you have a condominium project. Once the  Generally, the co-venturers acting on behalf of the
condominium project is finished, they are not partners joint venture are agents thereof as to bind the joint
anymore. They are only particular to certain projects. venture; and
Similar with partnership

Because we have a particular partnership— that’s why the
joint venture is subsumed in the definition of a particular  Death, retirement, insolvency, civil interdiction or
partnership. Without a particular partnership, we can say dissolution of a co-venturer dissolves the joint venture
that the distinction between partnership and a joint
venture is that a joint venture is specific, particular for a Very similar.
certain project. But because we include a partnership
which is particular in nature it is subsumed in that
definition. Corporations entering into a contract of partnership—
This observation is not entirely accurate in this The previous SEC ruling,
jurisdiction, since under the Civil Code, a partnership may
FABE|MONDRAGON|SUAREZ P a g e 1 | 21
SEC OPINION, 22 December 1966 law that expressly prohibits a corporation from becoming
a limited partner in a partnership.
a corporation cannot enter into a contract of partnership
with an individual or another corporation on the premise Because of this condition, letter (b), it would be more
that if a corporation enters into a partnership agreement, burdensome if they enter into a partnership because they
it would be bound by the acts of persons who are not its would be liable separately. The SEC said, let’s take that
duly authorized agents and officers which is entirely out.
inconsistent with the policy of the law that the
corporation shall manage its own affairs separately and Currently, the only conditions are (a) and (c). There is
exclusively. no more letter (b).
Corporations are managed through the BOD (Board of Special treatment of Joint Ventures
Directors). = If it partners with another corporation, then
essentially the BOD of another corporation would bind TUASON V. BOLANOS
the other corporation which would violate the principle of
centralized management through the BOD. That is the Recognized in Philippine jurisdiction the doctrine in
reason why, before, the SEC said you cannot. Anglo-American jurisprudence that "a corporation has no
Corporations cannot enter into a partnership. power to enter into a partnership." Nevertheless, Tuason
recognized that a corporation may validly enter into a
Now, they provided for a clear EXCEPTION and allowed joint venture agreement, "where the nature of that
corporations to enter into partnership arrangement, venture is in line with the business authorized by its
provided the following conditions are met— charter."
SEC OPINION, 29 February 1980 This is why a corporation, technically, do not enter into
a partnership but rather a joint venture because in a
(a) The authority to enter into a partnership relation joint venture, although it is a specie of a partnership,
is expressly conferred by the charter or the articles of they can create nuances to avoid the rights and
incorporation of the corporation, and the nature of the obligations of a partner in a partnership.
business venture to be undertaken by the partnership is in
line with the business authorized by the charter or articles
of incorporation; August 03, 2018
To avoid the predicament, previously, that the corporation By Suarez, Pearlie Joy
cannot be controlled or bind by the BOD of another
corporation, they put this condition— Joint Venture in the Philippine Setting
(b) The agreement on the articles of partnership Again, there is no statutory provision directly governing
must provide that all the partners shall manage the Joint Ventures. So it is a specie of partnership.
partnership and the articles of partnership must stipulate
We have the case of Aurbach vs Sanitary Wares
that all the partners shall be jointly and severally liable for
Manufacturing Corporation which distinguished
all the obligations of the partnership;
partnership from a Joint Venture:
They (SEC) said that yes, we will allow you to join a
AURBACH V. SANITARY WARES MANUFACTURING
partnership provided, both of them will manage so that
CORPORATION
both of you are aware in binding contracts with a 3rd party.
“The main distinction cited by most opinions in common
(c) If it is a foreign corporation, it must obtain a
law jurisdiction is that the partnership contemplates a
license to transact business in the country in accordance
general business with some degree of continuity, while
with the Corporation Code of the Philippines
the Joint Venture is formed for the execution of a single
transaction, and is thus of a temporary nature. . . This
Now because of this, the SEC realized that it actually
observation is not entirely accurate in this jurisdiction,
prevented a corporation from entering into a limited
since under the Civil Code, a partnership may be particular
partnership which if allowed to do so would then be more
or universal, and a particular partnership may have for its
congruent with the policy that the corporation would then
object a specific undertaking. It would seem therefore
not be held liable for its venture beyond the investments
that under Philippine law, a Joint Venture is a form of
made and determined by its board of directors and would
partnership and should thus be governed by the laws of
therefore not be held liable for debts arising from the acts
partnership…”
of the general partners, reconsidered its position and
ruled that a corporation may become a limited partner in a
JOINT VENTURE CHARACTERISTICS
limited partnership since there is no existing Philippine
*not discussed by Atty. Ong so I just took the liberty of structure is that it should be governed by the Corporation
inserting the discussions from last year’s TSN (2017 TSN) Code basically and the case law on partnership.
1.) It would have a juridical personality separate and [The SEC has ruled that generally, a Joint Venture
distinct from that of each of the joint-venturers; agreement of two corporations need not be registered
with the SEC, provided it will not result in the formation of
This is viewed under Philippine law, ha. Under Philippine a new partnership or corporation. However, should there
Law ha, since this is considered partnership, ito yung be an intention to acquire a separate Tax Identification
consequences. Number (TIN) from the Bureau of Internal Revenue for the
business venture, the same requires registration with the
2.) Each of the co-venturers would be liable with their SEC in order to have a separate legal personality to obtain
private property to the creditors of the joint venture a separate TIN Equity Joint Venture.
beyond their contributions to the joint venture
Meaning, Joint Venture tayo pero gawin natin siyang
This is consistent with the doctrine of unlimited liability through a corporation. So we will establish a corporation,
for the partners in a partnership. we have all the requirements of a corporation, but Joint
Venture siya. So ano ang mangyayari? Tendency niyan,
3.) Even if a co-venturer transfers his interest to since a corporation is a contract between the state and
another, the transferee does not become a co-venturer that entity giving it juridical personality, in effect, in a
to the others in the joint venture unless all the other co- Joint Venture corporation, they result into 2 agreements:
venturer’s consent
1.) Article of Incorporation –charter of the corporation; its
This is consistent with the principle of our partnership that contract with the government
an assignee does not become a partner but has a set of
rights. 2.) Joint Venture – the contract of the venturers
4.) Generally, the co-venturers acting on behalf of the So ito, it is a Joint Venture, established in a corporation.
joint venture are agents thereof as to bind the joint There is a corporation, the vehicle that gives it juridical
venture; and personality, but the agreement is in the form of Joint
Venture. Meaning, may specific undertaking yung
This is consistent with the doctrine of delectus personae— corporation na yun. Meaning, yung corporation na yun is
mutual agents. not the general corporation na may business continuity.
Yung corporation nay un is specific lang talaga for a
5.) Death, retirement, insolvency, civil interdiction or particular undertaking. Nakuha niyo?] *taken from 2017
dissolution of a co-venturer dissolves the joint venture. TSN
How do you structure Joint Venture? II. EQUITY JOINT VENTURE
LEGAL FORMS IN JOINT VENTURE STRUCTURE An equity Joint Venture is (when) there is an existing
corporation tapos yung shares yun yung bibilhin ng Joint
 Joint Venture Corporation Venturer.
 Equity Joint Venture
 Partnership Arrangement Let’s say si Corporation 1 and Corporation 2. Si
 Contractual Joint Venture Corporation 2 entered into a Joint Venture, ang equity is it
(corporation 2) would buy the shares of corporation 1. So
The reason I’m telling you this is because I don’t know
essentially may percentage of the ownership na sya with
where in your law school you will be able to encounter this
corporation 1 which is the equity Joint Venture, it
topic. Since this is business organization class so we ought
combined portion of the equity.
to discuss a little but in your actual practice you would
encounter this very often because most corporations [Equity Joint Ventures are also available in Philippine
enter into Joint Venture instead of establishing a setting which may cover the formation of a new Joint
corporation. Venture company, with each co-venturer being allocated
proportionate shareholdings in the outstanding capital
I. JOINT VENTURE CORPORATION
stock of the Joint Venture corporation. Equity Joint
There are two (2) corporations under Joint Venture Venture may also be pursued where a co-venturer is
Corporation. So by establishing a new corporation, this is allocated the agreed shares of stock in an existing
what you call Joint Venture corporation. corporation, either from new issuances of the capital
stock of the existing corporation, or sold shares from
The law that governs this is the Corporation Code. It is just those already issued in the names of the other co-
like any other corporations, it’s just that the initiative of venturers.
creating this came from two different corporations in
pursuit of a particular business. So that is your Joint In equity Joint Ventures, the rights and obligations of the
Venture corporation. So the governing law for this type of parties among themselves is covered not only in a
separate Joint Venture agreement, but also implemented What determines the kind of structuring that you would
by certain provisions of the articles of incorporation and want to have in your Joint Venture?
by-laws of the Joint Venture corporation.
Basically it’s the LIMITED LIABILITY, the TAX
So ito, pwede may existing corporation tapos may gusto CONSEQUENCES and the LIMITATION OF FOREIGN
makipagJoint Venture sa kanya, ibenta mo na lang ang EQUITY.
shares mo sa kanya. There is no establishment of a new
partnership kundi benta lang ng shares. Benta lang ng I. LIMITED LIABILITY
ownership.
So most corporations enter into a Joint Venture rather
Medyo abstract? Okay lang. Again, I will not ask you than setting up a corporation in general partnerships in
complicated questions with regards to this. Basic lang the sense that they can actually provide for the liability na
talaga ang tanong ko. It is just the application.] *taken after nung project, tapos na. So they can specifically
from 2017 TSN provide for their responsibilities or obligations in the
contract.
III. PARTNERSHIP ARRANGEMENT *not discussed
II. TAX CONSEQUENCE
[A third type of Joint Venture arrangement is to formally
operate the Joint Venture set-up as a partnership, with a Kapag mag Joint Venture ang let’s say, a condomiminium
separate and distinct juridical personality project, kapag mag Joint Venture ang developer and land
owner, there was a regulation before na the Joint Venture
Ito yung the usual. Again, similar to a Joint Venture is not taxable. Kasi whatever projects idedeclare naman
corporation, may separate personality, kasi nga sya ng developer and the land owner. So if itatax mo pa
partnership. Pero eto, made under the partnership law, ang JV, that would be double taxation (indirect). So it is
yung isa is under corporation law.] *taken from 2017 TSN prohibited.
IV. CONTRACTUAL JOINT VENTURE Yun yung ginagawa nila before. But since it was abused,
there is this new RR issued that this could only apply if
Very common tong contractual Joint Venture. You will see both of them are registered in the PCAB. So in effect
major corporations like in condominium development, the ngayon tinatax na sya as a corporation.
land owner will enter into a JOINT VENTURE with a
developer. So they have this Joint Venture Agreement III. LIMITATION OF FOREIGN EQUITY
(JOINT VENTURE AGREEMENT), so meaning contractual
na sya. What they (foreign equities) try to avoid, since they
cannot do it by establishing a corporation, they try to
What do you mean when you say contractual? avoid the limitations of a partnership by the
establishment of Joint Ventures.
They can actually vary the effects by specifying the
liabilities and responsibilities of the JOINT VENTURE in GOVERNING LAW AND LANGUAGE
the contract. So just like any other contract, this is
governed by your provisions on Obligations and *sad to say Atty. Ong did not discuss these one by one so I
Contracts. just took the liberty of inserting the discussions from last
year’s TSN (2017 TSN)
What if there is a certain transaction that you cannot
find in the contract of the JOINT VENTURE? What  Freedom to contract, in General
should apply?
[The Philippine Constitution prohibits any law impairing
the obligation of contracts. The established rule is that
We have the case of Litonjua vs Litonjua where the
Supreme Court said that in the absence of contractual contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem
provisions, since it is considered a specie of partnership,
convenient, provided they are not contrary to law, morals,
the Partnership Code will govern.
good customs, public order, or public policy Sec. 10, Art.
Please ake note in the next case of J. Tiosejo Investment III.
Corp. vs Ang, diba they followed the contractual
provisions kasi specified naman dun kung ano yung You have the right to contract for as long as it is not
contrary to law, morals, good customs, public order or
liabilities. So in effect, pag walang specific provision in the
contract of JOINT VENTURE, dun ka sa general principles public policy.]
of partnership kasi it’s a specie of partnership. Pero pag
 Formal or Extrinsic Validity of Agreements
specified na sa contract ung liabilities and responsibilities
of a Joint Venturer, you go to the contract. [Philippine laws recognize the principle that the formal or
extrinsic validity of contracts, including a Joint Venture
FACTORS arrangement, shall be governed by the laws of the country
in which they are executed. Therefore, Joint Venture
arrangements, which are essentially partnership language does not go into the validity or enforceability of
agreements, are valid in whatever form executed. Art. 17, the agreement. Nevertheless, it would be prudent for the
Civil Code. parties to draw the documents in an official language,
since any future suit on a document must always be
Yung extrinsic? What will govern it? Of course, where you accompanied by an official transaction in the official
executed the contract. language.
Example: Kunwari ako si Joint Venture, gusto ko ng Under Section 33, Rule 132 of the Philippine Rules of
subdivision development from a co-venturer from Court, documents written in an unofficial language shall
Singapore, ako Filipino. Gawa kami ng contractual Joint not be admitted as evidence, unless accompanies with a
Venture and i-eexecute namin ito sa Singapore. As to translation into English or Filipino. Under the 1987
form, what will govern? The law that will govern the form Constitution of the Philippines, the official languages are
will be the law wherein that contract is executed. So in Filipino and, until otherwise provided by law, English.
this case, sa Singapore. So ano ang law ni Singapore with
regards to contracts extrinsic, sa labas like form, It will again depend on the agreement of the parties based
notarization etc.? It will be governed by the Singapore on the freedom to contract.]
law. Ito yung sinasabi nito.]
So technically you have your Law on Obligations and
 Capacity of Contract Parties Contracts. Suppletory, Law on Partnership.
[The capacity of the parties to enter into a Joint Venture HOW DO YOU DEFINE A JV’s SCOPE OF BUSINESS
agreement is generally governed by their national law. ACTIVITY?
However, in case of Joint Venture agreements covering
the alienation or encumbrance of properties, both real We have this Foreign Investment Act of 1991:
and personal, located in the Philippines, the capacity of
the parties is governed under Philippine laws Art. 15, Civil  It is the basic law that provides the conditions,
Code. activities and procedures where foreign
enterprises may invest and do business in the
Of course, they will be governed by the national law. So Philippines. It applies to Joint Venture
kung ako, 17 years old, I enter into a Joint Venture arrangements in the Philippines.
agreement with the Singaporean na 20 years old, sa
Singapore kami nag-execute ng contract, now do I have So I’m talking about foreign investments entering into Joint
the capacity to contract? My capacity to contract will be Ventures. So it applies to Joint Venture arrangements as
governed by my national law. My national law is the well.
Philippine law. Under the Philippine law, do I have the
capacity to enter into the contract? No. So in that case, I We have what we call negative list. Now very few, even
do not have the capacity to enter into the contract.] lawyers especially those not exposed in the corporate world,
doesn’t know what we mean by negative list. Pag sinasabi
 Intrinsic Validity nilang “ Pag gumawa ka ng corporation ng Filipino, okay
lang ba na may foreigner?” No! You always look at the
[The intrinsic validity of a Joint Venture agreement, as in negative list. Pag andun sya sa negative list ibig sabihin
all contracts in general executed in the Philippines, may restriction. Pag wala, then it can be owned by foreign
including consideration or cause thereof, the owners.
interpretation or constructions of its provisions, and the
nature and amount of damages for breach thereof, are  The salient points of FIA ’91 are the following:
governed by the law voluntarily agreed upon by the a) Under the concept of a negative list, more areas are
parties. The parties to a Joint Venture arrangement can open to foreign investments and investment policy is
therefore validly stipulate which laws shall govern their made transparent and stable;
arrangement. b) The law redefined “export enterprise” to mean at least
60% export (from the former 70% export level);
However, any stipulation in the Joint Venture agreement c) It opened the domestic economy to 100% foreign
cannot operate to oust Philippine courts of their investments except for those in the negative lists;
jurisdiction under the law, although the local courts would d) One layer of bureaucracy is reduced because there is
still apply the laws chosen by the parties to the agreement no need for Board of Investment’s (BOI) approval if
the investor is not seeking incentives.
It is governed by that voluntarily agreed upon by the
parties. So freedom to contract, whether or not kung ano You have the concept of BOI. Now if a foreign company
ang agreement nila.] invests in the Philippines, and it’s an industry which is the
priority program of the President, there can be incentives.
 Language of Joint Venture Agreements Can be income tax free, pwedeng fiscal incentives, etc.
When you reach your income tax, makaencounter kayo ng
[There are likewise no restrictions on the language in terms na “board of investments” “income tax holiday”
which a document or contract may be executed, since the “PEZA” “gross income taxed 5%,” that is all in relation to
the incentives given by the Foreign Investment Act, of Technology as involving advanced technology;
course given by the two departments PEZA and BOI. and
 Finally, the negative List B also includes export
NEGATIVE LISTS enterprises using raw materials form depleting
natural resources and with less than
LIST A USD200,000 paid in equity capital.
(covers area of investment in which foreign ownership INCENTIVES AVAILABLE TO FOREIGN JOINT
is limited by the Constitution and nationalization laws) VENTURE PARTNERS
NO FOREIGN EQUITY ALLOWED:  Preferred Areas of Investments (BOI Registered

