Universal Manpower Services Co.

April 25, 1985 Universal Manpower Services Co. Room 301 Puso Ng Maynila Bldg. A. Mabini, U. N. Avenue Ermita, Manila Attention : Mr . Manuel O . Soriano Sir : This relates to your letter, dated April 8, 1985, requesting the opinion of this Commission as to the effect of the execution of a deed of assignment by one of the existing partners therein in favor of a new partner to the continuity of the partnership. The new Civil Code in defining the term "dissolution" insofar as it refers to partnership provides as follows: "The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business". (Article 1828, Civil Code). The Commission on several occasions has ruled that the term "dissolution" as used in our Civil Code simply means the point in time when all the partners cease to carry on the business together and should not be understood as necessarily including the winding up and termination of the partnership. Thus, while the sale of interest of a partner to a third person dissolves the partnership, the dissolution in such a case is only in the sense that his connection with the partnership is terminated, that is, there is a technical dissolution . "Any change in the membership or personnel of a partnership, either by the retirement of a partner or by the admission of new members into the partnership, produces, technically , an immediate dissolution of the existing partnership relation and the formation of a new one, although common business usage speaks of the admission of a partner to a firm and regards the firm as subsisting so long as the course of its business is not materially interrupted." 40 Am. Jur., par 197, p. 267, citing Fritz v. Commissioners of Internal Revenue (CCA 5th) 76 F (2s) 460 ( Ltr. to Atty. Mamento Lumibao, dtd. June 29, 1960 ). Much necessarily depends upon the contract of transfer and it is frequently said that a sale of partnership effects by one partner to another is simply evidence tending to show a dissolution and is not ipso facto a dissolution. In other words, the effects to be given such a sale or assignment is primarily a question of intention. (40 Am. Jur., 244) It is therefore opined that the sale/assignment of interest by one of the partners therein in favor of a third party does not dissolve the partnership should there be a clear and indisputable indication that the intention of the parties is to continue the partnership. It is, however, advised that the date of execution of the deed of assignment/sale and the amended articles of partnership relating to the admission of the new partner must be simultaneous. Please be advised accordingly. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman