Limited Partnership Part 2

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  LIMITED PARTNERSHIP -A partnership which has one or more general partners and one or more limited partners. The limited partners as such shall not be bound by the obligations of the partnership, (Art 1843) except up to the extent of their contribution. REQUIREMENTS FOR FORMATION (Art 1844) 2 or more persons desiring to form a limited partnership must comply with the ff requirements: 1. Must subscribe and swear to a CERTIFICATE, w/c shall state : a. NAME OF THE PARTNERSHIP, adding thereto the word “Limited.”   EFFECT OF OMISSION OF THE TERM “LIMITED”: the name cannot be considered as the firm name of a limited partnership. Partnership will therefore be a general partnership. b. CHARACTER of the business c. LOCATION of the principal place of the biz d. NAME and PLACE of residence of each member; gen & limited partners being respectively designated. e. TERM for which the partnership is to exist. f. AMOUNT of cash and a DESCRIPTION of and the agreed value of the other property contributed by each LP. g. ADDITIONAL CONTRIBUTIONS, if any, to be made by each LP and the times at w/c or events on the happenings of w/c they shall be made. h. TIME, if agreed upon, when the contribution is to be returned. i. SHARE OF THE PROFITS or the COMPENSATION by way of incomew/c each LP shall receive by reason of his contri.  j. RIGHT, if given, of a LP to substitute an assignee/contributor in his place and the terms & conditions of the substitution. k. RIGHT, if given, of the partners to admit additional LP. l. RIGHT, if given, of one or more of the LP to priority over the LP, as to contributions or as to compensation by way of income, and the nature of such priority. m. RIGHT, if given, of the remaining GP(s) to continue the business on the death, retirement, civil interdiction, insanity or insolvency of a GP. n. RIGHT, if given, of a LP to demand and receive property other than cash in return for his contribution. 2. They must FILE FOR RECORD the CERTIFICATE with the SECURITIES AND EXCHANGE COMMISSION (SEC). (Art 1844) a. EFFECT of substantial compliance: - A Limited Partnership is formed. b. EFFECT of FAILURE to REGISTER with the SEC: - partnership will be considered a GENERAL PARTNERSHIP since the requirements are intended to protect the public. LIABILITY FOR FALSE STATEMENT (Art 1847) One who suffers loss by reason of a false statement in the certificate may hold liable any party to the certificate who knew the same to be false: 1. At the time he signed the certificate, 2. Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel/amend the certificate, or petition for both. ADMISSION OF ADDT’L LP AFTER FORMATION  - may be admitted after formation BY filing an amendment to the srcinal certificate (Art 1849). RIGHT must be stated in the srcinal certificate. RIGHTS AND LIABILITIES OF A GP IN A LIMITED PARTNERSHIP 1. RIGHTS - A GP has ALL the rights and powers of a GP in a partnership without LimitedPartners. 2. LIABILITIES - a GP shall be subject to all restrictions and liabilities of a partner in a partnership without limited partners. RESTRICTIONS OF A GENERAL PARTNERS- shall have no authority to perform the ff acts w/o written consent or ratification by ALL the Limited Partners: a. Do any act in contravention of the certificate. b. Do any act w/c would make it impossible to carry on the biz of the partnership. c. Confess a judgment against the partnership. d. Possess partnership property, or assign their rights in specific property, for other than a partnership purpose. e. Admit a person as a GP. f. Admit a person as a LP, unless the right to do so is given in the certificate. g. Continue the business with partnership property on the death, retirement, CI or insolvency of a GP unless RIGHT is given in the cert. OBLIGATIONS OF A LIMITED PARTNER 1. Not to allow the inclusion of his surname in the  partnership name (Art 1864). a. XPNS: 1.) If it’s also the surname of the a GP  2.) Biz had been carried on under a name in which his surname appeared prior to his admission as a LP. b. EFFECT if a LP allows the inclusion of his surname in the Partnership name: - liable as a GP to partnership creditors who extend credit to the partnership w/o actual knowledge that he is a GP.  2. To be liable as a GP if he takes part in the control of the biz (Art 1848) 3. To be liable to the partnership for the ff: a. For the difference bet. his actual contribution and that stated in the certificate. b. For any unpaid contribution which he agreed in the cert to make in the future at the time and on the conditions stated therein (Art 1858). 