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XII. Limited Partnerships - Coggle Diagram

- - - - Check if rights are present or absent in the partnership certificate.
    - - False Statement in the Certificate (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:
        
        At the time he signed the certificate, or
        
        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.
    - - Rationale - Contribution of service gives them control over the business. Goes against the concept of LP as mere passive investor.
      - Effect of Participation (1848) - Limited Partner becomes liable as a general partner if he takes part in the control of the business. . Becoming a general partner opens up to violations of anti-dummy law.
        
        Shareholder - This distinguishes limited partner from Shareholder. Shareholder always protected so long as no Fraud. LP liable the moment they participate.
        
        Erroneous Contribution (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.
        
        General and Limited Partner (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.
        
        Advantage - If dual nature, there is priority in the recovery of their contributions in case of dissolution. However, still unlimited liability to partnership creditors.
        
        Multiple Limited Partners;Priority(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.
        
        Conduct - Conduct as important as contractual stipulations in determining the character of the LP. If they do things that amount to control, can be considered as a GP.
      - Surname of a Limited Partner (1846) - he surname of a limited partner shall not appear in the partnership name unless:
        
        It is also the surname of a general partner, or
        
        Prior to the time when the limited partner became such, the business has been carried on under a name in which his surname appeared.
        
        Effect of Inclusion - 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.
        
        Rationale - Inclusion of Surname gives rise to apparent authority. To protect the legitimate expectations of the creditors.
        
        Admission of Limited Partner (1849) - After the formation of a lifted partnership, additional limited partners may be admitted upon filing an amendment to the original certificate in accordance with the requirements of article 1865.
        
        Statutory Investor Protection Devices (Powers and Obligations of General Partner) (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:
        
        Do any act in contravention of the certificate;
        
        Do any act which would make it impossible to carry on the ordinary business of the partnership; - Sir mentioned this in class
        
        Confess a judgment against the partnership;
        
        Possess partnership property, or assign their rights in specific partnership property, for other than a partnership purpose;
        
        Admit a person as a general partner;
        
        Admit a person as a limited partner, unless the right so to do is given in the certificate; - Sir mentioned this, possibly diluting the shares of the limited partner.
        
        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.
        
        Protects the LP as an investor by limiting the powers of the general partner in the management of the business as the LP cannot participate. Similarly, acts of strict dominion or ownership that fall outside the scope of authority of a general parptner.
        
        Supplement to Articles of Partnership - You can supplement these, either through articles of partnership or future partnership agreements.
        
        Rights of a Limited Partner (1851) - A limited partner shall have the same rights as a general partner to:
        
        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;
        
        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
        
        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.
        
        Right to Loan and Transact with the Partnership (1854) -
        GR: A limited partner also may loan money to and transact other business with the partnership, and, receive on account of resulting claims against the partnership, with general creditors, a pro rata share of the assets.
        XCPN - LP is also a GP.
        Prohibitions - No limited partner shall in respect to any such claim:
        
        Receive or hold as collateral security any partnership property, or
        
        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.
        
        Rationale - Relationship between limited partner and partnership is not based on trust and confidence. Prohibition is to prevent illegal competition between the limited partner and creditors of the partnership for partnership assets, in case the partnership assets are not sufficient
        
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        Share of the Limited Partner (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.
        
        Receipt of Contributions (1857) - A limited partner shall not receive from a general partner or out of partnership property any part of his contributions until:
        
        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;
        
        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
        
        The certificate is cancelled or so amended as to set forth the withdrawal or reduction.
        
        Demand of Return of Contribution - Subject to the provisions of the first paragraph, a limited partner may rightfully demand the return of his contribution:
        
        On the dissolution of a partnership; or
        
        When the date specified in the certificate for its return has arrived, or
        
        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. - Sir noted this provision
        
        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.
        
        When Dissolved - A limited partner may have the partnership dissolved and its affairs wound up when:
        
        He rightfully but unsuccessfully demands the return of his contribution, or
        
        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.
        
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        Limited Partner as money investor. Thus, generally can only get money as contribution. Property only if stipulated.
        
        Liability to the Partnership (1858) - Limited partner is liable to the partnership for:
        
        DIFFERENCE - For the difference between his contribution as actually made and that stated in the certificate as having been made, and
        
        UNPAID CONTRIBUTION - 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.
        
        Liability as Trustee (1858) -
        
        Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned, and
        
        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.
        
        Assignment of Interest (1859) - A limited partner's interest is assignable. Assignee may become substituted limited partner or not.
        
        Substituted limited partner is a person admitted to all the rights of a limited partner.
        Requisites:
        
        CONSENT - 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.
        
        AMENDMENT - An assignee becomes a substituted limited partner when the certificate is appropriately amended in accordance with article 1865.
        
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        Death of General Partner(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:
        
        Under a right so to do stated in the certificate, or
        
        With the consent of all members.
        
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