05-Limited Partnership.pdf

*** Art. 1843. A limited partnership is one formed by two or more persons under the provisions of the following article, having as members one or more general partners and one or more limited partners. The limited partners as such shall not be bou...

*** Art. 1843. A limited partnership is one formed by two or more persons under the provisions of the following article, having as members one or more general partners and one or more limited partners. The limited partners as such shall not be bound by the obligations of the partnership. *** Q: What is the basic difference between a limited and a general partner provided in this article? A: A limited partner is not bound by the obligations of the partnership. This means that partnership liabilities are paid out of the common fund and, if such is insufficient, from the personal properties of the general partners. From the very term used, the liability of the limited partner is limited only to the extent of his capital contribution. Q: What makes a limited partnership an attractive option? A: Obviously, it allows the limited partner to shelter his personal properties from partnership liabilities while participating in the profits of the business. On the other hand, the general partner gains access to additional capital that can be used for the business without losing control over its management. *** Art. 1844. Two or more persons desiring to form a limited partnership shall: (1) 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 terms and conditions of the substitution; (k) The right, if given, of the partners to admit additional limited partners; (l) The 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. *** Q: What is the special requirement in the formation of a limited partnership that does not apply in the formation of a general partnership? A: While a general partnership can be created in any form, including through an oral agreement, except when immovable property is contributed, a limited partnership requires the execution of a certificate that must be signed and sworn to by all the partners and registered with the Securities and Exchange Commission. Q: What is the effect of omitting the word “Limited” or “Ltd.” from the firm name? A: The partners will be presumed to have intended a general partnership and shall be treated as such for the protection of third persons. The law treats the latter with greater favor over the partners who managed to disguise the extent of their liability, whether deliberately on inadvertently. Q: What special provisions can be included in the certificate to make the venture more attractive for the limited partner? A: The following rights can be specified in the certificate upon agreement of the partners: 1.) The time when the contribution of each limited partner is to be returned, including the right to demand and receive property other than cash; 2.) The share in the profits or other compensation by way of income which each limited partner shall receive, including the enjoyment of any priorities over other limited partners. 3.) The right to substitute an assignee as contributor in his place. Q: What special obligations can be imposed on the limited partner other than his agreed capital contribution? A: The certificate can provide for certain instances, such as specific times or events, on the happening of which additional contributions shall be required from each limited partner. Q: What is the effect of failure to comply strictly with the foregoing requirements? A: A limited partnership is still formed for as long as there had been substantial compliance in good faith, otherwise, the partnership shall be treated as a general partnership in which all the members are liable for partnership debts. *** Art. 1845. The contributions of a limited partner may be cash or property, but not services. *** Q: Why can’t a limited partner contribute services? A: Since the liability of a limited partner to partnership creditors is limited to the contribution that he is making to the common fund, the law requires that he give cash and/or property which are specific and determinable but not service which is not easily quantifiable. The law cannot allow partnership creditors to look up to something not capable of being ascertained because it will open the avenue for fraud and deception. Q: What is the effect if the limited partner insisted on contributing services? A: The limited partner will be treated like a general partner insofar as liability to partnership creditors is concerned. Q: May an industrial partner join a limited partnership? A: Yes, the industrial partner can join the limited partnership as a general partner but not as a limited partner. ***  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 has been carried on under a name in which his surname appeared. A limited partner whose surname appears in a partnership name contrary to the provisions of the first 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. *** Q: What is the effect of a violation of this article? A: The limited partner shall incur the liabilities, but not the rights, of a general partner towards partnership creditors who are unaware of his real status as a limited partner. *** Art. 1847. If the certificate contains a false statement, one who suffers loss by reliance on such statement may hold liable any party to the certificate who knew the statement to be false: (1) At the time he signed the certificate, or (2) Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate, or to file a petition for its cancellation or amendment as provided in Article 1865. *** Q: What is the remedy of a person who suffers loss or injury