Does my partnership have to register with the SEC, and what happens if we do not?

When registration is required

Article 1772 sets a threshold. Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission. Two elements trigger the duty: the capital — contributions in money or property — reaches three thousand pesos or more, and the partnership agreement is put in a public instrument, meaning one notarised before a notary public. That public instrument is then what gets recorded with the SEC. Below the threshold, the article does not impose these formalities, though a partnership can still choose to register.

Not registering does not undo the partnership

The more important half of the article is what non-compliance does not do. Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons. In other words, a partnership that never went to the SEC still exists, still binds its partners, and still owes the people it deals with. Registration does not create the partnership; the partners' agreement does that. So partners cannot escape a debt to a supplier or a client by pointing out that they never registered. The obligation to third persons stands regardless.

So why register at all?

If the partnership binds you either way, registration can look pointless — but it is not. Recording the partnership in a public instrument with the SEC gives it a documented existence that banks, government offices and counterparties routinely ask to see before they will transact, open accounts or issue permits. It fixes the terms the partners agreed on in a form that is hard to dispute later. And where the law requires the public instrument — the threshold in this article, and separately whenever real property is contributed — skipping it can create problems of proof and formality even though it does not dissolve the partnership. Registration is about credibility and clean dealing, not existence.

What to do

For a new partnership at or above the threshold, the clean course is to put the agreement in a notarised public instrument and record it with the SEC at the outset, keeping the stamped copies with your books. If capital is below three thousand pesos, weigh registering anyway for the practical doors it opens. And if you are already operating unregistered, do not assume you are insulated from creditors — you are not — but you can still regularise by having the agreement notarised and recorded. The liability to third persons was always there; registration simply puts the partnership on a proper footing going forward.

Cases citing this provision

These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.

• Aniceto G. Saludo, Jr. vs. Philippine National Bank, G.R. No. 193138, August 20, 2018 — read the decision on LawPhil →
• Lilibeth Sunga-Chan, et al. vs. Lamberto T. Chua, G.R. No. 143340, August 15, 2001 — read the decision on LawPhil →
• Marjori Tocao and William T. Belo vs. Court of Appeals and Nenita A. Anay, G.R. No. 127405, October 4, 2000 — read the decision on LawPhil →

Related provisions

• Civil Code, Article 1772 — Registration of a P3,000+ Partnership