Law On Partnership And Corporation Study Guide De Leon 5y3b68

(LIMITED PARTNERSHIP) Study Guide

I.

Definition 1. Limited partnership – or more persons under having as one limited partners. The by the obligations of

A limited partnership is one formed by two the provisions of the following article, or more general partners and one or more limited partners as such shall not be bound the partnership.

2. Substituted limited partner - A substituted limited partner is a person itted to all the rights of a limited partner who has died or has assigned his interest in a partnership. 3. Presumption of general partnership – a partnership transacting business is, prima facie, a general partnership.  Those who seek to avail themselves of the protection accorded by law to limited partnerships must show due compliance with statutory requirements. In other words, to obtain the privilege of a limited partnership liability, one must conform to the requirements of article 1844 regulating the formation of limited partnerships.  The failure of limited partnership to extend its term when it expired and to it anew with the SEC , has the effect of divesting the limited partners of the privilege of limited liability. 4. Contributor – practically a stranger in the limited partnership whose liability is limited to his interest in the firm without any right and power to participate in the management and control of the business. 5. Preferred limited partner- general and limited partners.

II.

Discussions 1. What are the characteristics of a limited partnership?  A limited partnership is formed by compliance with the statutory requirements  One or more general partners control the business and are personally liable to creditors  One or more limited partners contribute to the capital and share in the profits but do not participate in the management of the business and are not personally liable for partnership obligations beyond their capital contributions  The limited partners may ask for the return of their capital contributions under the conditions prescribes by law  The partnership debts are paid out the common fund and the individual properties of the general partners 2. Give the cases when a limited partner is liable as the general partner  

Art. 1845. The contributions of a limited partner may be cash or other property, but not services. Art. 1846. The surname of a limited partner shall not appear in the partnership name unless: 1.) It is also the surname of a general partner; Or 2.) Prior to the time when the limited partner became such, the business had been carried on under a name in which his surname had appeared. A limited partner whose surname appears in a partnership name contrary to the provisions of the first

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paragraph is liable as a general partner to partnership creditors who extend credit to the partnership without actual knowledge that he is not a general partner. Art. 1852. Without prejudice to the provisions of article 1848, a person who has contributed to the capital of the business conducted by a person or partnership erroneously believing that he has become a limited partner in a limited partnership, is not, by reason of his exercise of the rights of a limited partner, a general partner with the person or in the partnership carrying on the business, or bound by the obligations of such person or partnership; provided that on ascertaining the mistake he promptly renounces his interest in the profits of the business or other compensation by way of income. Art. 1853. A person may be a general partner and a limited partner in the same partnership at the same time, provided that this fact shall be stated in the certificate provided for in Art. 1844. A person who is a general, and also at the same time a limited partner, shall have all the rights and powers and be subject to all the restrictions of a general partner; except that, in respect to his contribution, he shall have the rights against the other which he would have had if he were not also a general partner.

3. Give at least four differences between a general partner and a limited partner. GENERAL Personally liable for partnership obligations When manner of mgt. not agreed upon, all gen partners have an equal right in the mgt. of the business Contribute cash, property or industry Proper party to proceedings by/against partnership

LIMITED Liability extends only to his capital contributions No participation in management Contribute cash or property only, not industry Not proper party to proceedings by/against partnership

Interest not assignable w/o consent of other partners Name may appear in firm name

Interest is freely assignable

Prohibition against engaging in business Retirement, death, insolvency, insanity of gen partner dissolves partnership

No prohibition against engaging in business Does not have same effect; rights transferred to legal representative

Name must appear in firm name

4. What conditions must exist before the contribution of a limited partner may be returned to him?  All liabilities of the partnership, except liabilities to general partners and to limited partners on of their contributions, have been paid or there remains property of the partnership sufficient to pay them 5. Give at least for specific rights of a limited partner  To require that the partnership books be kept at the principal place of business of the partnership;  To inspect and copy at a reasonable hour partnership books or any of them;  To demand true and full information of all things affecting the partnership;  To demand a formal of partnership affairs whenever circumstances render it just and reasonable;

