Understanding Shareholder Rights and Corporate Structures in Stock Corporations, Slides of Law

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LAW ON BUSINESS ORGANIZATION

PARTNERSHIP

• Art. 1767. By the contract of partnership two

or more persons bind themselves to contribute

money, property, or industry to a common fund

with the intention of dividing the profits among

themselves.

CHARACTERISTIC ELEMENTS OF

PARTNERSHIP

- 1. Consensual – there must be meeting of minds. - 2. Nominate – it has name/designation. - 3. Bilateral/Multilateral – there must be 2/more persons. - 4. Onerous – the services/business of partnership has something in return; it is not gratuitous in character.

5.Commutative – partnership has something in return. (almost same meaning with onerous)

6. Principal – it can stand alone. 7.Preparatory – when you have put up a partnership, it is being set up in preparation for future contracts.

PRINCIPLE OF DELECTUS PERSONAE

(CHOICE OF PERSONS)

• a person has the right to select persons with

whom he wants to be associated with in partnership.

JURIDICAL PERSONALITY

• Art. 1768. The partnership has a juridical

personality separate and distinct from that of each

of the partners even in case of failure to comply

with the requirements of Article 1772, first

paragraph.

Kinds of Persons

1. Natural Person – created by God. 2. Juridical Person – created by operation of law.

*If you want to be an incorporator you must be a natural person, but juridical persons can be a stockholder.

*partnership rule: dead partner = exclude in the partnership name.

*Who can form a partnership?

P= Partnership; C= Corporation; N= Natural Person P and P ( yes ) P and N P and C C and C C and N N and N

( yes ) ( No ) ( No ) ( No ) ( Yes )

Effect of failure to comply with statutory requirements

Under Art 1772

Partnership still acquires personality despite failure to comply with the requirements of execution of public instrument and registration of name in SEC.

Under Arts 1773 and 1775

Partnership with immovable property contributed, if without requisite inventory, signed and attached to public instrument, shall not acquire any juridical personality because the contract itself is void. This is also true for secret associations or societies.

3.The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.

4.The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

a. As a debt by installments or otherwise.

b. As wages of an employee or rent to a landlord.

c. As an annuity to a widow or representative of a deceased partner.

d. As interest on a loan, though the amount of payment vary with the profits of the business.

e.As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.

PARTNERSHIP VS. CO-OWNERSHIP

• Exists with a contract, either express or implied.
• Separate & distinct from that of each partner
• Realization of profits
• No limits
• Must have consent from other partners
• A partner may bind the partnership
• Death of one of the partners dissolves partnership - Created by law, may exist w/o a contract. - none - Common enjoyment of a thing/right - Keep the thing undivided for more than 10 years is NOT allowed - May do whatever he wants freely - Cannot represent the co-ownership - Death of one of the co owner does not dissolve the co-ownership

Effects of an unlawful partnership

1. The contract is void and the partnership never existed in

the eyes of the law;

2.The profits shall be confiscated in favor of the

government;

3.The instruments or tools and proceeds of the crime shall

also be forfeited in favor of the government;

4.The contributions of the partners shall not be confiscated

unless they fall under #3.

CONTRIBUTION OF IMMOVABLE/REAL

PROPERTY

- Art. 1771. A partnership may be constituted in

any form , except where immovable property or

real rights are contributed thereto, in which case a

public instrument shall be necessary .Form of

partnership contract.

CONTRIBUTION OF MONEY/ PROPERTY

(PERSONAL)/ OR COMBINATION OF BOTH

- ART 1173.

• must have a public instrument if it is

three thousand pesos or more (P3000 or more)

• -must be recorded & registered w/ Securities and

Exchange Commission (SEC).

• -failure to comply, shall not affect the liability of the

partnership & members to the 3rd persons.

CONTRIBUTION OF IMMOVABLE/ REAL

PROPERTY

Art 1773.

- Where immovable property contributed, failure to comply w/ the following requisites will render the partnership contract void:

• 1. The contract must be in a public instrument;
• 2. An inventory of the property contributed must be made, signed by the parties, and attached to the public instrument.