4. To hold as trustee for the partnership of the ff: a. SPECIFIC PROPERTY stated in the cert as contributed by him, but w/c was not contributed. b. SP w/c has been wrongfully returned to him. c. Money or Property wrongfully paid or conveyed to him on account of his contribution. Waiver or compromise of Limited Partner’s liability in #s 3 & 4- Said liabilities may be waived or compromised provided: a. ALL partners consent thereto b. Right of a partnership creditor who extended credit or whose claims arose after the filing and before the cancellation or amendment of the certificate is not affected. 5. To be liable to the partnership after he has rightfully received the return of his capital contribution, for any sum not in excess of such return w interest , w/c is necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before such return (1858). 6. Not to receive or hold as collateral security any partnership prop on acct of his claims for loan granted to or other biz transaction w the partnership. (1854) 7. Not to receive from a GP or the partnership on acct of such claims any payment, conveyance, or release from liability, if at the time the assets of the of the partnership are not sufficient to discharge partnership liabilities to persons not claiming as Gen or Lim partners. (1854) RIGHTS OF A LIMITED PARTNER 1. have the partnership books kept at the principal place of biz.   2. inspect and copy the partnership books at a reasonable hr. 3. have on demand true and full info of all things affecting the partnership. 4. have on demand formal acct of partnership affairs whenever circumstances render it just and equitable. 5. have dissolution and winding up by decree of court. 6. receive a share of the profits or other compensation by way of income stipulated in the certificate. -right is subject to the condition that after such payment, whether from the prop of the partnership or GP, the partnership assets are in excess of all liabilities to LPs on acct of their contribution and to GPs. (1856) 7. to receive the return of his contribution provided partnership assets exceed the liabilities. 8. loan money to the partnership. 9. transact biz w the partnership. 10. receive, unless he is also a GP, on acct of resulting claims against the partnership, w general creditors, a pro rata share of the asset. 11. Agree w other LPs that one or more of them shall have priority over other LPs as to: a. return of their contributions b. compensation by way of income c. any other matter *This agreement, when made, must be stated in the certificate. In the absence thereof, all the LPs shall stand on equal footing. (1855) STATUS OF A PERSON WHO HAS CONTRIBUTED TO THE CAPITAL ERRONEOUSLY BELIEVING HE HAS BECOME A LP Such person is not, by reason of his exercise of the rights of a LP, a GP provided: 1.   On ascertaining the mistake, he promptly renounces his interest in the profits of the biz or other compensation by way of income (1852) 2.   He does not take part in the control of the biz GEN-LIMITED PARTNER -person may be a GP and a LP at the same time provided that fact is stated in the cert. -he shall have all the rights and powers of a GP, except, that in respect to his contribution, he shall have all the rights of a LP. (1853) RETURN OF A LP’s CONTRIBUTION  1.   Requisites: a.   All liabilities of the P have been paid or there remains sufficient partnership property to pay them, EXCEPT liabilities to GPs and to LPs on acct of their contributions. b.   Consent of all the partners have been obtained, unless the return of the contribution may be rightfully demanded. c.   Cert is cancelled or so amended to set forth the withdrawal or reduction. 2.   When LP may demand return of his contribution: a.   Dissolution of partnership b.   When date specified in the cert has arrived c.   After he has given 6 months notice in writing to all members 3.   Contribution of LP to be returned in cash -irrespective of the nature of his contribution, a LP has only the right to demand and receive cash EXCEPT in the ff:  a. When the cert contains a statement that the contribution may be returned in a form other than cash. b. there is an agreement that the contribution may be in a form other than cash. 4.   When LP may have the partnership dissolved and wound up: a.   When he rightfully but unsuccessfully demands the return of his contribution b.   When, although entitled to return of contri, the same is not paid to him because the other liabilities of the partnership have not been paid or the property of the partnership is insufficient for their payment. ASSIGNMENT OF LP’s INTEREST  1.   Rule: A LP’s interest is assignable.  2.   EFFECT of assignment: a.   If assignee does not become a substituted  partner: 1.)   Assignee is only entitled to receive the  ff: a.)   Share of profits b.)   Other compensation by way of income c.)   Return of the contribution 2.)   He has no right to: a.)   Require any information or acct of partnership transactions. b.)   Inspect partnership books. b. If the assignee becomes a Substituted Limited Partner: 1.) SLP, concept: - a person admitted to all the rights of a LP who has died or has assigned his interest in the partnership. 