III. Problems

1. It depends, the certificate is cancelled or so amended as to set forth the withdrawal or reduction. 2. It depends, Art. 1866. A contributor, unless he is a general partner, is not a proper party to proceedings by or against a partnership, except where the object is to enforce a limited partner’s right against or liability to the partnership. 3. It depends, Art. 1844. Two or more persons desiring to form a limited partnership shall: Sign and swear to a certificate, which shall state – a.) The name of the partnership, adding thereto the word “Limited”; b.) The character of the business; c.) The location of the principal place of business; d.) The name and place of residence of each member, general and limited partners being respectively designated; e.) The term for which the partnership is to exist; f.) The amount of cash and a description of and the agreed value of the other property contributed by each limited partner; g.) The additional contributions, if any, to be made by each limited partner and the times at which or events on the happening of which they shall be made; h.) The time, if agreed upon, when the contribution of each limited partner is to be returned; i.) The share of the profits or the other compensation by way of income which each limited partner shall receive by reason of his contribution; j.)The right, if given, of a limited partner to substitute an assignee as contributor in his place, and the and conditions of the substitution; k.) The right, if given, of partners to it additional limited partners; l.)he right, if given, of one or more of the limited partners to priority over other limited partners, as to contributions or as to compensation by way of income, and the nature of such priority; m.) The right, if given, of the remaining general partner or partners to continue the business on the death, retirement, civil interdiction, insanity or insolvency of a general partner; and n.) The right, if given, of a limited partner to demand and receive property other than cash in return for his contribution. 2.) File for record the certificate in the Office of the Securities and Exchange Commission. A limited partnership is formed if there has been substantial compliance in good faith with the foregoing requirements. 4. (a) Art. 1860. The retirement, death, insolvency, insanity or civil interdiction of a general partner dissolves the partnership, unless the business is continued by the remaining general partners: 1.) 2.)

Under a right so to do stated in the certificate, or With the consent of all .

(b) Art. 1861. On the death of a limited partner his executor or shall have all the rights of a limited partner for the purpose of settling his estate, and such power as the deceased had to constitute his assignee a substituted limited partner. The estate of a deceased limited partner shall liable for all his liabilities as a limited partner.

(DISSOLUTION AND WINDING UP) STUDY GUIDE

I.

Definitions 1.) Dissolution is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on the business. 2.) Termination is that point in time when all partnership affairs are completely wound up and finally settled. It signifies the end of the partnership life. 3.) A person has "knowledge of a fact" within the meaning of this act not only when he has actual knowledge thereof, but also when he has knowledge of such other facts as in the circumstances show bad faith. 4.) A person has "notice of a fact" within the meaning of this act when the person who claims the benefit of the notice: a) States the fact of such person, or b) Delivers through the mail or by the other means of communication, a written c) statement of the fact to such person or to a proper person at his place of business or residence. 5.)

II.

Assets of the partnership. They are: a) Partnership property ( including goodwill); and b) Contributions of the partners necessary for the payment of all liabilities in accordance wuth Art. 1797.

Discussions

1.) Give the effect if the specific property to be contributed is lost: a) Before delivery- if the specific thing to be contributed by a partner is lost before delivery, the partnership is dissolved because there is no contribution inasmuch as the thing to be contributed cannot be substituted with another. There is, here, a failure of a partner to fulfil his part of the obligation. b) After delivery- if the loss occurred after delivery of the thing promised, then the partnership is not dissolved, but it assumes the loss of the thing having acquired ownership thereof. The partners may contribute additional capital to save the venture. 2.) Enumerate the right of a partner who has not caused the dissolution of a partnership wrongfully when such dissolution is in violation of partnership agreement. (Rights of partner who has not caused the dissolution wrongfully) a) To have partnership property applied for the payment of its liabilities and to receive in cash his share of the surplus; b) To be indemnified for damages caused by the partner guilty of wrongful decision;

c) To continue the business in the same name during the agreed term of the partnership, by themselves or tly with others; and d) To possess partnership property should they decide to continue the business. 3.) Who are authorized to wind-up the affairs of a dissolved partnership? (Persons authorized to wind up) a) The partners designated by the agreement; b) In the absence of such agreement, all the partners who have not wrongfully dissolved the partnership; or c) The legal representative of the last surviving partner (when all the partners are already dead), not insolvent. 4.) Give the rights of an injured partner when a partnership is rescinded or annulled on the ground of fraud or misinterpretation committed against him. (Rights of injured partner where partnership contract rescinded) a) 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; b) Right to subrogation in place of partnership creditors after payment of partnership liabilities; and c) Right of indemnification by the guilty partner against all debts and liabilities of the partnership. 5.) Give the rights of an injured partner when a partnership is rescinded or annulled on the ground of fraud or misinterpretion committed against him. (Rights of injured partner where partnership contract rescinded) a) 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 b) Right to subrogation in place of partnership creditors after payment of partnership liabilities; and c) Right of indemnification by the guilty partner against all debts and liabilities of the partnership. III. Problems 1. (a) YES, Y had notice, not knowledge (b)IT DEPENDS 2. IT DEPENDS 3. (a) IT DEPENDS under article 1834 (b) Art. 1834. After dissolution, a partner can bind the partnership, except as provided in the third paragraph of this article:

