Business Partner Withdrawal and Threats to Remove Assets as Potential Harassment Under Philippine Law

Philippine legal framework overview for founders, partners, and counsel.

1) Core Concepts

Partnership and its Property

Juridical personality. A partnership formed for the common exercise of a profession or for profit acquires a personality separate and distinct from the partners upon compliance with law (e.g., public instrument when immovables/contributions require it). Partnership property belongs to the partnership, not to any individual partner.
Fiduciary duties. Partners owe each other duties of loyalty, care, and accounting. They must account for partnership property, avoid self-dealing, and refrain from acts prejudicial to the firm.
Actual vs. apparent authority. Each partner is an agent of the partnership in the ordinary course of business. Termination of authority after withdrawal or dissolution must be communicated to third parties to avoid binding the firm via apparent authority.

2) Withdrawal, Expulsion, and Dissolution

A. How a Partner May Leave

At-will partnerships. Any partner may withdraw at any time; the act causes dissolution (a change in the relation of the partners), though the business may continue for winding up or by agreement of the others.
Term or particular undertaking. Withdrawal before the agreed term or before the undertaking is completed can be wrongful unless justified (e.g., another partner’s serious breach, illegality).
Contractual provisions. Partnership agreements commonly set:
- Notice requirements and effective dates
- Valuation formula for the departing partner’s interest
- Non-competition and non-solicitation limits (subject to reasonableness)
- Buyout and winding-up mechanics
- Expulsion grounds and voting thresholds

B. Legal Effects of Dissolution

Authority after dissolution. A partner’s authority ends except as necessary to wind up (collect receivables, pay creditors, complete existing contracts) and to protect the partnership from loss.
Notice to third persons. To cut off apparent authority, the partnership must:
- Give actual notice to known counterparties
- Give constructive notice (e.g., publication) to others
Liability to third parties. Partners remain liable for pre-dissolution obligations. For post-dissolution acts, the partnership may still be bound by a partner acting with apparent authority unless proper notice is given.
Priority of distributions. On winding up, pay in this order:
1. Outside creditors
2. Partner-creditors (loans/advances)
3. Return of capital contributions
4. Surplus to partners per profit-sharing ratio

3) “Threats to Remove Assets”: Civil and Criminal Angles

When a partner (current or withdrawing) threatens to “pull out” cash, inventory, equipment, or IP, several legal tracks may apply:

A. Partnership & Civil Law Remedies

Breach of fiduciary duty / abuse of rights. A partner acting in bad faith—e.g., leveraging threats to extort concessions or destabilize the firm—can be liable for damages under Civil Code standards (good faith, fairness, Article 19/20/21 principles).
Accounting and injunction. A partner may sue for accounting, injunction, or receivership to protect partnership assets where misappropriation is threatened. Courts can issue TROs/preliminary injunctions to prevent removal or dissipation of property.
Replevin and specific recovery. If partnership chattels are seized by a partner without authority, an action for replevin (delivery of personal property) may lie to recover possession.
Attachment. If there is a showing that an adverse party is disposing or about to dispose of property to defraud creditors (including the partnership), preliminary attachment may be available.

B. Criminal Law Exposure (context-dependent)

Grave threats / light threats. Threatening to commit a wrong (e.g., unlawful seizure, violence) to compel an act or omission may qualify as threats under the Revised Penal Code (RPC), with gravity depending on the nature and conditions.
Grave coercion. Using violence, intimidation, or threats to compel someone to do something against their will and without authority of law can amount to grave coercion.
Unjust vexation. A pattern of harassing acts short of threats or violence may amount to unjust vexation (a catch-all for annoying, disturbing conduct without lawful cause).
Theft / estafa (fraud). Because the partnership is a separate juridical person, unauthorized taking of partnership property or diversion of funds can constitute theft or estafa (especially when there is abuse of confidence or misappropriation of funds received in trust). The precise charge depends on how the property was accessed and what representations or fiduciary undertakings existed.
Cybercrime aggravation. If threats or harassment occur online or via electronic messages, offenses may be covered by the Cybercrime Prevention framework (as a means or with penalty modifiers).

Key idea: Not every “I’ll take my equipment back” statement is criminal. Lawful self-help over one’s separate property differs from unlawful appropriation of partnership property. Facts matter: ownership, consent, timing (pre/post dissolution), and contractual clauses.

4) Is It “Harassment” Under Philippine Law?

“Harassment” is not a single omnibus offense outside specific statutes (e.g., sexual harassment, gender-based harassment). In business disputes, conduct commonly maps to:

Civil abuse of rights / willful injury (damages even without a specific penal law violated)
Unjust vexation, grave/light threats, or grave coercion under the RPC
Defamation if the threats are coupled with false imputations
Stalking/cyberharassment implications when gender-based or online elements exist under special laws

Practical threshold. Repeated, targeted, and unlawful threats to remove partnership assets—especially to force concessions (e.g., waiver of buyout terms)—strengthen a claim that the conduct is harassing or coercive, supporting civil damages and provisional relief.

5) Playbook: What to Do When a Partner Threatens to Pull Out Assets

Immediate Steps

Lock the paper trail. Secure the partnership agreement, amendments, capitalization schedules, inventory lists, bank mandates, board/partners’ resolutions, and communications (emails, chats, texts).
Clarify title. Identify who owns what:
- Partnership-owned: funded by the firm, recorded as assets, depreciated or inventoried → cannot be unilaterally taken.
- Individually owned but on loan/lease to the partnership → check the loan/lease/MOA terms and notice requirements.
Control access points. Update bank signatories, dual controls, and internal approvals consistent with the agreement and law. Implement hold procedures for physical assets (warehouse/IT access logs).
Send a legal demand. Assert rights, demand non-removal, invite immediate inventory and accounting, and propose a neutral audit.
Prepare for court protection. Draft for injunction (TRO/preliminary injunction), receivership, replevin/attachment, and accounting if removal is imminent.

Medium-Term Steps

Negotiate a buyout using the agreement’s valuation formula (capital accounts, appraisal, EBITDA multiple, or book value with adjustments).
Winding-up plan if dissolution is unavoidable: settle creditors, sell assets, allocate liabilities, distribute capital and surplus, and handle tax clearances.
Notice to counterparties (banks, suppliers, clients) to extinguish apparent authority of withdrawing partners.
Insurance and risk. Notify insurers if there is risk of employee dishonesty or similar coverage triggers.

6) Litigation and Remedies Map

Issue	Typical Cause(s) of Action	Provisional Remedy	Evidence Needed
Imminent removal of partnership assets	Injunction; Receivership; Replevin	TRO/Prelim. Injunction; Receiver appointment	Title/ownership records; photos; asset ledgers; access logs; messages
Bad-faith withdrawal / extortionate threats	Damages under civil abuse of rights; Coercion/Threats (RPC)	Injunction against specific acts; Protection of premises	Communications showing threats; witness statements
Misappropriation of funds	Estafa/Theft; Accounting	Attachment; Asset freeze (where available)	Bank statements; signatory mandates; vouchers; audit trails
Continuing apparent authority risk	Declaratory relief; Notice to third parties	N/A (but urgent notices)	Copies of notices served; publications; return receipts
Breach of non-compete/solicitation	Contract breach; Unfair competition	Injunction	Agreement clauses; client lists; solicitation evidence

7) Barangay Conciliation, Venue, and Jurisdiction

Katarungang Pambarangay (Barangay): If the parties are natural persons living/working in the same city/municipality and the dispute is civil or minor criminal, barangay conciliation is usually a condition precedent before filing in court. If the partnership (a juridical person) is the party, barangay conciliation does not apply.
Venue: Civil actions are filed where the plaintiff or defendant resides or where the property is located (for real property or where acts occurred).
Jurisdiction: Amounts claimed and relief sought determine whether the case goes to the first-level courts or Regional Trial Court (RTC). Applications for injunction/receivership typically fall within the RTC.

8) Contract Drafting: Clauses That Prevent Asset-Grab Crises

When revising or drafting a partnership agreement, consider:

Capital contributions schedule and title vesting language (e.g., “All equipment acquired with partnership funds or contributed in kind becomes partnership property upon acceptance and shall be inventoried.”)
Exit mechanics:
- Notice (e.g., 60–90 days) and effective date
- Cause-based expulsion with defined due process
- Valuation (book value ± appraisal; discounted for wrongful withdrawal)
- Payment terms (installments, security interest)
Protective covenants:
- No removal of assets without written consent or two-partner authorization
- Emergency powers for remaining partners to secure premises and accounts
- Dispute-resolution ladder (negotiation → mediation → arbitration/courts)
IP and data: Clarify ownership of source code, trademarks, client data, and accounts; mandate handover on withdrawal.
Confidentiality, non-compete, non-solicit with reasonable scope, duration, and geography.