and with Incentives);
a) Mass media ownership and management;  Non-Preferred Area Investor (Investment
b) Licensed professions, like lawyers, accountants, without Incentives);
and engineers;  Incentives of Export Processing Zone Enterprise
c) Retail trade;
d) Fisheries; and So we have what we call SPECIAL ECONOMIC ZONES.
e) Rice and corn farming. We have the Subic, Clark, Damosa Lanang (or all IT Parks).
So anong incentives ba pag nasa PEZA (Philippine
25% FOREIGN EQUITY ALLOWED: Economic Zone Authority) ka?
a) Recruitment agencies; and You enjoy income tax holiday. This is one way to
b) Locally funded public works project. encourage foreigners to invest. Kasi what do these
businesses do in our economy? They provide influx of the
30% FOREIGN EQUITY ALLOWED: US Dollar kasi usually mga exports yan eh. And also they
provide employment. So in return for that, to attract them
a) Advertising
to invest in the Philippines, they have what we call income
40% EQUITY ALLOWED: tax holiday. Usually 4 years and 6 years, and after that the
income tax na lng moving forward is 5% as opposed to
a) Exploitation of natural resources and utilization 30% corporate income tax. So it is a really good
of land ownership; motivation for foreigners or for all to invest.
b) Public utilities;
c) Educational institutions; Kasi in fact kapag itong mga sales nito, let’s say call
d) Financing companies; center, Matina IT park, PEZA yan. So Alorica, which is
e) Construction; owned by a foreign corporation, ang kanilang mga
f) Cooperatives; customers usually mga I think US or Australian, so there
g) Private security agencies; and are export sales. And also if they import machineries and
h) Small-scale mining. equipment, that’s also customs and duties free. So that’s
really a good incentive. But to be able to enjoy that, you
Retail Trade Liberalization Act of 2000 have to register with PEZA. They have a specific minimum
investment. Dapat per table ng call center agent and all
- Foreigners are excluded only in retail enterprises the accessories na ginagamit nila, dapat USD2,000.
with paid-up capita of less than
USD2,500,000.00 (Category A) which is Another example is if you’re in a business which is a new
resecured exclusively for Filipino citizens and technology in the Philippines. You are given incentives for
corporations wholly-owned by Filipino citizens. income tax holiday.
LIST B FINANCING JOINT VENTURES
 List B covers defense-related materials which by  Joint Venture projects in the Philippine
law are licensed and regulated by the Jurisdiction are financed through a combination
Department of National Defense, unless of equity infusion and commercial or special
specifically authorized, with substantial export, loans. What has become a very popular scheme
by the Secretary of National Defense; of financing Joint Ventures covering
 List B also includes activities regulated by law infrastructure projects is the Build-Operate-
because of risks they may pose to public health Transfer (B-O-T) schemes under Rep. Act No.
and morals. For example, dangerous drugs, 6957. The Act implements the declared policy of
gambling, nightclubs, bars, and massage clinics, the Philippine Government to recognize the
are not open for foreign investments; indispensable role of the private sector as the
 A third area under the negative List B refers to main engine for national growth and
domestic market enterprises with less than development and provide the most appropriate
USD200, 000 paid in equity capital, unless favorable incentives to mobilize private
determined by the Department of Science and resources for the purpose.
Apart from the development of condominiums, ang private. The sad thing about this is that if this is really
pinakacommon na JV is yung partnership between public applied by the book, okay naman talaga sya. Pero you
and private or the PPP. I’m just going to discuss these for know naman sa atin, parang the budget is this one
purposes na maging familiar kayo but I will not ask this in pero nakalagay sa implementation is this one kasi
your exam  madaming in betweens. So with that budget, the
technology used is not the “quality”.
 Build-Operate-and-Transfer (BOT)
- A contractual arrangement whereby the contractor *chika about Korean client and PCAB and SEC
undertakes the construction, including financing, of
a given infrastructure facility, and the operation and  Build-Transfer-and-Operate (BTO)
maintenance thereof. - The public sector contracts out the building of an
- Includes a supply-and-operate situation which is a infrastructure facility to a private entity such that
contractual arrangement whereby the supplier of the contractor builds the facility on a turn-key basis,
equipment and machinery for a given infrastructure assuming cost overrun, delay, and specified
facility, if the interest of the Government so performance risks. Once the facility is commissioned
requires, operates the facility providing in the satisfactorily, title is transferred to the
process technology transfer and training to Filipino implementing agency. The private entity however,
nationals. operates the facility on behalf of the implement
agency under an agreement.
So a private contractor will build it, operate it for a
while, and then eventually transfer including the This is talking about infrastructures that require
technology. Example: power plants heavy funding like the power plants.
 Build-and-Transfer Scheme (BT)