due to reliance on a false statement contained in the certificate? A: The injured person may hold liable any party to the certificate, whether general or limited partner, who knew the statement to be false upon signing, or who failed to cause the cancellation or amendment of such certificate within reasonable time upon knowledge of its falsity. The injured person may receive indemnity for the loss as well as payment for damages, if applicable. *** Art. 1848. A limited partner shall not become liable as a general partner unless, in addition to the exercise of his rights and powers as a limited partner, he takes part in the control of the business. *** Q: What is meant by taking part in the control of the business? A: Performing the usual management functions that are necessary and desirable in the operation of the business. Q: Can the limited partner take active part in the winding up of the affairs of the partnership? A: Yes. The scenario contemplated in the article pertains to the duration of the existence of the limited partnership, which ends at the moment of dissolution. *** Art. 1849. After the formation of a limited partnership, additional limited partners may be admitted upon filing an amendment to the original certificate in accordance with the requirements of Article 1865. *** Q: How can additional limited partners be admitted after the formation of the limited partnership? A: An amended certificate reflecting their admission to the partnership must be signed and sworn to by all partners including the newly admitted limited partners and filed before the Securities and Exchange Commission. *** Art. 1850. A general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of a partner in a partnership without limited partners. However, without the written consent or ratification of the specific act by all the limited partners, a general partner or all of the general partners have no authority to: (1) Do any act in contravention of the certificate; (2) Do any act which would make it impossible to carry on the ordinary business of the partnership; (3) Confess a judgment against the partnership; (4) Possess partnership property, or assign their rights in specific partnership property, for other than a partnership purpose; (5) Admit a person as a general partner; (6) Admit a person as a limited partner, unless the right so to do is given in the certificate; (7) Continue the business with partnership property on the death, retirement, insanity, civil interdiction or insolvency of a general partner, unless the right so to do is given in the certificate. *** Q: What is the rationale behind the limitations imposed by this article upon the general partners? A: The same principle of acts of strict dominion or ownership requiring the consent of all the partners in the business compared with routine acts of administration to carry on the business of the partnership, which are impliedly within the power of the general partners. ***  Art. 1851. A limited partner shall have the same rights as a general partner to: (1) Have the partnership books kept at the principal place of business of the partnership, and at a reasonable hour to inspect and copy any of them; (2) Have on demand true and full information of all things affecting the partnership, and a formal account of partnership affairs whenever circumstances render it just and reasonable; and (3) Have dissolution and winding up by decree of court. A limited partner shall have the right to receive a share of the profits or other compensation by way of income, and to the return of his contribution as provided in Articles 1856 and 1857. *** Q: Why do limited partners have the same right as general partners insofar as access to partnership information and accounts? A: Limited partners have made capital contributions but have no hand in how these resources will be managed. Giving them access to information is the least that can be done to safeguard their investment against fraud. Q: Why do limited partners have the same right as general partners to petition for dissolution through a court decree? A: As earlier discussed in the preceding chapter, the necessity for a legal proceeding rests on the need to determine the magnitude or severity of such grounds as incapability, prejudice, breach or loss, to warrant a dissolution as a fair and equitable recourse. The ultimate goal is to protect all partners, general and limited alike. *** Art. 1852. Without prejudice to the provisions of Article 1848, a person who has contributed to the capital of a 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. *** Q: What will result if a person intended to be a limited partner and, as such, made the necessary contribution and exercised the usual rights but, for some reason, was not duly constituted contrary to his clear intention (e.g., his name was inadvertently omitted in the certificate of limited partnership)? A: This situation will not automatically result in the person becoming a general partner because it is contrary to his intention. Consequently, he is not bound by the obligations of the partnership unless he ratifies the mistake by failing to renounce his interest in the profits of the business, or other compensation by way of income upon knowledge of the pertinent circumstances. Q: What is meant by the reference to Article 1848? A: Under Article 1848, a limited partner who takes part in the control of the business is liable as a general partner. The liability imposed in this article overtakes the intention of the person making a contribution to be constituted as a limited partner only because by taking part in the control of the business, he is deemed to have willingly presented himself to the public as an agent (hence, a general partner) of the partnership, hence, his liability as such. *** 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 Article 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 members which he would have had if he were not also a general partner.  *** Q: How is it possible to be a general partner and a limited partner at the same time? A: Such partner is every inch a general partner, meaning, he enjoys all the rights and powers but is also subject to all the restrictions that the law imposes on general partners. What makes him peculiar is that insofar as his contributions are concerned, the law puts him on the same status of limited partners. For instance, he may have the right to receive property other than cash on a fixed date of return. *** Art. 1854. A limited partner also may loan money to and transact other business with the partnership, and, unless he is also a general partner, receive on account of resulting claims against the partnership, with general creditors, a pro rata share of the assets. No limited partner shall in respect to any such claim: (1) Receive or hold as collateral security any partnership property, or (2) Receive from a general partner or the partnership any payment, conveyance, or release from liability if at the time the assets of the partnership are not sufficient to discharge partnership liabilities to persons not claiming as general or limited partners. The receiving of collateral security, or payment, conveyance, or release in violation of the foregoing provisions is a fraud on the creditors of the partnership. *** Q: When a limited partner loans money to the partnership, does he enjoy a better status than ordinary partnership creditors? A: No. As a matter of fact, he enjoys a less preferred status because while he is entitled to receive a pro-rata share of the partnership assets along with ordinary partnership creditors (see Article 1863), he cannot hold as collateral security any partnership property nor receive any payment if the assets of the partnership are not sufficient to discharge partnership liabilities. Q: What is the rationale behind this provision? A: The intention of the law is to protect general creditors from fraud. *** Art. 1855. Where there are several limited partners the members may agree that one or more of the limited partners shall have a priority over other limited partners as to the return of their contributions, as to their compensation by way of income, or as to any other matter. If such an agreement is made it shall be stated in the certificate, and in the absence of such a statement all the limited partners shall stand upon equal footing. *** Q: Do limited partners stand on equal footing? A: Yes, unless a grant of priority to one or more is stated in the certificate. Such priority usually pertains to the return of contributions or to compensation by way of income but it can also be as broad as to cover any other matter that the partners agree on. *** Art. 1856. A limited partner may receive from the partnership the share of the profits or the compensation by way of income stipulated for in the certificate; provided that after such payment is made, whether from property of the partnership or that of a general partner, the partnership assets are in excess of all liabilities of the partnership except liabilities to limited partners on account of their contributions and to general partners. *** Q: Can a limited partner receive his share in the profits or his compensation by way of income ahead of the other partners? A: Yes, on the condition that the partnership assets are still sufficient to pay partnership liabilities. In the computation of such liabilities, those owing to limited partners on account of their contributions and to general partners are not included. *** Art. 1857. A limited partner shall not receive from a general partner or out of partnership property any part of his contributions until: (1) All liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contributions, have been paid or there remains property of the partnership sufficient to pay them; (2) The consent of all members is had, unless the return of the contribution may be rightfully demanded under the provisions of the second paragraph; and (3) The certificate is cancelled or so amended as to set forth the withdrawal or reduction. Subject to the provisions of the first paragraph, a limited partner may rightfully demand the return of his contribution: (1) On the dissolution of a partnership; or (2) When the date specified in the certificate for its return has arrived, or (3) After he has six months' notice in writing to all other members, if no time is specified in the certificate, either for the return of the contribution or for the dissolution of the partnership. In the absence of any statement in the certificate to the contrary or the consent of all members, a limited partner, irrespective of the nature of his contribution, has only the right to demand and receive cash in return for his contribution. A limited partner may have the partnership dissolved and its affairs wound up when: (1) He rightfully but unsuccessfully demands the return of his contribution, or  (2) The other liabilities of the partnership have not been paid, or the partnership property is insufficient for their payment as required by the first paragraph, No. 1, and the limited partner would otherwise be entitled to the return of his contribution. *** Q: When may a limited partner demand a return of his contribution? A: Just like any other partner, a limited partner may demand a return of his contribution upon dissolution of the partnership. Nonetheless, it