2.) REQUISITES in order that assignee may become a SLP: a. All members of partnership MUST CONSENT to the assignee becoming a SLP, unless the assignor is empowered by the certificate to give the assignee such right. b. Certificate must be AMENDED to reflect the substitution. c. Cert. must be registered with the SEC. 3.) RIGHTS & LIABILITIES of the substituted partner: -He has all the rights and powers - subject to all restrictions and liabilities of the assignor, EXCEPT those liabilities of w/c he is ignorant at the time he became a LP and which could not be ascertained from the certificate. 4.) LIABILITIES of the ASSIGNOR: - substitution of the assignee as a LP does not release the assignor from the ff liabilities: a. To PERSONS WHO RELY ON A FALSE STATEMENT in the cert. (Art. 1848) b. To CREDITORS who extended credit or whose claims arose before the ass. (Art 1858) RETIREMENT, DEATH, CIVIL INTERDICTION, INSANITY OR INSOLVENCY OF A PARTNER (ART. 1860) 1. EFFECT: a. Partner is a GP- Partnership is dissolved. b. Partner is a LP  –  Partnership is not dissolved EXCEPT if there is no LP because in such a case, the requirement that there must be at least 1 LP in a limited partnership is NO LONGER COMPLIED with. 2. CONTINUATION OF BUSINESS: - Business may be continued by the remaining GPs if: a.  right to do so is stated in the certificate; b.  All the members consent; (1860) RIGHTS OF EXECUTOR/ADMINISTRATOR ON THE DEATH OF A LP (1861) 1. All the rights of a LP for the purpose of settling his estate. 2. To have the same power as the deceased had to constitute his assignee as a SLP CHARGING OF LP’s INTEREST   1. Creditor’s Right to Charge   -Creditor of a LP may charge (i.e., subject to attachment and execution) the latter’s interest in the partnership. (1862) 2.Redemption - Interest charged may be redeemed with the separate property of any GP, but not with partnership prop. (1862) This should be distinguished from the redemption of a partner’s interest in a General Partnership which may be redeemed not only w the property of one or more GPs but also with partnership prop (1814).  ORDER OF PAYMENT OF LIABILITIES (1863) 1. In settling accounts after dissolution, the liabilities of the partnership shall be entitled to payment in the  ff. order: a. those to creditors, including LPs, in order of priority as provided by law, EXCEPT those to LPs on acct of their contributions, and to GPs. b. to LPs by way of their share of the profits and other compensation by way of income on their contributions. c. to LPs in respect to the capital of their contributions. d. to GPs other than for capital and profits e. to GPs in respect to profits f. to GPs in respect to capital. 2. Sharing among LPs in partnership assets: LPs share in their partnership assets in respect to their CLAIM FOR CAPITAL, and in respect to their CLAIMS  FOR PROFITS or for COMPENSATION by way of income on their contributions respectively in proportion to the respective amounts of such claims unless otherwise stated: a. in certificate; or b. subsequent agreement CANCELLATION OR AMENDMENT OF CERTIFICATE (1864) 1. When cancelled: a. partnership is dissolved. b. all LPs cease to be such. 2. When Amended: a. change in the name of the partnership or in the amt or character of the contribution of any LP. a. change in the name of the partnership or in the amt or character of the contribution of any LP. b. Person is substituted as a LP. c. Additional LP is admitted. d. Person is admitted as GP. e. GP retires, dies, becomes insolvent or insane, or sentenced to CI ad the biz is continued by the GPs: 1. Under a right to do so stated in the cert; or 2. w the consent of all members. f. change in the character of the biz of the partnership; g. false or erroneous statement in the cert. h. change in the time as stated in the cert for the dissolution of the partnershipor for the return of the contribution. i. when a time is fixed for the dissolution, or the retur of the contribution, no time having been specified in the cert.  j. when members desire to make a change in any other statement in the cert in order that it shall accurately represent the agreement among them. REQUIREMENTS FOR AMENDMENT OF CERTIFICATE (1865) 1. Amendment Must Be in Writing. 2. Must be signed and sworn to by all members including: a. The assigning LP and the SLP, in case of substitution b. The newly admitted LP/s c. Newly admitted GP/s 3. Amended certificate must be filed with the SEC. REQUIREMENTS FOR CANCELLATION OF CERTIFICATE (1865) 1. must be in writing 2. signed by all members 3. filed with the SEC LIMITED PARTNER, NOT A PROPER PARTY TO PROCEEDINGS (1866) 1. A LP is not a proper party to proceedings: a. by a partnership; or b. against a partnership 2. EXCEPTIONS: a. if he is also a GP b. Where the object of the proceedings is to enforce a LP’s right against the partnership;  c. Where the object of the proceedings is to enforce a LP’s liability to the partnership.  
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