 Contract-Add-and-Operate (CAO)
- The contractor undertakes the construction,
- The project proponent adds to an existing
including financing, of a given infrastructure facility,
infrastructure facility which it is renting from the
and its turnover after completion to the government
government. It operates the expanded project over
agency or local government unit concerned which
an agreed franchise period. There may, or may not
shall pay the contractor its total investment
be, a transfer arrangement in regard to the facility.
expended on the project, plus a reasonable rate of
return thereon. Let’s say nagrerent ka tpos nag expand so that is
contract-add-and-operate.
Build lng, transfer agad. Wala ng operations.
 Develop-Operate-and-Transfer (DOT)
 Build-Own-Operate (BOO)
- The favorable conditions external to a new
- A project proponent is authorized to finance,
infrastructure project which is to be built by a private
construct, own, operate and maintain an
project proponent are integrated into the
infrastructure or development facility from which
arrangement by giving that entity the right to
the proponent as allowed to recover its total
develop adjoining property, and thus, enjoy some of
investment, operating and maintenance costs plus a
the benefits the investment creates such as higher
reasonable return thereon by collecting tolls, fees,
property or rent values.
rentals and other charges from facility users. Under
this scheme, the proponent which owns the assets
 Rehabilitate-Operate-and-Transfer (ROT)
of the facility may assign its operation and
- An existing facility is turned over to a private sector
maintenance to a facility operator.
to refurbish, operate and maintain for a franchise
You build, you own it and then you operate. Very period, at the expiry of which the legal title to the
very common example, expressways. facility is turned over to the government. The term is
also used to described the purchase of an existing
 Build-Lease-Transfer (BLT) facility from abroad, importing, refurbishing,
- A project proponent is authorized to finance and erecting and consuming it within the host country.
construct an infrastructure or development facility
and upon its completion turns it over to the  Rehabilitate-Own-and-Operate (ROO)
government agency or local government unit - An existing facility is turned over to the private
concerned on a lease arrangement for a fixed period sector to refurbish and operate with no time
after which ownership of the facility is automatically limitation imposed on ownership. As long as the
transferred to the government agency or local operator is not in violation of its franchise, it can
government unit concerned. continue to operate the facility in perpetuity.
Build, then naglease sya, saka ite-turn over. Ito yung

mga walang funds ang government, or walang
technology or expertise, so ang magfifinance si
CHARACTERISTICS of Limited Partnership

LIMITED PARTNERSHIP
Kaya wala masyadong cases nito kasi nga sa ating setting 1. It is formed by compliance with statutory
very few lang umaakyat and usually the issue raised is requirements (Art. 1844.);
more on “Is there a partnership?” “Is the partner liable?”
But mind you, in foreign jurisdictions, ito yung pinaka- So you have this as another example of a formal
usual na umaakyat sa kanilang Supreme Court, the nature partnership. What are the other formal partnerships? You
of the limited partnership. have (1.) kapag may real property, (2) kapag ang capital ay
3,000 or more, tapos eto yung third, (3.) if it is a limited
So the limited partnership has the best of both worlds, partnership. It has to comply with the statutory
meron syang nature of a Partnership and also that requirements, in the absence of which it cannot be
concept of limited liability that is similar sa Corporation. considered a limited partnership.
So you have articles 1843-1867 for Limited Partnership. 2. One or more general partners control the business
and are personally liable to the creditors (Article 1848,
1850.);
History of Limited Partnership 3. One or more limited partners contribute to the
capital and share in the profits but do not participate in
There is these Qirad and Mudaraba institutions in Islamic the management of the business and are not personally
law and economic jurisprudence that were similar to the liable for partnership obligations beyond the amount of
modern limited partnership. That there is that concept of their capital contributions. (Arts. 1845, 1848, 1856.);
investor. Investor lang, meron akong inenvest sa business
and that I am only liable to the degree of my investment. So apart from the fact that they are only liable to their
capital contributions, they are also not allowed to
In medieval Italy, a business organization known as the participate in the management.
commenda appeared in the 10th century that was
generally used for financing maritime trade. In a Remember our concept of why a partner has unlimited
commenda, the traveling trader of the ship had limited liability compared to a shareholder. Kasi a partner is just
liability, and was not held responsible if money was lost as an aggrupation of sole proprietorship having the active
long as the trader had not violated the rules of the participation in managing the business. Si shareholder,
contract. So since wala pa mang eroplano dati, what do passive lang. So eto din, para it has the benefit of the
they do to trade business? By boat. advantage of a shareholder, dapat passive lang din sya,
dapat hindi na rin sya magparticipate kasi nga hindi sya
The commenda actually is very common in Venice, Iitaly. liable beyond the capital contributed. So that is the
concept of limited liability.
“In contrast, his investment partners on land had
unlimited liability and were exposed to risk. As an 4. The limited partners may ask for the return of their
institution, the commenda is very similar to the capital contributions under the conditions prescribed by
qirad but whether the qirad transformed into the law (Arts. 1844 [h], 1857.); and
commenda, or the two institutions evolved
independently cannot be stated with certainty.” So another specific characteristic of limited partnership is
(Hillman, Robert H.; Limited Liability in Historical that the limited partner can actually ask for the return of
Perspective, "Washington and Lee Law Review," their contribution EVEN BEFORE DISSOLUTION.
Spring 1997)
5. The partnership debts are paid out of common fund
Concept of Limited Partnership and the individual properties of the general partners.
It is a form of business association that is composed of So not including the limited partner.
one or more general partners and one or more special
partners (also called as limited partners), the latter not Reason and purpose of statutes authorizing limited
being liable for the partnership debts. The liability of partnerships.
limited partners is limited to a fixed amount (that is their
capital contribution or the amount they have invested in 1. Secure capital from others for one’s business and still
the partnership. retain control.
So you have at least one (1) general partner, and at least So if you are a partnership and wala kang pera, wala kang
one (1) limited partner. So it is in this nature that it is capital, how would you entice people to invest in the
similar to a shareholder in a corporatation, na limited lang business? So you allow them to invest provided they have
ang kanyang liability to the amount invested in the limited liability, only to the extent of their capital
business. So that is why this has the benefit of a contribution.
corporation while it has the nature of a partnership.
2. Share in profits of a business without risk of personal retirement, civil interdiction, insanity or insolvency of a
liability. general partner; and
3. Associate as partners with those who have business Atty. Ong: please take note that the death
skills. retirement, civil interdiction, insanity or insolvency of a
general partner may not cause it to be dissolved provided
So let’s say ako, may pera ako pero pero hindi ako these rights are given to the remaining general partners
marunong maggawa ng machine, so punta ako dun sa
marunong gumawa ng machine ako lang magfinance. So (n) The right, if given, of a limited partner to demand
ako hindi ako magmanage, hindi ako magparticipate, so and receive property other than cash in return for his
ang liability ko is only to the extent of my contribution. contribution.
How do we compare GENERAL PARTNERSHIP to a Atty. Ong: This is another peculiar thing about
LIMITED PARTNERSHIP? (This is a common bar limited partnership where the limited partner can ask for the
question.) return of its contribution other than cash, so pwede
property. Very different form your liquidation in your general
Art. 1844. Two or more persons desiring to form a partnership.
limited partnership shall:
(2) File for record the certificate in the Office of the
(1) Sign and swear to a certificate, which shall state - Securities and Exchange Commission.
(a) The name of the partnership, adding thereto the A limited partnership is formed if there has been
word "Limited"; substantial compliance in good faith with the foregoing
requirements.
(b) The character of the business;
(c) The location of the principal place of business;

