L10 BIZ LAW

LAW OF BUSINESS ASSOCIATIONS: PARTNERSHIP

Introduction

- Partnership is defined in various law treatises as “an association of two or more people
formed for the purpose of carrying on a business with a view to profit”.
- The subject of partnership is divided into three major types as follows:
i. general partnership,
ii. limited partnership and
iii. limited liability partnership.
- All these major divisions of partnership are governed by different statutes in Nigeria.

Regulation
- In Nigeria, general partnership principles (excluding limited partnership and limited
liability partnership) are governed by the Partnership Act of 1890, a statute of general
application which was operative in the whole of Nigeria except the old Western Region of
Nigeria.
- However, in the geographical area known as Western Region of Nigeria, the statutory
provisions governing the subject matter of partnership cover both general and limited
partnerships within its territorial jurisdiction.
- The former Western Region, out of which were created Ekiti, Lagos, Ogun, Ondo, Osun
and Oyo states of Nigeria, have all replaced the partnership law of the defunct Western
Region - CAP 86, Laws of the Western Region of Nigeria, 1959 - with their respective
states laws also covering both general and limited partnerships.
- In 2009, the Partnership Law of Lagos State (with Limited Liability Partnership
Amendments), 2009, which made provisions for limited liability partnership was enacted.

Definition of partnership
- In both Section 1 of the Partnership Act and Section 3 of the Partnership Law of Ogun State,
the word partnership is defined as: “the relation which subsists between persons carrying on
business in common with a view to profit”.
- This relationship should arise from a contract, whether express or implied. A partnership could
arise from a mere agreement to agree which is subsequently implemented by all the parties
concerned as evinced from their conduct. This was the decision of the Lagos High Court in Sterios
Thomopoulos & Another v John Mandilas (1946) 10 W.A.C.A 269.

The three essential elements of partnership

(a) The first in the three elements is “carrying on a business”.
- Applicable statutes define ‘business’ to include “every trade, occupation, or
profession”(Section 45 Partnership Act/Section 2 Partnership Law).
- Note that constitutes a trade or occupation could easily be agreed upon.
- Underhill’s Law of Partnership defines ‘profession’ as, “What are recognised among
business men as commercial and professional business, that is, callings, in which men hold
selves out as willing to serve to all comers, goods, or skilled assistance or other services.”

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(b) The business must subsist between persons: The second element of partnership is that the
partnership must be carried on by or on behalf of at least two persons.

(c) The business must be carried on for profit making (and profit sharing): The third essential
element of partnership is that the business that is carried on by or on behalf of the partners must
for profit making and profit sharing.

Relationships that are similar to a partnership but which are not a partnership

(a) Joint tenancy, tenancy-in-common, joint property, common property or part ownership does
not of itself create a partnership as to anything so held or owned, whether the tenants or owners
do or do not share any profits accruing from the use of such property. The intention to create a
partnership must be explicitly expressed and not left to implication. Section 2 (1) PA.

(b) The sharing of gross returns (from a business transaction) does not of itself create a
partnership. This is so, notwithstanding that the person partaking in the sharing of such returns
have or have not a joint or common right or interest in any property from which or from the use of
which the returns are derived.

(c) The receipt by a person of a share of profits of a business is prima facie evidence that he is a
partner in the business, but the receipt of such a share, or of a payment contingent on or varying
with the profits of a business does not of itself make him a partner in the business. Examples:

i. Payment of a debt or liquidated amount.

ii. An agreement to pay remuneration of a servant or agent of a person engaged in business by a
share of the profits of the business does not of itself make the servant or agent a partner in the
business or liable to such
iii. Receipt of payment of annuity by a person being the widow or child of a deceased partner from
a portion of the profits made in the business in which the deceased person was a partner is not by
reason only of such receipt a partner in the business or liable as such a partner
iv. A loan advance to a person engaged or about to engage in any business on the agreement that
the lender will recoup his exposure through a rate of interest varying with the profits or shall
receive a share of the profits arising from carrying on the business does not ipso facto make the
lender a partner with the person or persons carrying on the business or liable as such.
v. The receipt of annuity or otherwise a portion of the profits as consideration offered to a person
for the sale by him of the goodwill of the business does not become a partner only by reason of
such a receipt, nor will such a person be liable as such a partner ipso facto

Types of partnership

GENERAL PARTNERSHIP
A general partnership is one where all members are legally entitled by law to take part in the
management of the firm’s business. In this situation, there is no distinction for all purposes
between the partners and the business. Also, members of a general partnership are subject to
unlimited liability for the debts and other obligations of the partnership. The necessity for

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registration or of drawing up partnership articles in a partnership deed is not obligatory for a
general partnership.