is a usual provision in the certificate of limited partnership that an earlier date is set for the return of contributions of limited partners, in which case, the interested limited partner may make a demand when the designated date comes. If no time is specified in the certificate, the limited partner must send a written notice of his intention to all the other partners. He can make the necessary demand six months after such notice. However, regardless of the foregoing, the contribution of the limited partner can be returned by the partnership if all the other partners consent. Q: In the above-enumerated scenarios, is the partnership obliged to automatically return the contributions of the limited partner? A: No, there are two more requisites that need to be complied with. First, all partnership liabilities, other than those owing to general partners and to limited partners on account of their contributions, should have been paid, or, if not, there should be remaining partnership assets sufficient to pay them. Second, the certificate should be accordingly cancelled or amended in view of the withdrawal or reduction of limited partners. Q: Is the partnership obliged to return to the limited partner exactly the same contribution that he made? A: As a general rule, a limited partner can only demand and receive cash in return for his contribution. The exception is when the certificate of limited partnership states otherwise, or when all partners consent to giving him other things of value. Q: What is the remedy of a limited partner if he is rightfully entitled to a return of his contributions but his demand was unsuccessful as when the partnership assets are insufficient to pay its liabilities? A: The limited partner can seek dissolution and winding up of partnership affairs. *** Art. 1858. A limited partner is liable to the partnership: (1) For the difference between his contribution as actually made and that stated in the certificate as having been made; and (2) For any unpaid contribution which he agreed in the certificate to make in the future at the time and on the conditions stated in the certificate. A limited partner holds as trustee for the partnership: (1) Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned, and (2) Money or other property wrongfully paid or conveyed to him on account of his contribution. The liabilities of a limited partner as set forth in this article can be waived or compromised only by the consent of all members; but a waiver or compromise shall not affect the right of a creditor of a partnership who extended credit or whose claim arose after the filing and before a cancellation or amendment of the certificate, to enforce such liabilities. When a contributor has rightfully received the return in whole or in part of the capital of his contribution, he is nevertheless liable to the partnership for any sum, not in excess of such return with interest, necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before such return. *** Q: What safeguard is provided by law against a limited partner who promised to contribute a specific property but failed to deliver the same to the partnership? A: Even if the said property remains in the custody of the limited partner, he is deemed to possess the same only in the capacity of a trustee for the benefit of the partnership. Q: Why is a limited partner who rightfully received the return of his capital contribution still liable to partnership creditors? A: Refer to the order of priority of payment under Article 1863 which gives first priority to partnership creditors while the return of capital contributions of limited partners only ranks third. Hence, even if a limited partner has rightfully received a return of his capital contributions, the said amount, including interest that it could have earned, can still be made to answer for partnership liabilities that arose prior to the return. Q: If a limited partner erroneously received an amount greater than his fair share in the partnership profits for a particular fiscal year, what is he obliged to do? A: He is obliged to return the amount but even if he does not, the money in his hands is only being held in trust for the partnership. *** Art. 1859. A limited partner's interest is assignable. A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership.  An assignee, who does not become a substituted limited partner, has no right to require any information or account of the partnership transactions or to inspect the partnership books; he is only entitled to receive the share of the profits or other compensation by way of income, or the return of his contribution, to which his assignor would otherwise be entitled. An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if the assignor, being thereunto empowered by the certificate, gives the assignee that right. An assignee becomes a substituted limited partner when the certificate is appropriately amended in accordance with Article 1865. The substituted limited partner has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor, except those liabilities of which he was ignorant at the time he became a limited partner and which could not be ascertained from the certificate. The substitution of the assignee as a limited partner does not release the assignor from liability to the partnership under Articles 1847 and 1858. *** Q: What happens when a limited partner assigns his interest in the partnership? A: The limited partner’s assignee shall be entitled to receive the share of the profits or other compensation by way of income, or the return of contribution, to which the assigning limited partner would otherwise be entitled. Q: Is it