Part Ⅱ Obligations
Chapter II Particular Kinds Of Obligations
Section 19 - Sleeping Partnership
A contract of sleeping partnership is a contract whereby one of the parties agrees to furnish a contribution to an enterprise managed by the other party, on the understanding that the former will share in the profits and losses of the enterprise.
In addition to the provisions of this Section, the provisions concerning Partnership shall apply mutatis mutandis to Sleeping Partnership.
On the contribution of the sleeping partner being handed over, the right over the same transfers to the active partner.
In respect to losses, the sleeping partner is liable only to the extent of his contribution.
The affairs of the sleeping partnership shall be exclusively managed by the active partner.
No rights or obligations towards third parties shall accrue to the sleeping partner on account of transactions entered into by the active partner.
If a sleeping partner takes part in the management of the affairs of a sleeping partnership or declares that he takes part in it, does not deny of others' expression of his participation of the management, he becomes liable to third parties as an active partner, notwithstanding any agreement to the contrary.
Notwithstanding any agreement to the contrary, a sleeping partner may at the expiration of each business year, inspect the books of the partnership and make investigations as to its business and financial state.
For vital reasons, the court may, on the application of a sleeping partner, authorize such sleeping partner to make, at any time inspections or investigations as specified in the preceding paragraph.
Unless otherwise provided for by contract, the active partner shall, at the expiration of each business year, take stock and find out the profits and losses made, and pay immediately to the sleeping partner the profits accrued to him.
Unless otherwise agreed upon, profits which are accrued to the sleeping partner but have not yet been paid out shall not be considered as increases of his contribution.
In addition to the provisions of Article 686 by which a sleeping partner is entitled to declare his withdrawal, a sleeping partnership is terminated in any of the following cases;
(1) Expiration of the agreed time;
(2) Consent of the parties;
(3) Accomplishment of the enterprise or impossibility of accomplishing;
(4) Death or subject to the order of the commencement of guardianship of the active partner;
(5) Bankruptcy of the sleeping or active partner;
(6) Cessation or transfer of enterprise.
In case of the termination of a sleeping partnership, the contribution of the sleeping partner shall be returned by the active partner together with the profit accruing to him.
However, if the contribution is decreased by losses, only the balance shall be returned.