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CORPORATION
Created by law
Has a juridical personality separate
and distinct from that of each partner
Depends on Art of Inc.
50 years , extendible to not more than
50 years in any one instance
Stockholder has a right to transfer
shares without prior consent of other
stockholders
Management is vested with the Board
of Directors
PARTNERSHIP
- is a CONTRACT whereby two or more persons bind themselves to CONTRIBUTE money,
property, or industry to a COMMON FUND with the intention of dividing the PROFITS among
themselves or in order to EXERCISE a PROFESSION
- a STATUS and a FIDUCIARY RELATION subsisting between persons carrying on a business
in common with a view on profit
it must be within the commence of man, possible and not contrary to law, morals, good
customs, public order or public policy
If a partnership has several purposes, one of which is unlawful, the partnership can still
validly exist so long as the illegal purpose can be separated from the legal purposes
when an unlawful partnership is dissolved by a judicial decree, the profits shall be
confiscated in favor of the STATE
FORMS OF PARTNERSHIP
A partnership may be constituted in any form exception: public instrument immovable property
is contributed real rights are contributed
* need for inventory of immovable
*for effectivity of the partnership contract insofar as innocent third persons are concerned the
same must be registered if real properties are involved
an AGREEMENT TO FORM a partnership does not itself create a partnership
when there are conditions to be fulfilled or when a certain period is to lapse, the partnership is
not created till after the fulfillment of the conditions or the arrival of the term and this is true
even if one of the parties has already advanced his agreed share of the capital
RULE: if CAPITAL is P3,000 or more REQUIRED:
1. PUBLIC INSTRUMENT
2. RECORDED S.E.C.
Failure to comply shall not effect the liability of the partnership and its members to third
persons
If real properties have been contributed, regardless of the value, a public instrument is needed for
the attainment of legal personality
Requirements where immovable / real property is contributed
Public instrument
Inventory signed and attached to the Public instrument
* applies regardless of the value of the real property
* applies even if only real rights over the real property are contributed
* applies if aside from real property, cash or personal property is contributed
Transfer of land to the partnership must be duly recorded in the ROD to make the transfer
effective insofar as third persons are concerned
RULE:
any immovable property or an interest therein maybe acquired in the partnership name
title so acquired can be conveyed only in the partnership name
RULES IF
A) articles are kept secret among the members
B) any one of the members may contract in his own name with third persons
Not a partnership not a legal person -it may be sued by third person under the common
name it uses
it cannot sue as such and cannot be ordinarily be a party to a civil action
in so far as innocent third parties are concerned
the parities can be considered as members of a partnership as between themselves or
insofar as third persons are prejudiced
only the rules of co-ownership must apply
Commercial / trading
Professional / non-trading
GENERAL PARTNERSHIP
one where all the partners are general partners
they are LIABLE even with respect to their individual properties, after the assets of the
partnership has been exhausted
LIMITED PATNERSHIP
one where at least one partner is a general partner and the others are limited partners
one whose liability is limited only up to the extent of his contribution
A partnership where all the partners are limited partners cannot exist as a limited partnership
- If it continuous as such, it will be considered as a general partnership and all the
partners
will be general partners
Kinds of universal partnership
Partnership of all present property
Partnership of all profits
Universal partnership of all present property
Contribution of All the properties actually belonging to the partners an fthe profits
acquired with said property
Becomes common property
Except all future property
Fruits of future property included if stipulated upon
Universal partnership of profits
comprises all that the partners may acquire by the industry or work of the partners
become common property regardless of within said profits were obtained through the
usufruct contributed
except prizes and gifts
Articles of universal partnership, entered without specification of its nature, only constitute a
universal partnership of PROFITS
Particular partnership
A particular partnership has for its object:
1.
Determinate things their use or fruits
2.
Specific undertaking
3.
Exercise of a profession or vocation
RULE: the partner shall be obliged to bring to the partnership capital what he received even
though he may have given receipt for his share only
* does not apply when debt was collected after dissolution of the partnership
RULE:
Every partner is responsible to the partnership for damages suffered by it through his fault
He cannot compensate them with the profits and benefits, which he may have earned for the
partnership by his industry
The courts may equitably lessen his responsibility
RISK OF LOSS
if specific and determinate things not fungible whose usufruct is enjoyed by a firm, the
partner who owns it bears the loss for ownership was never transferred to the firm
fungible or deteriorable, firm bears the loss for it is evident ownership was transferred
things contributed to be sold, firm bears the loss for evidently the firm was intended to be the
owner
contributed under appraisal, firm bears the loss because this has the effect of an implied sale
Responsibility of the firm
1. to refund amounts disbursed on behalf of the firm plus legal interest from the time expenses
where made
2. to answer to each partner for obligations he may have entered into in good faith in the
interest of the partnership, as well as the risks in consequence of its management
3. refund must be made even in case of failure of the enterprise entered into, provided the
partner is not at fault
4. amount disbursed does not refer to the original capital
Distribution of Profits
1. according to agreement
2. if none, according to amount of contribution
Distribution of Losses
1. according to agreement as to losses
2. if none, according to agreement as to profits
3. if none, according to amount of contribution
RULE on Industrial Partners Liabilities
- may be held liable by third persons BUT he may recover what he has paid from the other
capitalist partners
any partner shall have the right to a formal account as to partnership affairs
if the other partner receives other benefits, profits or uses partnership property
prescription begins to run only upon the dissolution of the partnership when the final
accounting is done
PROPERTY RIGHTS OF PARTNERS
1. rights in specific partnership properties
2. interests in the partnership
3. right to participate in the management
rule:
or
Firm Name
every partnership shall operate under a firm name
the firm name may or may not include the name of one or more of the partners
strangers who include their names in the firm are liable as partners because of estoppel, but
do not have the rights of partners
if a limited partner includes his name in the firm name, he has obligations but not the rights
of a general partner
Rule on liability for contractual obligations
all partners, including industrial ones, shall be liable pro-rata with all their property and after
all the partnership assets have been exhausted
not applicable for torts or crimes
while an industrial partner is exempted by law from losses as between the partners, he is not
exempted from liability insofar as third persons are concerned
he may recover what he has paid from the capitalist partners
under the law the liability of the partners is subsidiary and joint not principal and solidary
Rule on liability of a partner who has withdrawn
A partner who withdraws is not liable for liabilities contracted after he has withdrawn
If his interest has not yet been paid him
- his right to the same is that of a mere creditor
A stipulation exempting liability to third persons is void
Any partner may enter into a separate obligation to perform a partnership contract
Every partner is an agent of the partnership for the purpose of its business
Gen Rule:
1. The act of every partner for apparently carrying on in the usual way the business of the
partnership of which he is member binds the partnership
Except:
if he has no authority
and
the person with whom he was dealing with has knowledge of the fact that he has no such
authority
2. An act of a partner which is not apparently for the carrying on of business of the partnership in
the usual way does not bind the partnership unless authorized by the other partners
3. A partnership is a contarct of mutual agency, each partner acting as a principal on his own
behalf and as an agent for his co-partners or the firm
Requisites on when can a partner bind the partnership
1. expressly or impliedly authorized
2. when he acts in behalf and in the name of the partnership
The creditors of the partnership shall be preferred to those of such partner as regards the
partnership property
The private creditors of each partner may ask the attachment and public sale of the share of
the latter in the partnership assets
if a partner sells his share to a third party, but the firm itself still remains solvent, partnership
creditors cannot assail the validity of the sale by alleging that it is made in fraud of them,
since they have not really been prejudiced
If the cause is not justified or no cause was given, the withdrawing partner is liable for damages
but in no case can he be compelled to remain in the firm
The insolvency need not be judicially declared, it is enough that the assets be less than the
liabilities
Dissolution by judicial decree when allowed:
partner declared insane in any judicial proceeding or is shown to be of unsound mind
partner becomes incapable of performing his part of the partnership contract
partner has been guilty of such conduct as tends to affect prejudicially the business
partners persistent breach of agreement
the business of the partnership can only be denied on at a loss
other circumstances which render dissolution equitable
Effects of dissolution
1. When the firm is dissolved, a partner can no longer bind the partnership
2. A dissolved partnership still has the personality for the winding up of its affairs
the firm is still allowed to collect previously acquired credits
the firm is still bound to pay of its debts
Where the dissolution is caused by the act, insolvency or death of a partner, each partner is liable
to his co-partners for his share of any liability created by any partner acting for the partnership
Exception: - individual liabilities
1. If dissolution by act
The partner acting for the partnership had knowledge of the dissolution
or
2. If dissolution by death or insolvency
The partner acting for the partnership had knowledge or notice of the death or
insolvency
only the partner acting assumes liability