The Articles of Partnership is a document wherein the persons enter into an agreement or contract of partnership. A partnership is when two or more persons bind themselves to contribute money, property, or industry to a common fund for the purpose of conducting business and with the intention that the profits and losses will be divided among them.
Generally, a partnership can be limited or general.
Limited Partnership. A limited partnership is one where there is at least one general partner and at least one limited partner. Limited partners are only liable to the extent of their contribution. The partnership name of a limited partnership should always contain the word "Limited" or "Ltd.".
General Partnership. On the other hand, a general partnership is one where the partners are liable for the contracts and obligations of the partnership with their personal property. Generally, the partners' liability will be in proportion to the amount that they contributed to the partnership. Further, this kind of partnership requires that there are no limited partners, otherwise it becomes a limited partnership.
In both kinds of partnerships, there could be industrial partners or those who contribute industry or service. Industrial partners are not required to contribute money or property and will not be personally liable for losses of the partnership.
This document is specifically drafted for limited partnerships. In case a general partnership will be created, the document Articles of Partnership (General Partnership) can be used.
Basic information on the partners will be included in this document such as their names, citizenship and residential addresses. Information regarding the partnership will also be asked such as:
Firm Name. The firm name may or may not include the surnames of the partners. However, if a surname of a person who is not a partner is included in the firm name, said person would be liable as a general partner.
Purpose. The purpose of the partnership must be lawful such as a valid and legal business purpose (e.g. restaurant, food supply, or service establishment).
Contributions. The contribution to the partnership can be in cash, property or industry.
Capital Partners are the partners who contribute money and/or property to the partnership. They are bound to make additional contributions in case of an imminent loss of the business of the partnership. They are also liable for the losses of the business of the partnership. Finally, they can engage in other businesses as long as the same do not compete with the business of the partnership. Capital Partners are further classified as General Partners or Limited Partners.
Industrial partners are the partners that will only contribute industry or service. An industrial partner cannot be compelled to give additional contributions to the partnership and is not liable for losses of the partnership venture. An industrial partner cannot engage in any other business as long as they are an industrial partner unless there is a stipulation allowing them to do so.
Term of the Partnership. The partnership can be for a definite term or at will. A partnership at will is one whose term is indefinite and may be dissolved at the will of any of the partners.
It will also be asked if certain rights are granted by the partnership to a partner such as the right to receive salary or compensation, the right to allow admission of new limited partners, and the right to assign a partner's right or interest of a partner in favor of another.
Once the document is completed, the partners should print and sign the Articles. The partners should then acknowledge the document as their free and voluntary act before a notary public. Once the document has been notarized, the document should be filed with the Securities and Exchange Commission ("SEC").
There may be other documents that might be required to be submitted to complete the registration with the SEC such as the Name Verification Slip, Endorsement Clearance (From other government agencies) or FIA Form 105 (If one of the partners is not a resident or citizen of the Philippines).
Partnerships in the Philippines are generally governed by the Civil Code of the Philippines, specifically Articles 1767 to 1867. However, other laws, such as the Tax Code, and memorandums and issuances from government organizations such as the Securities and Exchange Commission may also be applicable to partnerships and its conduct and business dealings. The Foreign Investment Negative List also provides the list of investments that are reserved for Philippine nationals and limits foreign participation.
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