Chapter 3

Article 1828 – Definition of dissolution

Article 1829 – Definition of winding up

Article 1830 – Causes of dissolution (1) w/o violation of the agreement; (2) contravention of the
agreement; (3) event which makes the business unlawful; (4) loss of specific thin; (5) death; (6)
insolvency; (7) civil interdiction; (8) decree of the court accrdg. to 1700a and 1701a

Article 1831 – On application by or for a partner, the court shall decree a dissolution (1) insane; (2)
incapable of performing his part; (3) guilty of such conduct; (4) willfully or persistently commits a breach
of the partnership agreement; (5) carried on at a loss; (6) other circumstances render a dissolution
equitable. On the application of the purchaser of a partner’s interest under Art. 1813 or Art. 1814: (1)
After the termination of the specified term or particular undertaking; (2) At any time if the partnership
was at will when the interest was assigned or when the charging order was issued

Article 1832 – Dissolution terminates all authority of any partner to act for the partnership except for
winding up and completing transactions. (1) w/ respect to the partners: (a) dissolution is not by the act,
insolvency, or death; (b) caused by (a) in cases where Article 1833 so requires; (2) w/ respect to persons
not partners in Article 1834

Article 1833 – General rule: Any partner is liable to his co-partners for his share of any liability created
by the partnership if the dissolution is caused by the act, death or insolvency UNLESS (1) the cause of
the dissolution is the act of a partner and the acting partner had knowledge of such dissolution; (2) the
cause of the dissolution is the death or insolvency of a partner and the acting partner had knowledge or
notice of the death or insolvency

Article 1834 – Rules on whether the partner can bind the partnership or not after dissolution: CAN: (1)
by an act for winding up and completing unfinished transaction; (2) any binding transaction if dissolution
had not taken place PROVIDED: (a) had extended credit to the partnership prior to the dissolution
without the knowledge or notice of the dissolution or (b) though no extension, had known the
partnership prior to the dissolution and having no knowledge or notice of the dissolution

The liability of the partnership for (2)^ shall be satisfied out of partnership assets alone

CANNOT: (1) dissolved due to unlawfulness, unless the act is for winding up, (2) insolvency, (3) no
authority to wind up partnership affairs EXCEPT by a transaction of: (a) had extended credit to the
partnership prior to the dissolution without the knowledge or notice of the dissolution or (b) though no
extension, had known the partnership prior to the dissolution and having no knowledge or notice of the
dissolution

This article should not affect the liability in Art. 1825

Article 1835 – Dissolution does not discharge the existing liability of any partner; if discharged it should
be by agreement among the involved parties and can be implied. The liability of a deceased partner may
be paid through his properties after his personal debts are considered.
Article 1836 – The winding up of the partnership may be done by the partners themselves (designated
by the agreement or those who have not wrongfully dissolve the partnership) or by a legal
representative or assignee of any partner under the control and direction of the proper court.

Article 1837 – Dissolution is caused in any way (except in contravention): each partner may apply
partnership property to discharge its liabilities, and the surplus applied to pay in cash the net amount
owing to the respective partners. Dissolution is caused by expulsion of a partner – if the expelled partner
is discharged from all partnership liabilities, he shall receive in cash only the net amount due him from
the partnership.

Dissolution is caused in contravention of the partnership agreement, the rights of the partners:

(1) Each partner who has not caused dissolution wrongfully shall have: (a) all the rights mentioned
above, (b) the right to damages for breach of the agreement from the one who caused wrongfully;

(2) If all of them desire to continue the business in the same name either by themselves or jointly with
others, may do so, during the agreed term. They may also possess the partnership property, if they
secure the payment by bond approved by the court or if they pay to any partner who caused wrongfully
the amount less damages recoverable ;

(3) A partner who caused the dissolution wrongfully: (a) have the partnership property applied to
discharged the partnership liabilities and to receive in cash his share of surplus less damages he caused
(b) to have the value of his interest less any damaged he caused to his co-partners, ascertained and paid
in cash or secured by bond approved by the court and to be released from all existing and future
liabilities of the partnership

Article 1838 – Rescinded partnership contract due to fraud or misrepresentation. The party entitled to
rescind is, without prejudice to any other right, entitled: (1) Right of a lien on, or retention of, the
surplus of partnership property after satisfying partnership liabilities for any sum of money paid or
contributed by him; (2) Right to subrogation in place of partnership creditors after payment of
partnership liabilities; and (3) Right of indemnification by the guilty partner against all debt and liabilities
of the partnership.