1. By any act appropriate for winding up partnership affairs or completing transactions unfinished at dissolution. 2. By any transaction which would bind the partnership if dissolution had not taken place, provided the other party to the transaction: a. Had extended credit to the partnership prior to dissolution and had no knowledge or notice of the dissolution. b. Though he had not so extended credit, had nevertheless known of the partnership prior to dissolution, and, having no knowledge or notice of dissolution, the fact of dissolution had not been d in a newspaper of general circulation in the place (or in each place if more than one) at which the partnership business was regularly carried on. The liability of a partner under the first paragraph, No. 2, shall be satisfied out of partnership assets alone when such partner had been prior to dissolution: 1. Unknown as a partner to the person with whom the contract is made. 2. So far unknown and inactive in partnership affairs that the business reputation of the partnership could not be said to have been in any degree due to his connection with it. The partnership is in no case bound by any act of a partner after dissolution: 1. Where the partnership is dissolved because it is unlawful to carry on the business, unless the act is appropriate for winding up partnership affairs. 2. Where the partner has become insolvent. 3. Where the partner has no authority to wind up partnership affairs; except by a transaction with one who — a. Had extended credit to the partnership prior to dissolution and had no knowledge or notice of his want of authority. b. Had not extended credit to the partnership prior to dissolution, and, having no knowledge or notice of his want of authority, the fact of his want of authority has not been d in the manner provided for advertising the fact of dissolution in the first paragraph, No. 2 (b). 4. 320,000 – 150,000 = 170,000 -20,000 = 150,000-(30,000x3) = P60,000 (profits)÷3=P20,000 share of each profits. 5. P335,000 - 320,000-15,000 (Liability of partnership to W) ÷ 3 =5,000 (personal liability of each partner to W) Y and Z liable to X P10,000 each. But separate creditors, C and D, have preference over separate property of Y and Z. So, X gets only P5,000 from Y (20,000-15,000) X gets nothing from Z who remains liable to X for 10,000

(INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATION) Study Guide

I.

DEFINITIONS 1. Articles of corporation–is the document prepared by the persons establishing a corporation and filed with SEC containing the matters required by the code. 2. De Facto Corporation – generally refer to organizations exercising corporate power under colour of a more or less legally constituted corporation. 3. De jure corporations – is one created in strict or substantial conformity with the mandatory statutory requirements for incorporation and whose right to exist as a corporation cannot be successfully questioned by any party even in a direct proceeding for that purpose by the state. 4. Collateral attack– is one whereby corporate existence is questioned in some incidental proceeding not provided by law for the express purpose of attacking the corporate existence.

II.

DISCUSSIONS

1. What are the requisites in the statement of the purpose or purposes for which a corporation is formed? The requisites are: (1) Purpose or purposes must be lawful. (2) Purpose or purposes must be stated with sufficient clarity. (3) Primary purpose must be stated. (4) Purpose must be capable of being lawfully combined. 2. May individuals organize a corporation by mere agreement like in the formation of a general partnership? NO, because under title II section 10 stated that any number of natural persons not less than five (5) but not more than fifteen (15), all of legal age and a majority of whom are residents of the Philippines, may form a private corporation for any lawful purpose or purposes. Each of the incorporators of Stock Corporation must own or be a subscriber to at least one (1) share of the capital stock of the corporation. 3. How shall the 25% subscription requirement be computed where the capital stock consist only of par value shares? Where the capital stocks consist only of par value shares, the minimum subscription should be 25% of the amount of the authorized capital stock or 25% of the aggregate value of all the shares of stock the corporation is authorized to issue. 4. What are the essential for the existence of a de facto corporation?

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IV.

It is essential to the existence of a de facto corporation that there be: A valid law under which a corporation with powers assumed might be incorporated; A bona fide attempt to organize a corporation under such law and; Actual or exercise in good faith of corporate powers conferred upon it by law.

PROBLEMS

1. It depends because under title II section 22 if a corporation does not formally organize and commence the transaction of its business or the construction of its works within two (2) years from the date of its incorporation, its corporate powers cease and the corporation shall be deemed dissolved. However, if a corporation has commenced the transaction of its business but subsequently becomes continuously inoperative for a period of at least five (5) years, the same shall be ground for the suspension or revocation of its corporate franchise or certificate of incorporation. 2. It depends under section 11 title II A corporation shall exist for a period not exceeding fifty (50) years from the date of incorporation unless sooner dissolved or unless said period is extended. The corporate term as originally stated in the articles of incorporation may be extended for periods not exceeding fifty (50) years in any single instance by an amendment of the articles of incorporation, in accordance with this Code; Provided, That no extension can be made earlier than five (5) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be determined by the Securities and Exchange Commission. 3. No, there is no violation of the mandatory requirement of minimum number of incorporators. 4. YES, subscribe of 20,000; paid-up 25% of 20,000 or 5,000.

LAW ON PARTNERSHIP AND PRIVATE CORPORARTION (Study Guide)

Submitted to: Ryan Yamanaka, A Submitted by: Lhorene Zamora, Noha Guianodin, Jessabel Hista, and Christine Bañas