Published — May 13, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
OBLIGATIONS OF PARTNERS AMONG THEMSELVES, read also: EXISTENCE OF PARTNERSHIP WITHOUT BEING LEGALLY FORMED
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The losses and profits are based on the agreement of the partners
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If only profits have been agreed upon, the share of each partner in the losses shall be in the same proportion
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If there is no agreement, the share of each partner in the profits and losses is based on his contribution
How should the losses and profits of the partnership be distributed?
The law says:
The losses and profits shall be distributed in conformity with the agreement of the partners. If only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion.
In the absence of stipulation, the share of each partner in the profits and losses is in proportion to what he may have contributed. However, an industrial partner who contributed purely his services is not liable for the losses. As for the profits, the industrial partner shall receive such share as may be just and equitable under the circumstances. But, if besides his services he has contributed capital, he shall also receive a share in the profits in proportion to his capital. Take note that a stipulation which excludes one or more partners from any share in the profits or losses is not allowed.
Who among the partners may execute all acts of administration?
The law says:
The partner who has been appointed manager in the articles of partnership may execute all acts of administration despite the opposition of his partners. This power of an appointed manager is irrevocable unless he has acted in bad faith. In such a case, the vote of the partners representing the controlling interest shall be necessary for such revocation of power. This is in contrast with a power of a partner which was granted after the partnership has been constituted as said power may be revoked anytime.
Now, there are instances where there are two or more partners have been entrusted with the management of the partnership without specification of their respective duties, or without a stipulation that one of them shall not act without the consent of all the others. In either case, as stated in Article 1801 of the Civil Code of the Philippines, each one may separately execute all acts of administration. If any one of the partners oppose the acts of the others, the decision of the majority shall prevail. In case of a tie, the matter shall be decided by the partners owning the controlling interest.
On the other hand, in case it should have been stipulated that none of the managing partners shall act without the consent of the others, the concurrence of all shall be necessary for the validity of the acts. Also, when the management has not been agreed upon, the following rules shall be observed:
- All the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership, without prejudice to article 1801 as mentioned above.
- None of the partners may, without the consent of the others, make any important alteration in the immovable property of the partnership, even if it may be useful to the partnership. But if the refusal of consent by the other partners is manifestly prejudicial to the interest of the partnership, the court’s intervention may be sought.
Furthermore, partners shall render on demand true and full information of all things affecting the partnership to any partner or the legal representative of any deceased partner or of any partner under legal disability. In addition, every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.
Moreover, the capitalist partners cannot engage for their own account in any operation which is of the kind of business in which the partnership is engaged, unless there is a stipulation to the contrary. Should a capitalist partner violate this prohibition, he shall bring to the common funds any profits accruing to him from his transaction, and shall personally bear all the losses.
Any capitalist partner violating this prohibition shall bring to the common funds any profits accruing to him from his transactions, and shall personally bear all the losses.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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