Article 1839 – The rules applied in settling accounts between the partners after dissolution: (1) The
assets of the partnership are the partnership property and the contributions of the partners necessary
for the payment of all the liabilities;

(2) The liabilities of the partnership are RANKED in order of payment:

1 – Those owing to creditors other than partners;

2 – Those owing to partners other than for capital and profits;
3 – Those owing to partners in respect of capital and profits;
4 – Those owing to partners in respect of profits;

(3) The assets shall be applied in the order of their declaration to the satisfaction of the liabilities; (4) The
partners shall contribute the amount necessary to satisfy the liabilities (Art. 1797); (5) Assignee for the
benefit of creditors or any person assigned by the court shall have the right to enforce the contributions
in the next numbers; (6) Any partner/his legal representative shall have the right to enforce the
contributions specified in 4th to the extent of the amount which he has paid in excess of his share to the
liability; (7) The individual property of the deceased partner shall be liable for the contributions in 4 th; (8)
Partnership property on court: Partnership creditors shall have the priority on it; For individual property
on court: separate creditors, saving the rights of lien or secured creditors;

(9) Insolvent partner or his estate became insolvent: the claim is RANKED

1 – Those owing to separate creditors;

2 – Those owing to partnership creditors;
3 – Those owing to partners by way of contribution;

Article 1840 – Creditors of the dissolved partnership are also creditors of the person or partnership
continuing the business in:

(1) New partner admission/any partner retires and assigns (or the rep. of the deceased partner
assigns) his rights in partnership property to 2/more partners or 1/more partner(s) and 1/more
third persons.
(2) All but one partner retire and assign (or rep. of the deceased partner assigns) their rights in
partnership property to the remaining partner.
(3) Any partner retires or dies and the business of the dissolved partnership is continued as set
forth in (1) and (2) with the consent of the retired partners or the rep. of the deceased partner,
BUT WITHOUT any assignment of his right in partnership property.
(4) All partners/their reps assign their rights in partnership property to one or more third persons
who promise to pay the debts and who continue the business of the dissolved partnership.
(5) Any partner wrongfully causes a dissolution and the remaining partners continue the business
(Art. 1837)
(6) A partner is expelled and the remaining partners continue either alone or with others

The liability of a third person becoming a partner to the creditors shall be satisfied out of the
partnership property only unless there is a stipulation to the contrary.

The creditors of the dissolved partnership has a PRIORITY over separate creditors over the interest in
partnership or in partnership property of the retiring, deceased, or rep of the deceased partner.

When there is fraud, the rights of the creditors are not modified using this article.

Using the name of the deceased person or the old partnership name shall not make the individual
property of a deceased partner liable for any debts of the person or partnership.

Article 1841 – The rights of the retiring partner or the legal representative of the deceased when the
partnership continued after dissolution: (1) to have the value of the interest of the retiring or deceased
partner in the partnership ascertained as of the date of dissolution; (2) To receive thereafter, as an
ordinary creditor, an amount equal to the value of his share in the dissolved partnership with interest/
at his option, the profits attributable to the use of his rights.

Article 1842 – In the absence of any agreement, accrual and prescription of a partner’s right to account
his interest against the winding up partner, the surviving partner, or the person/partnership continuing
the business

Chapter 4
Article 1843 – Definition of limited partnership

Article 1844 – Requirements for Limited Partnership: (RIGHTS)

(1) Sign and swear to a certificate: the name of partnership with the word “Limited”, character of the
business, location, name and place of residence of each member (general and limited), term of
existence, amount of cash contribution and the agreed value of other property by limited partner(s),
additional contributions to be made and the time/events on the happening of which they shall be made,
time when the contribution of limited partners is to be return, share of profits/other compensation by
the contribution of the limited partner(s), right to substitute an assignee and the terms and conditions
of the substitution, the right of the partners to admit additional limited partners, the right to be
prioritized for contribution/compensation by income/nature of such priority, the right of the remaining
general partner(s) to continue the business on the death, retirement, civil interdiction, insanity, or
insolvency of a general partner, the right of a limited partner to demand and receive property other
than cash in return of his contribution, and file for record the certificate in the Office of SEC.

