Rosel Joy A.

Provido March 2, 2019

Law on Partnership, Agency, and Trusts

Proposed Amendment of Article 1848 of the New Civil Code:

Inclusion of Limited Partnership Safe Harbors

ABSTRACT

Under Article 1848 of the New Civil Code, limited partners are

generally not liable for the obligations of the limited partnership unless they

take part in the control of the business. However, the aforementioned law is

silent as to the meaning of “taking part in the control of the business”. Easily

put, no adequate standard of "control" has been enunciated, and no

definition of the "rights and powers" of a limited partner has been provided.

This predicament attaches with it the necessity to supplement a detailed

parameter of the limited partner’s liability when he or she does participate in

the control of the business of the limited partnership.

The proposed amendment aims to address the instant issues by

offering a non-exclusive list of activities that can be undertaken by a limited

partner without such limited partner being deemed to be "taking part in the

control of the business" of a limited partnership. These list of activities are

often called as “safe harbors” or “safe harbor activities” which is widely

adopted in some states of the United States of America as taken from the

Uniform Limited Partnership Act and in the country of New Zealand. Also, an

additional provision will be supplied, clarifying the scope of limited

partnership liability when found to be “taking part in the control of the

business” of a limited partnership.