GENERAL PARTNERSHIP V.
(d) The name and place of residence of each member, LIMITED PARTNERSHIP
general and limited partners being respectively
designated;
GENERAL LIMITED
(e) The term for which the partnership is to exist; PARTNER/PARTN PARTNER/PARTN
ERSHIP ERSHIP
(f) The amount of cash and a description of and the A general partner is
agreed value of the other property contributed by each Limited partner’s
personally liable for
limited partner; liability extends
AS TO partnership
only to his capital
LIABILITY obligations (Article
(g) The additional contributions, if any, to be made by contribution (Arts.
1816.)
each limited partner and the times at which or events 1845, 1848, 1856.)
on the happening of which they shall be made;
Limited partner has
no share in the
(h) The time, if agreed upon, when the contribution of When the manner
management of a
each limited partner is to be returned; of management has
LIMITED
not been agreed
(i) The share of the profits or the other compensation PARTNER;
upon, all of the
by way of income which each limited partner shall Rights are limited
general partners
receive by reason of his contribution; AS TO THE to those
have an equal right
MANAGEM enumerated in
in the management
(j) The right, if given, of a limited partner to substitute ENT OF Article 1851, such
of the business
an assignee as contributor in his place, and the terms THE that he renders
(Arts.1803, 1810
and conditions of the substitution; BUSINESS himself liable to
[3].), w/n the
creditors as a
general partner has
(k) The right, if given, of the partners to admit general partner if
made any capital
additional limited partners; he takes part in the
contribution.
control of the
(l) The right, if given, of one or more of the limited business (Article
partners to priority over other limited partners, as to 1848.)
contributions or as to compensation by way of income, Can only contribute
and the nature of such priority; AS TO May contribute cash or property
CONTRIBU money, property, or but not services.
(m) The right, if given, of the remaining general partner TION industry.
or partners to continue the business on the death, Of course kung
magcontribute sya The firm becomes a general partnership only as to its