Article 1845 – The contributions of a limited partner = cash or other property NOT services

Article 1846 – Surname of a limited partner shall not appear in the partnership UNLESS: surname of a
general partner, prior to the time when the limited partner became, the business had been carried
under a name in which his surname appeared. If it appeared he became a general partner in the eyes of
the partnership creditors which will make him liable WITHOUT THE ACTUAL KNOWLEDGE of the
creditors

Article 1847 – Liability for false statement in certificate

Article 1848 – Limited partners are not liable as general partners unless he takes part in the control of
the business

Article 1849 – Limited partners may be admitted even after the formation so long as there is filing of an
amendment to the original certificate in accordance with 1865.

Article 1850 – Rights, powers, and liabilities of a general partner in a limited partnership. HOWEVER,
there should be a written consent or ratification of the specific act of ALL the limited partners for them
to do: (1) do any act in contravention of the cert, (2) any act that would make it impossible to carry on
the ordinary business of the partnership, (3) confess a judgment against the partnership, (4) possess
partnership property/assign rights in specific partnership property, for other than the partnership
purpose, (5) admit a person as general, (6) admit a person as a limited, unless the right to do so is given
in the cert, (7) continue the business with the partnership property on the death, etc. of a general
partner, unless the right to do so is given.

Article 1851 – Similar rights of limited and general partners: (1) partnership books kept at the principal
place, accessible at reasonable hour to inspect and copy; (2) on demand true and full information of all
things affecting the partnership, and a formal account of partnership affairs whenever the circumstances
render it JUST and REASONABLE; (3) have dissolution and winding up by decree of the court.

Article 1852 – Exemption for Article 1848, erroneously believed he is a limited partner since he
contributed to the capital only and ascertain the mistake, renounces PROMPTLY his interests in the
profits/other compensation, his surname does not appear in the partnership name, he does not
participate in the management of business.

Article 1853 – A person can be general and limited partner as long as it is stated in the cert provided in
1844. This person has the rights of a general partner EXCEPT, that in his contribution, he shall have the
rights against the other members which he would have had if he was not a general partner

Article 1854 – ALLOWABLE transaction for limited partners: loan money and transact other business
with the partnership, and (if he is also a general) receive on account of resulting claims against the
partnership, with general creditors, a pro rata share of the assets. PROHIBITED transactions for limited
partners: (in respect to any such claim) receive/hold as collateral security any partnership property,
receive any payment, conveyance, release from liability if it will prejudice the right of third persons.
Violation of these prohibition may be grounds for fraud.

Article 1855 – On priority of the limited partners: can be based on the return of their contributions,
compensation by way of income, or as to any other matter IF stated in the certificate OTHERWISE equal
footing.

Article 1856 – Compensation of limited partner (share of profits or by income) CAN ONLY BE DONE if
partnership assets > partnership liabilities after the payment is paid.

Article 1857 – Limited partner cannot receive any of his contributions UNTIL (1) all liabilities of the
partnership, other than the partners, have been paid or there remains a property of partnership
sufficient to pay them; (2) the consent of ALL members is received UNLESS it may be rightfully
demanded based on the second paragraph; AND (3) the certificate is cancelled or so amended.

Subject to the first paragraph, a limited partner may rightfully demand the return: (1) on the dissolution;
(2) date specified in the cert for its return has arrived; OR (3) 6-month notice to all members, no time
specified in cert, either for return of contribution/dissolution.

In the absence of any statement in the cert/consent of all members, a limited partner can only demand
and receive cash in return of his contribution.

Right of a limited partner to dissolve and wind up partnership: (1) He rightfully but unsuccessfully
demands the return of his contribution, or (2) other liabilities have not been paid/ partnership property
is insufficient and the limited partner would otherwise be entitled to his contribution.

Article 1858 – Liabilities of limited partner: (1) difference on actual payment and stated in the cert; and
(2) unpaid contributions in the future as stated in the cert

Limited partner as trustee: (1) specific property stated in cert as contributed by him, which was not
contributed or wrongfully returned; (2) money/other property wrongfully paid or given to him on
account of his contribution

CAN BE WAIVED only by the consent of all partners, not compromising the rights of the creditors. If he
has rightfully received in whole/part, he is only liable to the extent of excess of such return necessary to
pay the liabilities of all creditors who extended credit or rights over them

Article 1859 – Assignable rights of limited partner, definition of a substituted limited partner, assignee
’s (but not substitute) rights are only limited to receiving share in profits/other compensation by income,
assignee can only be a substituted by: CONSENT of ALL members or the assignor has power given by the
CERT. Substitute partner has all the rights and power, and restrictions and obligations of his assignor
except the liabilities he was ignorant when he became a limited partner which could not be ascertained
by the certificate. Substitution does nor release the assignor from the liabilities of the partnership in
Articles 1847 and 1858.