Rights and duties of partners inter se

The Partnership Act contains rules which will apply subject to any agreement, express or implied,
between the partners (Section 24) as follows:
(a) Equal Share: All partners are entitled to share equally in the capital and profits of the business
and must contribute equally towards the losses whether of capital or otherwise sustained by the
firm;
(b) Management: Every partner may take part in the management of the partnership business;
(c) Remuneration: No partner shall be entitled to remuneration for acting in the partnership
business;
(d) Introduction of Partners: No person shall be introduced as a partner without the consent of all
existing partners;
(e) Internal disputes: Any difference arising out of the ordinary matters connected with the
partnership business may be decided by a majority of the partners but no change may be made in
the nature of the partnership business without the consent of all existing partners;
(f) Indemnity: The firm must indemnify every partner in respect of payments made and personal
liabilities incurred by him in the ordinary and proper conduct of the business of the firm;
(g) Interest on Capital: A partner is not entitled, before the ascertainment of profit, to interest on
capital subscribed by him;
(h) Books: The Partnership books are to be kept at the place of business of the partnership and
every partner may when he thinks fit, have access to and inspect any copy of them;
(i) Assignment of a Share in a Partnership: An assignment by any partner of his share in the
partnership either absolutely or by way of mortgage or redeemable charge does not entitle the
assignee to interfere in the management, require accounts or inspect the partnership books. He is
only entitled to receive a share of the profits which the assigning partner would otherwise be
entitled to; and
(j) Transmission of Shares in the Partnership: When a partner dies or becomes bankrupt, his
property vests by operation of law in his personal representatives or trustee in bankruptcy as the
case maybe. They do not become partners in the firm, indeed the firm will have been dissolved by
the death or bankruptcy unless the partnership agreement otherwise provides.

Relations of partners and third parties

Every partner is an agent of the firm and his other partners for the purpose of the business of the
partnership and every partner's act done for carrying on the business in the usual way will bind the
firm and his partners. However, the firm and the co-partners will not be bound;

(i) Where the partner who acts has no authority to bind the firm in the particular matter, and;
(ii) Where the person who deals with him knows that he has no authority or does not believe him
to be partner (Section 5).

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Extent of Power:
Decided cases indicate that the implied authority of a partner envisaged above is as follows:

• In a general partnership, partners have implied authority to buy, pledge and sell goods of the
type in which the firm deals; give valid receipts; sign cheques; engage and dismiss employees;
and sue on behalf of firm or defend an action against it.
• In a non-trading partnership, such as a firm of solicitors, accountants, quarry workers, and
cinema proprietors a partner cannot.
• In trading Partnerships, partnerships where business consists in the buying and selling of goods,
the partners have additional powers to borrow money and give security over the firm's land or
chattels; and draw, accept or in dose bills of exchange and promissory notes; accept, make or
issue negotiable instruments other than ordinary cheques; and borrow or pledge the partnership
property.

There are however certain acts that are not within the usual authority of a partner whether it is a
trading partnership or a non-trading partnership, thus a partner does not have the usual authority
to:
(a) execute a deed, unless his authority is expressly conferred by deed;
(b) give a guarantee in the firm's name unless a trade custom in that regard is proved;
(c) submit a dispute to arbitration;

(d) accept property in lieu of money to satisfy a debt owed to the firm;

(e) make his partners into partners with other persons in another firm; and

(f) authorise a third person to make use of the firm's name in legal proceedings

LIMITED PARTNERSHIP
A limited partnership is a partnership with at least one general partner and at least one limited
partner. Unlike a general partner, a member who opts for limited partnership could only invest in
the partnership without taking part in its management. By opting to be a limited partner, such a
member will have his liability limited to the quantum of his investment in the partnership. If a
limited partner decides to participate in the management of the business, he will thereby become
a general partner without any limit to his liability.