possible for the assignee to have greater rights than these? A: Yes, if the assignee becomes a substituted limited partner, he would be entitled to all the rights and powers of the assigning limited partner. He would, for instance, have the right to require any information or account of the partnership transactions or to inspect the partnership books. Consequently, he would also be subject to all the restrictions and liabilities of his assignor, except those liabilities of which he was ignorant at the time he became a limited partner and which could not be ascertained from the certificate. Q: How can the assignee become a substituted limited partner? A: An assignee shall have the right to become a substituted limited partner if the certificate of limited partnership gave his assignor the power to constitute him as such. It is also possible for the assignee to become a substituted limited partner if all partners give their consent. In any event, the certificate of limited partnership should be appropriately amended to reflect his admission as a substituted limited partner. *** 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) Under a right so to do stated in the certificate, or (2) With the consent of all members. *** Q: What is the effect of death of a general partner to the limited partnership? A: Just like in a general partnership, the death of a general partner results in the dissolution of a limited partnership. So does retirement, insolvency, insanity or civil interdiction. However, it is possible for the remaining general partners to continue the business of the partnership provided such is granted as a matter of right in the certificate, or, when all the partners give their consent. ***  Art. 1861. On the death of a limited partner his executor or administrator 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 be liable for all his liabilities as a limited partner. *** Q: Will death release a limited partner from liabilities? A: No, his estate shall remain liable for all his liabilities as a limited partner. For this purpose, the executor or administrator of his estate shall be vested with all the rights he used to have as a limited partner in order for his estate to be properly settled. *** Art. 1862. On due application to a court of competent jurisdiction by any creditor of a limited partner, the court may charge the interest of the indebted limited partner with payment of the unsatisfied amount of such claim, and may appoint a receiver, and make all other orders, directions and inquiries which the circumstances of the case may require. The interest may be redeemed with the separate property of any general partner, but may not be redeemed with partnership property. The remedies conferred by the first paragraph shall not be deemed exclusive of others which may exist. Nothing in this Chapter shall be held to deprive a limited partner of his statutory exemption. *** Q: What is the difference between the right granted under this article to a limited partner and that granted under Article 1814 to a general partner? A: The charged interest of the limited partner under this article can be redeemed with the separate property of any general partner, but may not be redeemed with partnership property. On the other hand, the charged interest of a general partner under Article 1814 can be redeemed with both. *** Art. 1863. In setting accounts after dissolution the liabilities of the partnership shall be entitled to payment in the following order: (1) Those to creditors, in the order of priority as provided by law, except those to limited partners on account of their contributions, and to general partners; (2) Those to limited partners in respect to their share of the profits and other compensation by way of income on their contributions; (3) Those to limited partners in respect to the capital of their contributions; (4) Those to general partners other than for capital and profits; (5) Those to general partners in respect to profits; (6) Those to general partners in respect to capital. Subject to any statement in the certificate or to subsequent agreement, limited partners share in the partnership assets in respect to their claims for capital, and in respect to their claims for profits or for compensation by way of income on their contribution respectively, in proportion to the respective amounts of such claims. *** Q: Simplify the order of priority in payment provided in this article. A: Non-Members Limited Partners General Partners Other Liabilities 1st priority 1st priority 4th priority (e.g., loans) Share in the profits N/A 2nd priority 5th priority or income on capital Return of capital N/A 3rd priority 6th priority contributions Q: If the resources of the partnership are not enough to pay all its liabilities owing to outside creditors and to limited partners, what is the rule of preference considering that the article appears to have given highest priority to both? A: Liabilities owing to limited partners should give way to the liabilities owing to outside creditors in view of the general principle that grants greater protection for the interest of third parties dealing with the partnership. *** Art. 1864. The certificate shall be cancelled when the partnership is dissolved or all limited partners cease to be such. A certificate shall be amended when: (1) There is a change in the name of the partnership or in the amount or character of the contribution of any limited partner; (3) A person is substituted as a limited partner; (4) An additional limited partner is admitted; (5) A person is admitted as a general partner; (5) A general partner retires, dies, becomes insolvent or insane, or is sentenced to civil interdiction and the business is continued under Article 1860; (6) There is a change in the character of the business of the partnership; (7) There is a false or erroneous statement in the certificate; (8) There is a change in the time as stated in the certificate for the dissolution of the partnership or for the return of a contribution; (9) A time is fixed for the dissolution of the partnership, or the return of a contribution, no time having been specified in the certificate, or (10) The members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement among them.  *** Q: What is the difference between cancellation and amendment of certificate? A: Cancellation of the certificate is a result of dissolution, as when all the limited partners cease to be such. On the other hand, an amendment reflects minor changes that the limited partnership is able to survive against. *** Art. 1865. The writing to amend a certificate shall: (1) Conform to the requirements of Article 1844 as far as necessary to set forth clearly the change in the certificate which it is desired to make; and (2) Be signed and sworn to by all members, and an amendment substituting a limited partner or adding a limited or general partner shall be signed also by the member to be substituted or added, and when a limited partner is to be substituted, the amendment shall also be signed by the assigning limited partner. The writing to cancel a certificate shall be signed by all members. A person desiring the cancellation or amendment of a certificate, if any person designated in the first and second paragraphs as a person who must execute the writing refuses to do so, may petition the court to order a cancellation or amendment thereof. If the court finds that the petitioner has a right to have the writing executed by a person who refuses to do so, it shall order the Office of the Securities and Exchange Commission where the certificate is recorded, to record the cancellation or amendment of the certificate; and when the certificate is to be amended, the court shall also cause to be filed for record in said office a certified copy of its decree setting forth the amendment. A certificate is amended or cancelled when there is filed for record in the Office of the Securities and Exchange Commission, where the certificate is recorded: (1) A writing in accordance with the provisions of the first or second paragraph, or  (2) A certified copy of the order of the court in accordance with the provisions of the fourth paragraph; (3) After the certificate is duly amended in accordance with this article, the amended certified shall thereafter be for all purposes the certificate provided for in this Chapter. *** Q: Why did the law painstakingly set forth a procedure for amendment or cancellation of the certificate of limited partnership? A: We should recall that the law provided for certain solemnities before a limited partnership can be created, unlike a general partnership that can be formed quite easily, e.g., oral or implied agreement. Consequently, the law likewise imposed some formal requirements before a limited partnership can be modified or cancelled. *** 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. *** Q: What is meant by this article in using the word “contributor”? A: The article refers to a limited partner who is described as a “contributor” because of his or her contribution of money or property to the partnership. Q: What is the significance of this article insofar as the rights and responsibilities of a limited partner are concerned? A: The article explains that the limited partner is not a proper party to proceedings by or against a partnership unless the object of the action is to enforce his or her right against, or liability to, the partnership. For instance, if the partnership intends to sue a business client for breach of contract, the limited partner cannot institute the action as co- plaintiff. Put it another way, if it is the partnership that is sued, the limited partner cannot  be impleaded as a co-defendant. But, then again, if the action is for enforcement of the limited partner’s own rights against the partnership, such as those enumerated in Article 1851, the limited partner is certainly a proper plaintiff in such proceedings. Q: If it isn’t proper for the limited partner to be a party to proceedings by or against the partnership, who commonly bears such responsibility? A: The general partners. *** Art. 1867. A limited partnership formed under the law prior to the effectivity of this Code, may become a limited partnership under this Chapter by complying with the provisions of Article 1844, provided the certificate sets forth: (1) The amount of the original contribution of each limited partner, and the time when the contribution was made; and (2) That the property of the partnership exceeds the amount sufficient to discharge its liabilities to persons not claiming as general or limited partners by an amount greater than the sum of the contributions of its limited partners. A limited partnership formed under the law prior to the effectivity of this Code, until or unless it becomes a limited partnership under this Chapter, shall continue to be governed by the provisions of the old law. *** Q: What benefit is available to existing limited partnerships under this transitory provision? A: Limited partnerships that were created under existing laws prior to the effectivity of the New Civil Code may continue to be governed by such old laws unless they wish to be governed by the new law for which purpose they must be properly constituted as limited partnerships under this title. Copy protected with Online-PDF-No-Copy.com