Article 1860 – The retirement, death, etc. of a general partner dissolves the partnership UNLESS it is
continued by the remaining general partners: (1) under the right stated in the cert; OR (2) consent of all
members.

Article 1861 – On the death of a limited partner: his executor or administrator shall have all the rights
for the purpose of settling his estate, and such power has to constitute his assignee as substitute limited
partner. The estate of a deceased limited partner shall be liable for all his liabilities as limited partner.

Article 1862 – Rights of creditors of limited partner to charge his interest in the partnership through
court. It may be redeem through a general partner’s property but not with partnerships.

Article 1863 – Order of the liability settlement:

1 – Those to creditor, in order of priority given by the law

2 – Those to limited partners in respect of their share of the profits and other compensation by way of
income of their contributions

3 – Those to limited partners in respect of the capital of their contributions

4 – Those to general partners other than for capital and profits

5 – Those to general partners in respect to profits

6 – Those to general partners in respect to capital

Proportional sharing occurs when partnership assets are insufficient to pay claims of limited partners

Article 1864 – Cancelled certificate: dissolution or all limited partners cease to be such

A certificate shall be amended when: (1) change in the name of the partnership or amount/character of
the contribution of any LIMITED partner, (2) A person is substituted as a limited partner, (3) An
additional limited partner is admitted, (4) A person is admitted as general partner, (5) A general partner
retires, dies, etc., and the business is continued, (6) Change in the character of business, (7)
False/Erroneous statement in the cert, (8) Change in time for dissolution or return of contribution, (9) A
time is fixed for dissolution and return after having no time specified in the cert, and (10) Change in any
other statement to accurately represent the agreement.

Article 1865 – Rules in writing to amend: (1) Conform to the requirements of Article 1844 as far as
necessary to set forth clearly the change desired, and (2) Be signed and sworn to by all members, and
amendment substituting a limited partner/ adding a limited/general partner shall be signed also by the
member to be substituted or added, or when limited partner is substituted, the assigning limited partner
shall sign.
To cancel a certificate: shall be signed by all members.

Court petition if any person opts not to sign. Court should order OSEC to record the
cancellation/amendment if he finds that the petitioner has a right and file a certified copy of its decree
to set forth the amendment.

Filed cert (amended/cancelled) for record in OSEC: (1) A writing in accordance to the provisions of the
first/second paragraph, (2) A certified copy in accordance of the fourth paragraph, (3) After cert is duly
amended, it shall be for all purpose the cert provided for this article.

Article 1866 – A restriction on being a contributor and liabilities.

Article 1867 – Limited partnership form prior to this code, may become a limited partnership under this
Chapter by complying to Article 1844: (1) Amount of original contribution of each limited partner and
the time when the contribution was made, (2) Partnership Property > Partnership Liabilities by an
amount GREATER than the sum of contributions of limited partners.

If they didn’t comply with this code, they will still be governed by the old law.

A universal partnership of present property shall include the profits which the partners may
acquire therewith such as properties to be acquired through legacy, donation or inheritance.

A limited partner whose surname appears in a partnership shall become a general partner, as a rule.

In case of liquidation, before the partners can be paid their shares, the creditors of the
partnership must first be compensated. After all the creditors have been paid, whatever is left of
the partnership assets becomes available for the payment of the partners’ shares.
A limited partner’s interest is not assignable.
In a limited partnership, the general partners need not secure the written consent or ratification
by all of the limited partners concerning acts of ownership.
The transfer by a partner of his partnership interest does not make the assignee of such interest
a partner of the firm, nor entitle the assignee to interfere in the management of the partnership
business or to receive anything except the assignees profits.
The partnership, although dissolved, continues to exist until its termination, at which time the
winding up of its affairs should have been completed and the net partnership assets are
partitioned and distributed to the partners.
After dissolution, the partners may still enter into contracts in the name of the dissolved
partnership if it is for the purposes of winding up.
A limited partnership is dissolved by the insanity of a limited partner.
A person who is a general, and also at the same time a limited partner, shall have all the rights
and powers and subject to all the restrictions of a general partner.
The dissolution of the partnership means that the juridical entity was immediately terminated
and that the distribution of the assets to its partners should perfunctorily follow.
A person may be a general partner and limited partner in the same partnership at the same
partnership at the same time, provided that this fact shall be stated in the certificate.