9) Evidence & Documentation Checklist

Partnership agreement and all amendments
Capital contribution receipts and acceptance resolutions
Fixed asset registry; inventory and depreciation schedules
Bank account mandates; board/partners’ resolutions; signatory cards
Leases/loan-for-use agreements for individually owned equipment on site
Emails, texts, chat logs evidencing threats or admission of intended removal
CCTV/access logs; delivery receipts; warehouse gate logs
Independent audit or inventory reports
Notices to suppliers, banks, clients re: dissolution/authority changes
Proof of service of demand letters and notices

10) Sample, Adaptable Tools

A. Demand Letter (Outline)

Re: Unauthorized Removal of Partnership Assets; Bad-Faith Withdrawal

Recite the partnership agreement, partner’s obligations, and the assets at risk.

State that partnership property cannot be removed without written authorization; reference inventory IDs.

Demand immediate cessation of threats, preservation of status quo, and cooperation in a joint inventory within 48 hours.

Offer good-faith exit talks (buyout valuation meeting in 5 days).

Warn that failure to comply will prompt filing for injunction, receivership, replevin/attachment, damages (civil abuse of rights), and potential criminal complaints (threats/coercion/misappropriation).

Reserve all rights.

B. Injunction Application (Key Allegations)

Specific assets (serials, values) and imminent risk of removal
Lack of adequate remedy at law; irreparable injury to goodwill and operations
Strong likelihood of success (ownership proofs; contract terms; fiduciary breach)
Bond posting and narrowly tailored restraining orders (no removal, no access without escort, preserve electronic records)

11) Practical Scenarios

Partner says: “I’m taking the servers tonight unless you buy me out at 2× book.”
- Likely coercion if used to compel unfair terms; seek TRO; secure premises; propose expedited valuation and escrow.
Departing partner removes a machine he personally owns (on loan) after giving notice.
- Check the loan/lease: if removal violates notice or disrupts essential operations before winding-up agreements, you can seek injunction to maintain status quo pending handover plans.
Partner transfers clients and funds to a new entity before formal withdrawal.
- Potential estafa, unfair competition, and breach of fiduciary duty; seek accounting, attachment, and injunction against solicitation.

12) Compliance, Tax, and Regulatory Notes

BIR and LGU: Dissolution or structural change may require BIR closure/updates, books of accounts balancing, inventory reconciliation, and LGU (mayor’s permit) updates.
Employees and suppliers: Notify and settle obligations consistent with Labor and commercial laws to avoid derivative liabilities.
Data protection: If client data are at risk, implement data-security measures and consider reporting obligations consistent with privacy principles.

13) Risk-Lowering Best Practices

Maintain a living inventory and access controls (dual custody, logs).
Use two-partner or majority authorization for movement of high-value assets.
Require written acknowledgments for contributed assets and any loans of personal property.
Build exit paths into the partnership agreement; avoid “all-or-nothing” standoffs.
Keep negotiations documented; propose mediation early.

14) Quick Decision Tree

Is the asset partnership property?
- Yes → Removal without authority: pursue injunction/accounting; consider criminal angle if misappropriation.
- No / personal property on loan → Enforce contractual notice/return terms; seek status-quo injunction if removal is abusive.
Is there an imminent act (within days) that will cause irreparable harm?
- Yes → Prepare TRO filing with detailed evidence; lock down access.
- No → Send demand, propose audit, commence buyout talks.
Are threats being used to compel unlawful concessions?
- Yes → Consider grave coercion/threats complaint; preserve messages and witnesses.

15) Final Notes

Fact patterns drive outcomes. Ownership records, the partnership agreement, and communications are decisive.
Courts are receptive to preserving the status quo through injunctions while the parties complete accounting and valuation.
Even when criminal avenues exist, civil remedies (injunction, receivership, accounting) are usually the fastest way to protect assets and stabilize operations.

This article provides a Philippine-law-focused framework for handling partner withdrawals paired with threats to remove assets. For concrete action, have counsel review your agreement, your asset registers, and your evidence, then calibrate the mix of demand, negotiation, and urgent court relief.