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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.
AT A GLANCE:
Partners in a partnership shall have the following rights:
- Property rights;
- Rights in specific partnership property interest in the partnership;
- Rights to participate in the management;
- Right to associate with another person in his share;
- Right to inspect and copy partnership books;
- Right to demand a formal account; and
- Right to ask for the dissolution of the firm at the proper time.
Partners shall have the following obligations:
- Obligation to give his contribution;
- Obligation not to convert firm money or property for his own use;
- Obligation not to engage in unfair competition with his own firm;
- Obligation to account for and hold as trustee, unauthorized personal profits;
- Obligation to pay for damages caused by his own fault;
- Obligation to credit to the firm payment made by a debtor who owes him and the firm; and
- Obligation to share with the other partners the share of the partnership credit which he has received from an insolvent firm debtor.
Rights of partners
Partners in a partnership shall have the following rights:
- Property rights
The law says:
“Article 1810. The property rights of a partner are:
(1) His rights in specific partnership property;
(2) His interest in the partnership; and
(3) His right to participate in the management” (Article 1810, Civil Code)
- Rights in specific partnership property interest in the partnership
The law says:
“Article 1812. A partner’s interest in the partnership is his share of the profits and surplus.” (Article 1812, Civil Code)
- Rights to participate in the management
The law says:
“Article 1803. When the manner of management has not been agreed upon, the following rules shall be observed:
(1) All the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership, without prejudice to the provisions of article 1801.
(2) 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.” (Article 1803, Civil Code)
- Right to associate with another person in his share
The law says:
“Article 1804. Every partner may associate another person with him in his share, but the associate shall not be admitted into the partnership without the consent of all the other partners, even if the partner having an associate should be a manager.” (Article 1804, Civil Code)
- Right to inspect and copy partnership books
The law says:
“Article 1805. The partnership books shall be kept, subject to any agreement between the partners, at the principal place of business of the partnership, and every partner shall at any reasonable hour have access to and may inspect and copy any of them.” (Article 1805, Civil Code)
- Right to demand a formal account
The law says:
“Article 1809. Any partner shall have the right to a formal account as to partnership affairs:
(1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstances render it just and reasonable.” (Article 1809, Civil Code)
- Right to ask for the dissolution of the firm at the proper time
The law says:
“Article 1830. Dissolution is caused:
(1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular undertaking specified in the agreement;
(b) By the express will of any partner, who must act in good faith, when no definite term or particular is specified;
(c) By the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking;
(d) By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners;
(2) In contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the express will of any partner at any time;
(3) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership;
(4) When a specific thing which a partner had promised to contribute to the partnership, perishes before the delivery; in any case by the loss of the thing, when the partner who contributed it having reserved the ownership thereof, has only transferred to the partnership the use or enjoyment of the same; but the partnership shall not be dissolved by the loss of the thing when it occurs after the partnership has acquired the ownership thereof;
(5) By the death of any partner;
(6) By the insolvency of any partner or of the partnership;
(7) By the civil interdiction of any partner;
(8) By decree of court under the following article.”
Article 1831. On application by or for a partner the court shall decree a dissolution whenever:
(1) A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind;
(2) A partner becomes in any other way incapable of performing his part of the partnership contract;
(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business;
(4) A partner wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him;
(5) The business of the partnership can only be carried on at a loss;
(6) Other circumstances render a dissolution equitable.
On the application of the purchaser of a partner’s interest under article 1813 or 1814:
(1) After the termination of the specified term or particular undertaking;
(2) At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued. (Article 1830 and 1831, Civil Code)
Obligations of partners
Partners shall have the following obligations:
- Obligation to give his contribution
The law says:
“Article 1786. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto.
He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership, in the same cases and in the same manner as the vendor is bound with respect to the vendee. He shall also be liable for the fruits thereof from the time they should have been delivered, without the need of any demand. (Article 1786, Civil Code)
- Obligation not to convert money or property of the partnership for his own use
The law says:
“Article 1788. A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation.
The same rule applies to any amount he may have taken from the partnership coffers, and his liability shall begin from the time he converted the amount to his own use.” (Article 1788, Civil Code)
- Obligation not to engage in unfair competition with his own firm
The law says:
“Article 1808. 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.
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.” (Article 1812, Civil Code)
- Obligation not to account for and hold as trustees unauthorized personal profits
The law says:
“Article 1807. 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.” (Article 1807, Civil Code)
- Obligation to pay for damages caused by his fault
The law says:
“Article 1794. 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 this responsibility if through the partner’s extraordinary efforts in other activities of the partnership, unusual profits have been realized.” (Article 1794, Civil Code)
- Obligation to credit to the firm payment made by a debtor who owes him and the firm
The law says:
“Article 1792. If a partner authorized to manage collects a demandable sum which was owed to him in his own name, from a person who owed the partnership another sum also demandable, the sum thus collected shall be applied to the two credits in proportion to their amounts, even though he may have given a receipt for his own credit only; but should he have given it for the account of the partnership credit, the amount shall be fully applied to the latter.
The provisions of this article are understood to be without prejudice to the right granted to the other debtor by article 1252, but only if the personal credit of the partner should be more onerous to him.” (Article 1792, Civil Code)
- Obligation to share with the other partners the share of the partnership credit which he has received from an insolvent firm debtor
The law says:
“Article 1793. A partner who has received, in whole or in part, his share of a partnership credit, when the other partners have not collected theirs, shall be obliged, if the debtor should thereafter become insolvent, to bring to the partnership capital what he received even though he may have given receipt for his share only.” (Article 1793, Civil Code)
Related article: Dissolution of Partnership
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