AT A GLANCE:
A general partnership indicates the extent of the partners’ liability for the obligations of the partnership.
In our previous article, we discussed limited partnerships. This time, let us examine the concept of a general partnership.
May a Partner Contribute Services Alone?
Yes.
Article 1767 of the Civil Code of the Philippines provides that by the contract of partnership, 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.
What is the extent of the liability of a partner in a general partnership?
Article 1794 of the Civil Code provides that every partner is responsible to the partnership for damages suffered by it through his fault, and he cannot compensate them with the profits and benefits which he may have earned for the partnership by his industry. However, the courts may equitably lessen his responsibility if through the partner’s extraordinary efforts in other activities of the partnership, unusual profits have been realized.
Further, Article 1816 of the Civil Code provides that all partners, excluding industrial partners, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract.
How should the losses and profits of the partnership be distributed?
In Article 1797 of the Civil Code, the losses and profits shall be distributed in accordance with the partnership agreement. If only the share of each partner has been agreed upon, the share of each in the losses shall be in the same proportion.
In the absence of such stipulation, the share of each partner in the profits and losses shall be in the proportion to what he may have contributed, but the industrial partners shall not be liable for the losses. As for the profits, the industrial partner shall receive such share as may be just and equitable under the circumstances. However, if, besides his services, said industrial partner has contributed capital, he shall also receive a share in the profits in proportion to his capital.
What are the Rights of a General Partner?
Article 1850 of the Civil Code states that:
Article 1850. A general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of a partner in a partnership without limited partners..
However, without the written consent or ratification of the specific act by all the limited partners, a general partner or all of the general partners have no authority to:
(1) Do any act in contravention of the certificate;
(2) Do any act which would make it impossible to carry on the ordinary business of the partnership;
(3) Confess a judgment against the partnership;
(4) Possess partnership property, or assign their rights in specific partnership property, for other than a partnership purpose;
(5) Admit a person as a general partner;
(6) Admit a person as a limited partner, unless the right so to do is given in the certificate;
(7) Continue the business with partnership property on the death, retirement, insanity, civil interdiction or insolvency of a general partner, unless the right so to do is given in the certificate.
Read also: What is Limited Partnership?
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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