ng services he will relation to third persons. It is still therefore a limited
be participating in partnership subject to all the rules applicable to limited
the management of partnership, thus a LIMITED PARTNER treated as General
the business. Partner as far as third persons are concerned is entitled to
Not a proper party reimbursement from the GENERAL PARTNER for
unless he is also a whatever obligations he may have paid to partnership
AS TO THE general partner or creditors beyond his capital contribution.
PROPER Proper party to where the object of
PARTY IN proceedings by or the proceeding is to Rule where partnership creditor is guilty of estoppel
THE against the enforce a limited
PROCEEDI partnership. partner’s right If the attaching creditors recognize and deal with a firm as
NGS against, or liability a limited partnership, they will be estopped from insisting
to, the partnership that there is no such partnership, or that the terms of the
(Art. 1866.) partnership were not sufficiently stated in the notice of its
His name may Generally, his name formation.
AS TO THE
appear in the firm must not appear in
FIRM NAME So let’s say may creditor, may limited partnership. If I deal
name (Art. 1815.) the firm name.
with this company as a limited partnership and later on
Prohibited from
maningil na ako, tapos nalaman ko na bankrupt na sya,
engaging in a
then I cannot go to the property of the limited partner. I
business which is of
AS TO cannot make the defense na “uy general partnerhip man
the same kind of
PROHIBITI No prohibition. pla dapat kayo kasi di man kayo nagcomply substantially
business which the
ON IN Considered as a with the requirements” for me to just go to the property
partnership is
ENGAGING mere contributor to of the limited party. I am already estopped of treating the
engaged, if he is a
INTO the partnership partnership as a limited partnership.
capitalist partner
OTHER (Art. 1866)
(Art.1808.) or in any
BUSINESS GOOD QUESTION: What constitutes substantial
business for himself
compliance?
if he is an industrial
partner (Art. 1789.) So ilan ba to, 11. So pag magcomply ba ako sa 6 out of 11
EFFECT OF would that mean substantial compliance na? How do we
His retirement, His retirement,
RETIREME know that there is substantial compliance in good faith? Is
death, insanity, or death, insanity, or
NT, DEATH, it the number of requirements complied with? 6 out of 11,
insolvency dissolves insolvency does not
INSANITY, substantial na ba yan?
the partnership dissolve the
or
(Arts. 1860, 1830, partnership, as a
INSOLVEN There is no specific case law on this but if you try to look at
1831.) general rule.
CY the old case of Jo Chung Cang vs Pacific (45 Phil 142) the
His interest in the Supreme Court said that to establish a limited
partnership may partnership, there must be at least one GENERAL
not be assigned as PARTNER to appear in the firm name but in this case
His interest is freely
to make the neither of these requirements have been complied with.
assignable, with the
assignee a new
assignee acquiring
ASSIGNME partner without the So the general rule is that those who seek to avail
all the rights of the
NT OF consent of the themselves of protection of the laws in the creation of
limited partner
INTEREST other partners limited partnerships must show substantial compliance of
subject to certain
(Art.1813.) although such laws. A limited partnership that does not comply
qualifications (Art.
he may associate a with the laws of its creation is not considered a limited
1859.)
third person with partnership at all but a general partnership in which all
him in his share partners are liable.
(Art. 1804.)
So it can be deduced in this case that it is sufficient for you
to be considered in substantial compliance if nadesignate
What are the formal requirements? We have Article 1844. mo sino ang limited, sino ang general. Kapag nakalagay
ka ng atleast one GENERAL PARTNER and one LIMITED
Please memorize this article because these are the formal PARTNER, that is sufficient to be considered a substantial
requirements. So kung di mo alam yan, how will you be compliance in good faith.
able establish a limited partnership?
Does the failure to record the certificate in the SEC vary
So according to the law, substantial compliance in good the liability of the partners in a limited partnership?
faith. Meaning, di kailangan strict compliance.
There is this case where si A and B gumawa ng limited
What is the rule if there is no substantial compliance? partnership. Ang contribution ni A ay pera, ang sabi ni B
nag issue sya ng promissory note tapos ireturn yung (2) Subsequently, but within a sufficient time before
investment. So they created a limited partnership. At the the statement was relied upon to enable him to cancel
time na nanigil na si A, ang sinabi ni B “wala pa mang or amend the certificate, or to file a petition for its
limited partnership because there was a failure to record it cancellation or amendment as provided in Article 1865.
with the SEC. So walang cause of action, wala talagang
partnership” What’s your criminal liability if there is falsification in a
sworn statement?
Sabi ng Supreme Court, kung walang rights of third
persons na naprejudice, the contractual stipulations must Perjury. So apart from that you are also liable under the
govern. Since dun sa ginawa nilang certificate it stipulated manner in Article 1847.
na ireturn ang money after the expiry date, then that
should govern. Meaning, the nature of limited liability Any partner to the certificate containing a false statement
inter se between the partners will prevail even if there is is liable provided the following requisites are present:
no recording in the SEC. So therefore the recording is only
for purposes of third persons. 1. He knew the statement to be false at the time
he signed the certificate, or subsequently, but
Why is that so? having sufficient time to cancel or amend it or
file a petition for its cancellation or amendment,
Because how would the third person know that you are a he failed to do so;
limited partnership? There has to be a registry saying that 2. The person seeking to enforce liability has relied
these are the limited partnerships, which is only for the upon the false statement in transacting business
purposes of informing the third persons of the list of the with the partnership; and
limited partnerships. 3. The person suffered loss as a result of reliance
upon such false statement.
Art. 1845. The contributions of a limited partner may be
cash or property, but not services. So these requisites must concur for the person or the
partner who falsified particular statements may be held
liable.
Art. 1846. The surname of a limited partner shall not
So we will go later to the rights and powers of a limited
appear in the partnership name unless:
partner but if he takes part in the control of the business,
he can also be liable as a General Partner.
(1) It is also the surname of a general partner, or
(2) Prior to the time when the limited partner became Art. 1848. A limited partner shall not become liable as a
such, the business has been carried on under a name in general partner unless, in addition to the exercise of his
which his surname appeared. rights and powers as a limited partner, he takes part in
the control of the business.
A limited partner whose surname appears in a
partnership name contrary to the provisions of the first Now what do we mean when we say “he takes part in
paragraph is liable as a general partner to partnership the control of the business”?
creditors who extend credit to the partnership without
actual knowledge that he is not a general partner. We have what we call the Control Test.
So if you are a limited partner and your name is included Such control contemplates active participation in the
management of the partnership business and does not
in the partnership name, you can be liable as a General
Partner to those creditors or third parties who extended comprehend the mere giving of advice to general
credit without actual knowledge that he is not a General partners.
Partner.
Because masyadong hairline distinction when we say
Please take note that actual knowledge ang kailangan. So takes part in the control of the business. So kung expert
talaga yung LIMITED PARTNER, can I not ask an advice
you cannot make use of the defense na “uy, narecord
man” since the record is only a constructive notice. This from him for the business? Let’s say lawyer sya tpos may
provision talks of actual knowledge. problema ang business, kailangan pa ba kumuha ako ng
consultant? Di ba pwedeng magpa-advise na lng ako sa
Liability for false statement in certificate kanya? Would that constitute control? Sabi ng lawyer “NO
NO NO, I will not give you advice because that would
Art. 1847. If the certificate contains a false statement, mean I’m participating in the control of the business.” So
one who suffers loss by reliance on such statement may it is clear. It does not comprehend the mere giving of
hold liable any party to the certificate who knew the advice to general partners.
statement to be false:
The limited partner takes part in the management of
(1) At the time he signed the certificate, or the business and is liable generally for the firm’s
obligations where:
1.) The business of the partnership is in fact carried on by a signing A was on vacation outside of the country. Afraid
people chosen by the limited partners; that B might change the terms, A contacted C (limited
partner) to sign the agreement. Nagsign lang sya ng lease
Kung bata-bata sa limited partner ang mga managing agreement kasi wala yung General Partner.
partners then effectively they are liable for the firm’s
obligations as general partner. Now would that mean that that signing limited partner
was already taking part in the control of the business?
2.) By the terms of the contract between the parties, an
appointee of the limited partner becomes the directing So they used the reliance test in saying that it does not
manager of the firm; automatically. You have to know whether or not there
was reliance or the limited partner can be blamed for
Because again we have a rule that what you cannot do holding himself out as a GENERAL PARTNER.
directly, you should not do indirectly. So you cannot say
that since I’m not allowed to participate so maglagay na Kung sinabi nya before signing “Uy, for the record I’m only
lang ako ng tao which is reporting for me, ako din yung a limited partner.” So there is no reliance and you cannot
nagadirect sa kanyang activities. So that will be construed blame the limited partner then that LIMITED PARTNER
also as taking part in the management of the business. may not be held liable.
3.) The limited partner purchases the entire property of Admission of additional limited partners.
the partnership, taking title in himself and then carries on
the business in his own name and for his own exclusive Art. 1849. After the formation of a limited partnership,
benefit. additional limited partners may be admitted upon filing
an amendment to the original certificate in accordance
So these are just examples of what is considered as taking with the requirements of Article 1865.
part in the management of the business.
So you can file an amendment to your sworn certificate.
The interference contemplated is with respect to an Remember the sworn certificate that you filed and put on
existing LIMITED PARTNER. A limited partner is not record with the SEC, you can amend it to add additional
subject to general liability for taking part in the partners.
management of the firm because he settles its affairs
after dissolution. Rights, powers, and liabilities of a general partner.
Ang meaning ng “control of the business” is a business Art. 1850. A general partner shall have all the rights and
which is existing. So kung dissolution na sya, it doesn’t powers and be subject to all the restrictions and
mean na kung ang limited partner nagliliquidate and liabilities of a partner in a partnership without limited
settles the affairs after dissolution, that doesn’t mean that partners.
that partner is taking part in the control of the business.
However, without the written consent or ratification of
Now, here’s this Dutch Supreme Court who also gave the the specific act by all the limited partners, a general
the concept of the Reliance Test. Bago lang to, 2015. This partner or all of the general partners have no authority
is a landmark case actually. Ang tawag sa case na to is in to:
Dutch eh masyadong mahirap ipronounce.
(1) Do any act in contravention of the certificate;
“RELIANCE TEST”
(2) Do any act which would make it impossible to carry
In the event na tanungin kayo sa Bar, what is reliance test on the ordinary business of the partnership;
in relation to Limited Partnership?
(3) Confess a judgment against the partnership;
When having to decide if a limited partner is to become
liable for the consequences of holding himself out as a (4) Possess partnership property, or assign their rights
GENERAL PARTNER, the Court cannot take into account in specific partnership property, for other than a
if a third party knew or was under the impression that the partnership purpose;
partner concerned is not a GENERAL PARTNER. So there
has to be reliance for there to have liability. (5) Admit a person as a general partner;
Secondly, the court needs to take into account if the (6) Admit a person as a limited partner, unless the right
limited partner can be blamed for holding himself out as a so to do is given in the certificate;
GENERAL PARTNER.
(7) Continue the business with partnership property on
What happened in this case is eto: the death, retirement, insanity, civil interdiction or
insolvency of a general partner, unless the right so to
The partnership decided to continue an agreement which do is given in the certificate.
is of the same terms and conditions. But on the day of the
(6) Admit a person as a limited partner, unless the right A limited partnership is formed when there is substantial
so to do is given in the certificate; compliance in good faith with the requirements of the
law. If not complied with, the limited partner will have the
Take a look at your provisions on your certificate, diba you liability of a general partner as to third persons. However,
can stipulate that there is a right to admit a limited Article 1852 provides for an exemption.
partner? “(k) The right, if given, of the partners to admit
additional limited partners;” Art. 1852. Without prejudice to the provisions of Article
1848, a person who has contributed to the capital of a
So pag nakalagay yan sa sworn certificate mo and then business conducted by a person or partnership
you are going to admit, THERE IS NO NEED FOR erroneously believing that he has become a limited
CONCURRENCE. Exception sya na kailangan ng partner in a limited partnership, is not, by reason of his
concurrence ng partners. exercise of the rights of a limited partner, a general
partner with the person or in the partnership carrying
Now kapag wala yung right na nakalagay dun sa sworn on the business, or bound by the obligations of such
certificate tapos nag admit ka ng additional person as a person or partnership, provided that on ascertaining
limited partner, then you need to have the concurrence of the mistake he promptly renounces his interest in the
the partners. Please take note, it’s the written consent or profits of the business, or other compensation by way
ratification of the specific act by all the limited partners. of income.
So it has to be written.
For the limited partner, let’s say may partnership but
Now if General Partner naman ang inadmit, even if that
there was failure to substantially comply with the laws so
right is included in your sworn certificate, you still have to
there becomes general partnership. But still the limited
have the concurrence of everybody including the limited
partner can still be exempted from liability as general
partners.
partner if he complies with the following:
(7) Continue the business with partnership property on
1.) On ascertaining the mistake, he promptly renounces
the death, retirement, insanity, civil interdiction or
his interest in the profits of the business or other
insolvency of a general partner, unless the right so to
compensation by way of income;
do is given in the certificate.
2.) His surname does not appear in the partnership name;
Similar. So that is why you have to know which rights are
and
given or stated in the certificates.
3.) He does not participate in the management of the
Rights of a limited partner.
business.
Art. 1851. A limited partner shall have the same rights Now if wala sa 2 and 3 but upon knowing that there was a
as a general partner to: mistake he did not renounce his interest in the profits or
compensation by way of income, he will still be liable as a
(1) Have the partnership books kept at the principal
GENERAL PARTNER.
place of business of the partnership, and at a
reasonable hour to inspect and copy any of them; Can one person be both a General and a LIMITED
PARTNER? Can you get the best of both worlds?
(2) Have on demand true and full information of all
things affecting the partnership, and a formal account Article 1853 provides…
of partnership affairs whenever circumstances render it
just and reasonable; and Art. 1853. A person may be a general partner and a
limited partner in the same partnership at the same
(3) Have dissolution and winding up by decree of court.
time, provided that this fact shall be stated in the
certificate provided for in Article 1844.
A limited partner shall have the right to receive a share
of the profits or other compensation by way of income,
A person who is a general, and also at the same time a
and to the return of his contribution as provided in
limited partner, shall have all the rights and powers and
Articles 1856 and 1857.
be subject to all the restrictions of a general partner;
except that, in respect to his contribution, he shall have
These are the rights of a limited partner. the rights against the other members which he would
have had if he were not also a general partner.
Can the limited partner dissolve the partnership?
Pwede nyang idissolve BUT BY DECREE OF COURT. Please take note that your right lang is with regard to
other members of the partnership.
Status of partner when there is failure to create an LP
So what do we mean when we say, “xxx in respect to his
contribution, he shall have the rights against the other
members which he would have had if he were not also a 1.) Receiving or holding as collateral security any
general partner”? partnership property; or
So can a general partner who is also a limited partner limit 2.) Receiving any payment, conveyance, or release from
his liability to the amount of his contribution? Is that what liability if it will prejudice the right of third persons.
this phrase means? He is limited as to his liability? Now,
we’ve said yesterday that once a limited partner takes This implies that in the order of priority, priority parin ang
part of the active management of the business, then he third party creditors, next ang limited partner, bago ang
can be liable as a general partner. Does that mean that in GENERAL PARTNER.
this particular type of a partner, he can manage and at the
same time his liability is limited as to his contribution? Please take note that diba a LIMITED PARTNER has the
Does this person has the best of both worlds? Meaning he right to ask for the return of the contributions. Now if this
can manage and at the same time his liability is limited as will prejudice third persons, he cannot do that. The rights
to his contribution? to receive any payment, conveyance or release from
liability must give way to the rights of third persons.
Now please take note that this provision does not mean Dapat magparaya.
that his liability is limited as to his contribution. It only
means that he has the power or the right to have his Any violation of the prohibition will give rise to the
contribution returned. That is the only right that he had presumption that it has been made to defraud partnership
with respect to a limited partner. Why is that so? Because creditors.
if he has the right to limited liability, then it will run
contrary to the concepts that we have discussed Although a limited partner is a passive investor, still the
yesterday. Once he takes part of the management of the rights of partnership creditors are preferred.
partnership, he is liable without limitation.
Loan and other business transactions with limited

