Partnership and Corporation

November 22, 2012

The general rule is that a partnership may exist in whatever form. Difference of partnership and corporation: Partnership 2 or more Depends on the agreement of the partners Death of one partner dissolves the partnership on the pleasure of the partners. not limited to his capital contribution but likewise extend to his private properties Corporation 5 to 15 Maximum of 50 years - as to composition - as to period

Death of the creators does not dissolve the corporation On the basis of law

- as to dissolution

- as to creation

Limited to his/her capita contribution

- as to liability

Difference of a co-ownership and partnership Co-ownership No juridical personality Common ownership Partnership There is a Juridical personality For financial gain

Cannot exceed 10 years on the pleasure of the partner (general rule, as to succession It is 20 years) Action of one does not bind the other the action of one binds the other

1. 2. 3. 4.

Elements of a partnership 2 or more partners Contribution of money or property There must be intention to divide profits and loss The object and purpose must be in accordance to law (the partnership is considered void if the partnership is unlawful) (general rule = if the partnership is void due to unlawful object or purpose there is no need to go to court to have the partnership dissolved, exception to the rule = if the object or purpose of the partnership is, at first, lawful then in the course of time became unlawful then there is a need to dissolve the partner) a. If the partnership is unlawful the profit from the partnership will be given in favor of the state. b. If the partnership is unlawful the capital will be returned to the partner, but if the capital was used illegally then the capital will also be confiscated.

Different determination whether the partner is existing or not. 1. Persons who are not partners as to each other are not partners in a third person. Exception = partnership of estopel when two or more persons who are not partners but represent themselves to third persons as partners they shall be later on be held liable as partners. 2. The existence of co-ownership does not in itself establish partnership even though the partners share in the profits of the property owned in common. 3. The sharing of gross returns does not of itself establish partnership, whether or not these gross returns is divided amongst these persons.

4. If you receive part of the profit of a particular business, you are presumed to be a partner but the presumption is disputable. Exemption to the presumption: a. If you receive a profit as payment of debt by instalment b. If you receive part of the profits as wage or salary c. If you receive part of the profits as annuities d. If you receive the profit as a payment of interest of a particular debt e. If the profit is in consideration of the sale of good will or other properties. A good will be equate to the reputation of the business or establishment

January 10, 2013

A partnership is cumulative in general, but sometimes a partnership may be non-cumulative. A partnership contract is not entered for the sole purpose of engaging in a business, it is also entered to for the purpose of practicing a profession. The contract of partnership is always perfected by mere consent in the eyes of the law. A perfection of a contract is different from the validity of contract, a contract may be perfected but not valid (Statute of Frauds is not applicable if the contract has been partially executed). A husband and wife cannot enter into a partnership; they can only enter into a particular partnership. Common-law husband and wife cannot enter into a partnership. Refers to a partner who is personally liable to partnership liabilities but not to losses is the general industrial partner. All partners are liable, industrial partners are liable but have the
right for reimbursement from the capitalist partner.

Designation of losses and profits can be entrusted to the Creditor of the partnership. As a general rule if no stipulation as to the kind of universal partnership the partners had entered, then the assumption is universal partnership of profits and losses. There is a difference between liability and capacity to pay. There may be liability but no capacity to pay, likewise there may be capacity to pay but no liability. If the partners executed a designation of profit and loss, even if it is unfair and unjust, then the designation shall be followed due to the principle of estoppel. The share of each partner in profits and losses depends upon the common agreement of the partners. If there are no stipulations as to the profits and losses then the division shall be based on the contribution of the partners (capitalists partners). If no stipulation is made on losses but there is a stipulation on the profits then the losses shall be based on the profits. If the stipulation only indicates the losses then the profits should be based on the capital contribution. (Art. 1797) The industrial shall bear no losses unless he is a capitalist-industrial partner. The losses he shall bear then shall be in proportion to his capital. (Art. 1797, second paragraph)

