General Partner Obligations: Competition, Profit Sharing

Management and Partner Authority

No partner may contradict or hinder the action of the sole manager partner. Management is entrusted as an express condition of the partnership contract, and such a manager may not be removed from their position.

If the manager misuses their powers and their management causes damage to the corporate assets, the remaining partners may:

• Appoint a co-manager from among them.
• Bring a claim for rescission of the sole manager's contract before the courts.

Management can be entrusted to one or more persons who are not partners, and the manager can delegate to third parties who are not partners. All partners are entitled to take part in the management and running of common business, including the right of veto.

When management is entrusted to several partners jointly, those included shall agree to each contract or operation of interest to the partnership, requiring the unanimous consent of all managing partners, similar to civil rules.

Obligation of Non-Competition

General partners have an obligation not to compete with the partnership by dealing in the same type of trade.

Statutes consider two different situations:

• If the partnership has no specific type of trade, the partner must request the authorization of the other partners. Authorization must be granted unless it is proven that such competition will cause effective and manifest prejudice to the partnership. Any partner who infringes this provision must contribute any profits they have made to partnership assets, while bearing any personal losses.
• If the partnership deals in a particular type of trade, unless otherwise stipulated by a special agreement, partners may engage in an activity, provided this does not belong to the kind of business performed by the company.

There is a stronger incompatibility status in relation to service or working partners. They may not participate in any negotiations unless expressly authorized to do so by the other partners. If this provision is violated, service partners may be excluded from the profits obtained from such negotiations.

Obligation to Share Profits and Bear Losses

General partners have the right to share in profits and the distribution of assets upon dissolution. Because the principle of freedom of contract prevails in internal relations between partners, the law reserves them the power to regulate the distribution of assets in the partnership agreement. If no provision concerning distribution is made, the rules named in the statutes prevail.

The law states that each partner has the right to share in profits pro-rata to their share of interest in the partnership. Interest is understood to mean their initial contribution, subsequent contributions, and their share in compensating losses. General partners must also bear losses as provided for in the partnership agreement or, if not so provided, in proportion to their stake in the partnership.

General partners also have the obligation not to withdraw from the partnership assets any amounts exceeding those allocated to each partner for their expenses.

Obligation to Make Compensation

All partners shall be liable for willful or negligent acts in the terms provided for in the statutes. Accordingly, general partners must compensate the partnership for damages caused by malice, abuse of power, or gross negligence.

The law states that damage arising to the corporate interests due to malice, ultra vires acts, or gross negligence by one of the partners shall give rise to the obligation to compensate it if the other partners so require, provided it cannot be deduced from some act of approval or ratification, whether specific or implicit, of the event on which the claim is to be based.