partnership vis-a-viz limited partner. Now we have what we call Preferred Limited Partners.
Limited partner ka na nga lang, preferred ka pa.
Art. 1854. A limited partner also may loan money to
and transact other business with the partnership, and, Art. 1855. Where there are several limited partners the
unless he is also a general partner, receive on account members may agree that one or more of the limited
of resulting claims against the partnership, with partners shall have a priority over other limited
general creditors, a pro rata share of the assets. No partners as to the return of their contributions, as to
limited partner shall in respect to any such claim: their compensation by way of income, or as to any
other matter. If such an agreement is made it shall be
(1) Receive or hold as collateral security and partnership stated in the certificate, and in the absence of such a
property, or statement all the limited partners shall stand upon
equal footing.
(2) Receive from a general partner or the partnership
any payment, conveyance, or release from liability if at Preferred limited partners.
the time the assets of the partnership are not sufficient
to discharge partnership liabilities to persons not This must be indicated in the certificate. In the absence of
claiming as general or limited partners. the indication in the certificate, all limited partners stand
on equal footing. So this has to be indicated in the
The receiving of collateral security, or payment, certificate. Meaning if the partners have verbally agreed
conveyance, or release in violation of the foregoing that some of the limited partners are preferred but that
provisions is a fraud on the creditors of the partnership. fact was not indicated in the certificate, still there is no
preference. So the indication is mandatory. In the absence
So these are the only allowable transactions. A limited of such, they will be treated equally.
partner can:
By an agreement of all the members (general and limited)
1.) Grant loans to the partnership; stated in the certificate, priority may be given.
2.) Transact other business with it; What are the priorities or the preference of a preferred
limited partner?
3.) Receive a pro rata share of the partnership assets with
general creditors if he is not also a general partner. 1.) Return of their contributions;
So in effect para lang talaga syang investor. There is no 2.) Their compensation by way of income; or
conflict of interest.
3.) Any other matter.
The prohibited transactions are the following:
In the absence of such statement in the certificate, even if A limited partner may have the partnership dissolved
there is an agreement, all the limited partners shall stand and its affairs wound up when:
on equal footing in respect to these matters. (1) He rightfully but unsuccessfully demands the return
of his contribution, or
So you can actually designate that “eto, big investor to. So (2) The other liabilities of the partnership have not been
we will give him/her the right na mauna sa return of paid, or the partnership property is insufficient for their
contribution, na mabigyan ng certain percentage higher payment as required by the first paragraph, No. 1, and
than the other limited partners” or any other matter for as the limited partner would otherwise be entitled to the
long as these are stated in the certificate. If these are not return of his contribution.
stated in the certificate, there can be no preference. All
the limited partners should be treated equally. One of the rights of the limited partnership is to have his
contribution returned.
August 4, 2018
So what are the requisites? Can he demand it
Mondragon, Nice
unconditionally?
Suarez, Pearlie Joy No.
Compensation of limited partner Requisites for return of contribution of limited partner
1.) All liabilities of the partnership have been
Art. 1856. A limited partner may receive from the paid or if they have not yet been paid, the assets
partnership the share of the profits or the of the partnership are sufficient to pay such
compensation by way of income stipulated for in the liabilities;
certificate; provided that after such payment is made, 2.) The consent of all members (general and
whether from property of the partnership or that of a limited) has been obtained except when the
general partner, the partnership assets are in excess of return may be rightfully demanded; and
all liabilities of the partnership except liabilities to 3.) The certificate is cancelled or so amended as
limited partners on account of their contributions and to set forth the withdrawal or reduction of the
to general partners. contribution.
Art. 1857. A limited partner shall not receive from a When can the return be rightfully demanded?
general partner or out of partnership property any part When can the limited partner rightfully demand the return
of his contributions until: of his contribution? What if nagdemand siya ng return?
Then ayaw ng isang general partner na magreturn ng
(1) All liabilities of the partnership, except liabilities to contribution? Because look at the number 2 requisite. Kung
general partners and to limited partners on account of ayaw ng isa, doon siya sa exception, when the return may
their contributions, have been paid or there remains be rightfully demanded.
property of the partnership sufficient to pay them;
(2) The consent of all members is had, unless the return When return a matter of right
of the contribution may be rightfully demanded under (don’t need the consent of all members)
the provisions of the second paragraph; and • On the dissolution of the partnership; or
(3) The certificate is cancelled or so amended as to set • Upon arrival of the date specified in the
forth the withdrawal or reduction. certificate for the return; or
• After the expiration of the 6 months’ notice in
Subject to the provisions of the first paragraph, a writing given by him to the other partners if no
limited partner may rightfully demand the return of his time is fixed in the certificate for the return of
contribution: the contribution or for the dissolution of the
partnership.
(1) On the dissolution of a partnership; or
(2) When the date specified in the certificate for its So the statement in the certificate is very important. If there
return has arrived, or is no written date in the certificate as to the return, the
(3) After he has six months' notice in writing to all other limited partner cannot just demand the return. That limited
members, if no time is specified in the certificate, either partner has to get the consent of all members. Kay kung
for the return of the contribution or for the dissolution ayaw ng isa, pwede siya magbigay ng 6-month notice. But
of the partnership. please take note that it must be in writing, given to the other
partners.
In the absence of any statement in the certificate to the
contrary or the consent of all members, a limited So after the expiration of 6 months, let’s say January ko
partner, irrespective of the nature of his contribution, binigay yung notice. After 6 months, , he has the right to
has only the right to demand and receive cash in return demand for the return, doon na siya magfa-fall sa when
for his contribution. return can be rightfully demanded. He can demand the
return of his investment if it is not stated in the certificate,
for as long as he gives the 6-month notice. Please take note,
the other requisite for the return of the contribution, the Art. 1858. A limited partner is liable to the partnership:
certificate is cancelled or so amended as to set forth the (1) For the difference between his contribution as
withdrawal or reduction. Now the certificate has to be actually made and that stated in the certificate as
amended that there is already withdrawal. Now when we having been made; and
go to the provision of amendment, please take note that you (2) For any unpaid contribution which he agreed in the
can only amend if there is a consent of all partners. certificate to make in the future at the time and on the
conditions stated in the certificate.
So may checkmate, ayaw ng isa mag consent so nagpunta A limited partner holds as trustee for the partnership:
ako sa 6-month notice, after the 6- month notice, I have (1) Specific property stated in the certificate as
now the right to demand for my contribution, pero required contributed by him, but which was not contributed or
din sa batas na kailangan ko siya i-amend. So paano ko siya which has been wrongfully returned, and
i-amend, eh kailangan ko ang consent of all partners? (2) Money or other property wrongfully paid or
(Answer: Please see Article 1865) conveyed to him on account of his contribution.
Right of limited partner to cash in return for The liabilities of a limited partner as set forth in this
contribution article can be waived or compromised only by the
consent of all members; but a waiver or compromise
GENERAL RULE: Under the 3rd paragraph, even if a shall not affect the right of a creditor of a partnership
limited partner has contributed property, he has only the who extended credit or whose claim arose after the
right to demand and receive cash for his contribution. This filing and before a cancellation or amendment of the
is similar to your principle in general partnership. certificate, to enforce such liabilities.
EXCEPTIONS: When a contributor has rightfully received the return in

whole or in part of the capital of his contribution, he is
1.) When there is stipulation to the contrary in the nevertheless liable to the partnership for any sum, not
certificate; or in excess of such return with interest, necessary to
discharge its liabilities to all creditors who extended
Art. 1844. Two or more persons desiring to form a credit or whose claims arose before such return.
limited partnership shall:
(1) Sign and swear to a certificate, which shall Liabilities of a LIMITED PARTNER
state – xxx
(n) The right, if given, of a limited partner to a. To the partnership- The limited is liable to the
demand and receive property other than cash in partnership and not to the creditors of the partnership.
return for his contribution.
b. To partnership creditors and other partners – A
So without this statement in the certificate, he limited partner is liable for partnership obligations when:
has only the right to demand cash similar to a 1.) Contributes services;
general partnership.
Meaning he becomes liable as a general partner
2.) Where all the partners (general and limited) consent
to the return other than in the form of cash. 2.) Allows his surname to appear in name of
firm;
3.) Fails to have false statement in certificate

When limited partner may have the partnership corrected when he knew it to be false;
dissolved
1.) When his demand for the return of his If there is a false statement, he has the right to
contribution is denied although he has a right to correct it, if he did not correct it, he may be liable
such return; or as a general partner
Please refer to enumeration above for
when right to such return is present. 4.) Takes part in control of business;
2.) When his contribution is not paid although he
is entitled to its return because the other 5.) Receives partnership property as collateral
liabilities of the partnership have not been paid security, payment, conveyance, or release in
or the partnership property insufficient for their fraud of partnership creditors;
payment.
He is not allowed to receive it as a collateral, but
The limited partner must first ask the other partners to once he does so, he is liable to the partnership
have the partnership dissolved; if they refuse, then he can creditors because as an investor, compared it to a
seek the dissolution of the partnership by judicial decree. general partner, a general partner of a general
He can ask the court for the dissolution. partnership is liable directly to the creditor, but
the limited partnership is liable to the partnership
and not to the creditors of the partnership unless Art. 1859. A limited partner's interest is assignable.
he does the following instances. A substituted limited partner is a person admitted to all
the rights of a limited partner who has died or has
6.) Failure to substantially comply with legal assigned his interest in a partnership.
requirements of formation of limited An assignee, who does not become a substituted
partnership. limited partner, has no right to require any information
or account of the partnership transactions or to inspect
Because it will now be considered as a general the partnership books; he is only entitled to receive the
partnership share of the profits or other compensation by way of
income, or the return of his contribution, to which his
c. To separate creditors – Creditor of limited partner may assignor would otherwise be entitled.
also apply for a “charging order” subjecting the interest in
the partnership of the debtor partner for the payment of An assignee shall have the right to become a
his obligation. So what is the partnership interest? Profits substituted limited partner if all the members consent
and Surplus thereto or if the assignor, being thereunto empowered
by the certificate, gives the assignee that right.
An assignee becomes a substituted limited partner
Liability FOR UNPAID CONTRIBUTION when the certificate is appropriately amended in
Remember in your certificate, there can be a accordance with Article 1865.
future contribution. A limited partner is liable to
all the future contribution if agreed in the
certificate. The substituted limited partner has all the rights and
powers, and is subject to all the restrictions and
Liability AS TRUSTEE liabilities of his assignor, except those liabilities of
• Limited partner considered as trustee for the which he was ignorant at the time he became a limited
partnership for: partner and which could not be ascertained from the
1.) Specific property stated in the certificate as certificate.
contributed by him but which he had not
contributed; The substitution of the assignee as a limited partner
2.) Specific property of the partnership which does not release the assignor from liability to the
had been wrongfully returned to him; partnership under Articles 1847 and 1848.
3.) Money wrongfully paid or conveyed to him
on account of his contribution; and Assignment of limited partner’s interest
4.) Other property wrongfully paid or conveyed
to him on account of his contribution.
Effect of change in the relation of limited partners
Requisites for waiver or compromise of liabilities So the interest of the limited partner may be
1.) Waiver or compromise is made with the consent of all assigned, it does not necessarily dissolves the partnership.
the partners; and No limited partner, however, can withdraw his
2.) The waiver or compromise does not prejudice contribution until all liabilities to creditors are paid.
partnership creditors who extended credit or whose
claims arose before the cancellation or amendment of the Rights of assignee of limited partner
certificate. Assignee is only entitled to receive the share of
The liability of the limited partner may be waived the profits or other compensation by way of income or the
provided it has complied with these requisites. return of the contribution to which the assignor would
otherwise be entitled. He has no right to require any
Liability for return of contribution lawfully received information or account of the partnership transactions or
The limited partner is liable to the partnership for the to inspect partnership books.
return of contribution lawfully received by him to pay The assignee acquires all the rights of the
creditors who extended credit or whose claim arose limited partner only when he becomes a substituted
before such return. His liability, of course, cannot exceed limited partner.
the sum received by him with interest. So please differentiate an assignee to a
substituted limited partner. A substituted limited partner is
So you have already received your contribution tapos may for all intents and purposes a limited partner, substituted
creditor kang unpaid, so he is liable to that to the extent nga lang siya. Meaning, hindi siya doon sa original. An
only of the sum received by him. So the principle here is he is assignee is not a limited partner, he is merely an assignee of
liable to the partnership creditor as to the amount of his the interest of the limited partner. They don’t have the same
contribution. Kahit na receive nya na lawfully, he is still rights.
liable for that.
When assignee may become substituted limited
partner
Requisites:
1.) All the members must consent to the The interest may be redeemed with the separate
assignee becoming a substituted limited partner property of any general partner, but may not be
or the limited partner, being empowered by the 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
2.) The certificate must be amended; be deemed exclusive of others which may exist.
3.) The certificate as amended must be
registered in the SEC.
Nothing in this Chapter shall be held to deprive a
Liability of substituted partner and assignor limited partner of his statutory exemption.
Substituted limited partner is liable for all the
liabilities of his assignor except only those of which he was Please take note that redemption is same with the general
ignorant at the time he became a limited partner and partner, but in these particular instances, it cannot be
which could not be ascertained from the certificate. redeemed by a particular partnership. A limited partner
So if there is a concealed liability, he can argue can also invoke his statutory exception with regard to his
that he is ignorant at the time he was substituted. interest.
So please take note that there must be an
amendment of the certificate kasi initially si A ang limited Art. 1863. In setting accounts after dissolution the
partner tapos pag ina-assign nya kay B then B gets the liabilities of the partnership shall be entitled to
consent, the certificate must be amended and include the payment in the following order:
name of the substituted limited partner.
(1)Those to creditors, in the order of priority as
Art. 1860. The retirement, death, insolvency, insanity provided by law, except those to limited partners on
or civil interdiction of a general partner dissolves the account of their contributions, and to general partners;
partnership, unless the business is continued by the (2)Those to limited partners in respect to their share of
remaining general partners: the profits and other compensation by way of income
(1) Under a right so to do stated in the certificate, or on their contributions;
(2) With the consent of all members. (3)Those to limited partners in respect to the capital of
their contributions;
If limited partner ang nag retire, namatay of naging (4)Those to general partners other than for capital and
insolvent, or naging insane, it does not dissolve the profits;
partnership, unless he is the only limited partner. Kasi if he (5) Those to general partners in respect to profits;
dies, and he is only the limited partner, the partnership (6) Those to general partners in respect to capital.
becomes a general partnership. Kasi there has to be at
least one general partner and one limited partner. Subject to any statement in the certificate or to
subsequent agreement, limited partners share in the
If the business is continued by the remaining partners partnership assets in respect to their claims for capital,
under the rights given in the certificate or with the and in respect to their claims for profits or for
consent of all members, no dissolution but certificate compensation by way of income on their contribution
must be amended for limited partners to still avail of respectively, in proportion to the respective amounts of
limited liability. Go back to Art 1844, there can be an such claims
indication in the certificate that in the event na mawala
ang isang partner, they can continue the partnership. Dissolution of a limited partnership
Art. 1861. On the death of a limited partner his The partnership liabilities shall be settled in the following
executor or administrator shall have all the rights of a order:
limited partner for the purpose of setting his estate,
and such power as the deceased had to constitute his 1.) Those due to creditors, including limited
assignee a substituted limited partner. partners, except those on account of their
The estate of a deceased limited partner shall be liable contributions, in the order of priority as provided
for all his liabilities as a limited partner. by law;
2.) Those due to limited partners in respect to

their share of the profits and other
compensation by way of income on their
Art. 1862. On due application to a court of competent
contributions;
jurisdiction by any creditor of a limited partner, the
court may charge the interest of the indebted limited 3.) Those due to limited partners for the return
partner with payment of the unsatisfied amount of such of the capital contributed;
claim, and may appoint a receiver, and make all other
orders, directions and inquiries which the 4.) Those due to general partners other than
circumstances of the case may require. that for capital and profits;
5.) Those due to general partners in respect to