A manager is a person who runs the partnership. 2 modes of appointing a manager (in a partnership): 1. Appointment during the commencement of the partnership (the manager is appointed during the perfection of the partnership contract) the manager may perform all acts of administration. Any act related to the General Power of Attorney is needed partnership business is an act of administration. a. Law on agency can you entrust to a third person to act on your behalf? Yes, b. Acts of ownership performs acts such as selling, pledging, and donating of property. Bestowed using the special power of attorney. This is not strictly applied in a partnership. c. A person who is appointed with any power of attorney is called the Attorney-in-fact d. The powers of attorney are no longer needed in a partnership because the authority now emanates from the articles of partnership. e. The manager may only be removed when he has acted in bad faith, through the general controlling interest (holder of majority shares). 2. Appointment after the commencement of the partnership (oral appointment is allowed) a. The manager may be removed by the will of the partners (but the removal must be with due process through the controlling interest). When there is more than 1 managing partner and a disagreement shall arise then the people to resolve the problem shall be the managing partners in conflict by individual vote, if the conflict is still not resolved then the controlling interest shall take over.

January 17, 2013

A third person may be appointed as a manager of a partnership, however the third person, although appointed as a manager, is not a partner. Controlling interest simple means 50%+1 or majority of shares. As a definition, controlling interest is the partner/partners holding the largest number of shares. When there is a divide in the controlling interest and no compromise is reached then the partners may revert back to the status quo, if not then the partnership shall be dissolved. Status Quo the situation prior to the problem. Matters of business or administration should be solved amongst managing partners only. (Basis [Manresa]) If the contract of partnership or appointment of multiple manager states that of all managing partners consent is needed then a transaction cannot push through without said consent, except if the non-continuance or nontransaction shall cause irreparable damage to the partnership. If no managing partner is appointed, it is then understood that all partners shall be the managing partner (partner is the agent of one partnership therefore the act of the agent binds the others, except if the agent is not performing his job/duty). A partnership is a form of agency, in an agency there is a principle and there is an agent. In a partnership who is the agent and who is the partner? In a partnership there must be mutual trust and confidence. A, B and C are managing partners while D is just an ordinary partner, in case of material alteration the only partner whose consent is needed are the managing partners.

January 24, 2013

Sub partner is not a partner in a partnership, he/she is just a person who receives the shares of a partner of a partnership by transacting with a partner in a partnership. Example: A, B and C created a partnership, here comes Mr. X, he transacts with Mr. A, the transaction was about the share of Mr. A in a partnership. The consent of B and C is not required only As consent is mandatory because it is only the interest of A that is involved. The consent of B and C is only required if Mr. X wants to become a partner in the partnership and not a mere sub-partner (the sub-partner is an associate of a partner) Article 1804 the word share refers to the interest of a partner in a partnership. Can a sub-partner take part in the management of a partnership? No. Can a sub-partner demand information affecting the partnership? No, he is not a partner. Can a sub-partner demand for accounting of a partnership? No Can a sub-partner file a case towards a partner who mismanaged or mismanaging a business? Yes, because a sub-partner has to protect his interest. Can a sub-partner receive the share of a partner in a partnership? Yes Dissolution is different from removal. When Article 1808 has been breached can a capitalist partnership that breached it be removed from a partnership? No, but a dissolution of the partnership may be sought after. 1st effect: he must account in favour of the partnership, 2nd effect: he shall hold the trustee of that gain for the partnership (the partnership shall act as the trustor). Specific partnership properties: 1st the original capital to form the partnership, 2nd the properties acquired in the name of the partnership using partnership funds and 3rd all properties given to the partnership through gratuitous act. Partners interest in the partnership is the share of the partners in the profits and surplus.

The law on co-ownership in relation to Article 1811: X donated land to the partnership of A and B. Therefore A and B will own the land equally. In general co-ownership each of them may use, destroy and dispose their share in their own will. In Specific Partnership Property (SPP) The land cannot be used for personal use, unless there is consent of all partners. One partner cannot assign his/her share except when all partners had assigned their shares. SPP = property belonging to the partnership Partners interest = property belonging to the partner