profits; and
Art. 1865. The writing to amend a certificate shall:
6.) Those due to general partners for the return
of the capital contributed. (1) Conform to the requirements of Article
1844 as far as necessary to set forth clearly the change
Partnership creditors are entitled to first distribution, in the certificate which it is desired to make; and
followed by limited partners who take priority over (2) Be signed and sworn to by all members,
general partners. and an amendment substituting a limited partner or
adding a limited or general partner shall be signed also
Note that in a general partnership, the claims of the by the member to be substituted or added, and when a
general partners in respect of capital enjoy preference limited partner is to be substituted, the amendment
over those in respect of profits. shall also be signed by the assigning limited partner.
Diba doon sa general partnership dissolution, nauna ang
The writing to cancel a certificate shall be signed by all
return of capital bago profits, ditto, nauna ang profits bago
members.
ang return of capital.
A person desiring the cancellation or amendment of a
Shares of limited partners
certificate, if any person designated in the first and
In the absence of any statement in the
second paragraphs as a person who must execute the
certificate as to the share of the profits which each partner
writing refuses to do so, may petition the court to order
shall receive by reason of his contribution and subject to
any subsequent agreement, limited partners share in the a cancellation or amendment thereof.
partnership assets in respect to their claims for capital and
If the court finds that the petitioner has a right to have
profits in proportion to the respective amounts of such
the writing executed by a person who refuses to do so,
claims. So if it is of different proportion, it must be stated
it shall order the Office of the Securities and Exchange
in the certificate.
Commission where the certificate is recorded, to record
the cancellation or amendment of the certificate; and
Art. 1864. The certificate shall be cancelled when the
when the certificate is to be amended, the court shall
partnership is dissolved or all limited partners cease to
also cause to be filed for record in said office a certified
be such.
copy of its decree setting forth the amendment.
A certificate shall be amended when:
A certificate is amended or cancelled when there is filed
(1) There is a change in the name of the partnership or
for record in the Office of the Securities and Exchange
in the amount or character of the contribution of any
Commission, where the certificate is recorded:
limited partner;
(2) A person is substituted as a limited partner;
(1) A writing in accordance with the provisions
(3) An additional limited partner is admitted;
of the first or second paragraph, or
(4) A person is admitted as a general partner;
(2) A certified copy of the order of the court in
(5) A general partner retires, dies, becomes insolvent or
accordance with the provisions of the fourth paragraph;
insane, or is sentenced to civil interdiction and the
(3) After the certificate is duly amended in
business is continued under Article 1860;
accordance with this article, the amended certified shall
(6) There is a change in the character of the business of
thereafter be for all purposes the certificate provided
the partnership;
for in this Chapter.
(7) There is a false or erroneous statement in the
certificate;
Requirements for amendment and cancellation of
(8) There is a change in the time as stated in the
certificate
certificate for the dissolution of the partnership or for
If you want to amend, you conform with Art
the return of a contribution;
1844, meaning signed and sworn. Now, kung magsu-
(9) A time is fixed for the dissolution of the partnership,
substitute ka, both of them (nagpapa-substitute and
or the return of a contribution, no time having been
nagsubstitute) must sign with all the partners.
specified in the certificate, or
You have the problem earlier, what if ayaw nga
(10) The members desire to make a change in any other
nila and you gave the 6-month notice, and after the 6-
statement in the certificate in order that it shall
month notice, what would you do? If ayaw ng isang
accurately represent the agreement among them.
partner na i-return ang investment mo? Look at this
paragraph:
When certificate shall be cancelled or amended
You can only cancel the certificate for two reasons: A person desiring the cancellation or
1. Dissolution amendment of a certificate, if any person
2. All limited partners seized to exist designated in the first and second paragraphs
But you have many grounds for its amendment. as a person who must execute the writing
refuses to do so, may petition the court to order A:

a cancellation or amendment thereof.
What is the rule on liability?
So if the court finds that the petitioner has the
right for the return of contribution, you have complied a. Contractual— joint
with all the requisites na magkakaroon ka ng right, the b. Torts— solidary
court will order directing the office of the SEC where the
certificate is recorded to record the cancellation or the
amendment of the certificate. In this case, there is no Q: Is there an instance wherein B [innocent co-general
consent necessary kasi si court na ang mago-order. partner] may be held liable to the C [limited partner]? If
This is a petition, this has to be tried. Then after everyone is solvent? Is it absolute?
that magkakaroon ng order.
MISKE V. COXETER
What should you do if there is a court order? You file:
(1) A writing in accordance with the provisions of the first FACTS
or second paragraph, or In 1985, James Coxeter, Robert Bisno, and
(2) A certified copy of the order of the court in accordance Trans-Action Financial Corporation (“TAFC”) formed a
with the provisions of the fourth paragraph; California limited partnership (the “LP”) for the purpose of
(3) After the certificate is duly amended in accordance redeveloping certain properties. Both men served as
with this article, the amended certified shall thereafter be general partners of the LP, and solicited investments from
for all purposes the certificate provided for in this Chapter. third parties in exchange for limited partnership interests
in the LP.
Art. 1866. A contributor, unless he is a general partner, Mr. Bisno solicited and obtained investment in
is not a proper party to proceedings by or against a the LP from Haldir, Ltd. (“Haldir”). Mr. Bisno used fraud
partnership, except where the object is to enforce a and deceit to induce Haldir’s investment, including
limited partner's right against or liability to the misrepresenting the purchase price of a key asset and
partnership. failing to disclose his embezzlement of $470,000 in LP
funds. After its investment failed to produce results,
A limited partner is a mere contributor. Haldir sold its limited partnership stake to Berkeley
Commercial Center, LLC (“Berkeley Center”). Once
When limited partner a proper party apprised of Mr. Bisno’s fraud, Haldir assigned its fraud
• Where the object is to enforce limited partner’s claims to George Miske.
individual rights against the partnership, and to recover Mr. Coxeter performed his fiduciary duties to
damages for violation of such right. the LP faithfully, and was unaware of Mr. Bisno’s fraud
• When it’s a proceeding to enforce his liability to the until aggrieved limited partners sued the LP.
partnership; Mr. Miske sued the LP, Mr. Bisno and Mr. Coxeter for
• Creditors may go against him if he had withdrawn sums fraud in the inducement, and sought damages and
from the capital of the firm with outstanding debts on a attorney’s fees.
voluntary dissolution.
There is no direct link between partnership creditors to RULING
the limited partner, but when it comes to the rights of a The California court ruled that Mr. Bisno’s
limited partner, he is a proper party fraudulent concealment occurred before Haldir purchased
its limited partnership interest in the LP.
QUESTION: When a limited partner suffers loss, there is a At the moment of purchase, Haldir is in the
misappropriation of a partnership funds by one general same shoes as any defrauded innocent third party
partner, is the other general partner liable jointly to the purchasing a partnership asset. It had not yet retained any
limited partner? benefits from the partnership and had not yet begun
operating under the LPA. The fact that a limited partner
A— wrongfully misappropriates FUNDS [erring partner] discovers he or she was defrauded by a general partner
after becoming a limited partner is inconsequential where
B – innocent GENERAL PARTNER the fraud occurred when the limited partner was still an
“innocent third party.” Thus, Mr. Coxeter is jointly and
X – 3rd PERSON severally liable for Mr. Bisno’s fraud.
LIABILITY: 90k
What does that mean?
C— Limited Partner If the fraud was committed before he became a
limited partner, he stands as the same footing as the 3rd
Q: What if A is insolvent? Can the limited partner go person. Since our rule, the 3rd person can go after each of
after the general partner? Can you allow the general them whether or not, innocent or guilty.
partner to reimburse C? If the fraud, misrepresentation or wrongful act
was done before he became a limited partner, he stands in
the same footing as the 3rd person. Hence, he can demand (1) The amount of the original contribution of each limited
even from an innocent co-general partner because the partner, and the time when the contribution was made;
limited partner is in the same footing as a 3rd person and
before he became a limited partner even if at the time he
discovered it, he is already a limited partner. But the fraud (2) That the property of the partnership exceeds the
or misrepresentation occurred before he was a limited amount sufficient to discharge its liabilities to persons not
partner. That is an exception that deviates to the general claiming as general or limited partners by an amount
rule that an innocent co-partner cannot be held liable. greater than the sum of the contributions of its limited
partners.
GENERAL RULE— in a limited partnership, innocent
general partners are not liable to limited partners for the A limited partnership formed under the law prior to the
misdeeds of another general partner if the fraud was effectivity of this Code, until or unless it becomes a limited
committed after the limited partner exists. partnership under this Chapter, shall continue to be
governed by the provisions of the old law.
The innocent general partner is not liable.
Now, what if the erring partner is insolvent?
A – INSOLVENT erring partner
B – INNOCENT GENERAL PARTNER
C –LIMITED PARTNER – contribution: 30k

I paid the 120k.
X – 120k
Q: When a limited partner suffers loss because of the

misappropriation of partnership funds by one general
partner, is the other general partner liable jointly to the
limited partner for such loss?
KAZANJIAN V. RANCHO ESTATES, LTD.
A general partner responsible for

misappropriation of funds is obligated to return the funds
to the partnership. When this obligation is uncollectible,
its effect is the same as any other loss through imprudent
or unsuccessful partnership operation.
It is a loss which, being uncollectible, has
impaired partnership capital. The obligation to share
losses according to the division of profits applies where
the losses result in consumption of capital of the business.
Innocent general partners that are not liable to
limited partners for losses caused by other general
partner’s misappropriations are obligated upon
dissolution to contribute to the partnership their share of
the losses attributable to the uncollected misappropriated
funds.
NOTE— they considered this as a loss.
Provisions for existing limited partnerships—

ARTICLE 1867. A limited partnership formed under the
law prior to the effectivity of this Code, may become a
limited partnership under this Chapter by complying with
the provisions of article 1844, provided the certificate sets
forth:

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BUSINESS ORGANIZATION-1 || 2nd Exam

From the lectures of Atty. Raymund Ong-Abrantes, CPA

July 28, 2017 be particular or universal, and a particular partnership may

“degree of continuity”— there is habituality Similar with partnership

Similar with partnership

NO FOREIGN EQUITY ALLOWED:  Preferred Areas of Investments (BOI Registered

LIST B FINANCING JOINT VENTURES

 Build-and-Transfer Scheme (BT)

Build, then naglease sya, saka ite-turn over. Ito yung

CHARACTERISTICS of Limited Partnership

(c) The location of the principal place of business;

magcontribute sya The firm becomes a general partnership only as to its

Loan and other business transactions with limited

EXCEPTIONS: When a contributor has rightfully received the return in

3.) Fails to have false statement in certificate

2.) Those due to limited partners in respect to

5.) Those due to general partners in respect to

refuses to do so, may petition the court to order A:

Now, what if the erring partner is insolvent?

A – INSOLVENT erring partner

B – INNOCENT GENERAL PARTNER

C –LIMITED PARTNER – contribution: 30k

Q: When a limited partner suffers loss because of the

KAZANJIAN V. RANCHO ESTATES, LTD.

A general partner responsible for

NOTE— they considered this as a loss.

Provisions for existing limited partnerships—

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