Nature and attributes of a Limited Partnership (LP) (Section 795 – 810 CAMA, 2020)
A limited partnership has the following attributes under the CAMA, 2020:
(a) It may be formed with not more than 20 (twenty) persons who shall consist of one or more
persons called general partners, and the latter shall be liable for all the debts and other obligations
of the firm. In addition, it must have one or more members called the limited partners whose
liability for the debts and obligations of the firm shall be limited to their investments in it;

(b) When the limited partnership is formed or when a person joins a limited partnership, he is
expected to contribute or enter into an agreement to contribute a fixed sum of or sums in money

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or money’s worth and apart from this. It must be noted that unless there is an agreement to the
contrary, the limited partner shall not be liable for the debts and other obligations of the firm
beyond the amount earlier contributed or agreed to be contributed;

(c) During the subsistence of a limited partnership, a limited partner shall not draw or
receive back any part of his contribution unless there is a contrary agreement in writing permitting
this. Where a limited partner draws out or receive back any part of his contribution without a
contrary agreement permitting this, the limited partner shall be liable for the debts and obligations
of the partnership up to the amount so drawn out or received back;

(d) Membership in a limited partnership is open to both a natural or an artificial person.

Where a natural person has been adjudged by a court in Nigeria - or elsewhere - to be of unsound
mind or to be an undischarged bankrupt, such a person will be forbidden from being a limited
partner -Section 796, CAMA;

(e) A limited partnership must be registered under the CAMA, and where there is a default
to register, the limited partnership shall be deemed to be a general partnership and every limited
partner in the partnership shall also be deemed to be a general partner - Section 797;

(f) A limited partner cannot bind the firm;

(g) The death, bankruptcy, or insanity of a limited partner will not dissolve the partnership;
and

(h) A limited partner cannot dissolve the partnership by notice

Procedure for registration and running of limited partnership

(a) Before a limited partnership could be registered under the Act, the application for its
registration shall be made in the prescribed form issued by the Corporate Affairs Commission
(CAC);

(b) The application form must be signed or otherwise authenticated by or on behalf of each
partner.

(c) Apart from the duly filled and signed application form, the application for registration
of a limited partnership shall also include a statement signed by all the partners, including the
limited and general, containing the following:

i. The name of the limited partnership;

ii. The general nature of the business of the limited partnership;

iii. The principal place of business of the limited partnership;

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 iv. The full name and address of each general partner;

v. The full name and address of each limited partner;

vi. The term if any, for which the limited partnership is entered into and the date of its
commencement;

vii. A statement that the partnership is limited and the description of every limited partner
as such; and

viii. The sum contributed, or agreed to be contributed by each limited partner and whether
paid, or to be paid in cash or in another specified form.

(d) Upon the fulfillment of the requirements above, the CAC shall register the limited partnership
and issue a certificate of registration signed by its officer and duly authenticated by the official
seal of the CAC.
(e) The certificate of registration issued as evidence of registration of a limited partnership shall
contain the registered name of the limited partnership, its registration number, the date of
registration and the fact that the limited partnership is registered as a limited partnership.
(i) The certificate of registration is prima facie evidence that the limited partnership is in
existence as at the date of registration.

(j) The name of a limited partnership written on the certificate of registration or on any of
the firm’s business documents must end with the words “limited partnership” or the abbreviation
“LP”.

(k) Where changes are made to or occurring in a limited partnership firm in relation to general
nature of the business; principal place of business; partners or the name of any partner; terms or
character of the partnership; sum contributed or to be contributed by any limited partner; and or,
the liability of any partner by reason of his becoming a limited partner instead of a general partner,
vice versa, such changes shall be communicated to the CAC within seven days of the making or
occurrence of the change - Section 800 (1) (a-g).
(l) In the event of a where the firm defaults in notifying the Commission of any changes made by
or occurring in a limited partnership in accordance with the instances itemised in Section 800
CAMA 2020, each of the general partner in the firm shall be liable to a fine as shall be prescribed
in the regulations to be published by the Commission - Section 800 (2).
(m) Where a general partner in a firm decide to change his status to that of a limited partner in the
same firm, or the shareholding of a limited partner in a firm is to be assigned to any person whereby
the latter recipient will become a limited partner, the notice of such an arrangement or transaction
shall be filed with the Commission within a period of five days of such change. Section 801 (1).
(n) Until the requisite notice as mentioned in subsection (1) of section 801 is filed with the
Commission, any such purported arrangement or transaction for the purposes of Section 801 (1)
shall be deemed a nullity under the Act (Section 801 (2)), and each of the general partners of the
firm shall be liable to payment of a fine as prescribed by the Commission in its regulations, Section
801 (3).

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(o) The provisions of Section 30 of the Act in respect of change of name of an incorporated
company and that of Section 31 of the Act in respect of reservation of name of a company proposed
to be registered, shall apply mutatis mutandis to a limited partnership in similar circumstances.
Section 803.
(p) Where there is any improper use of the words “limited partnership” or the word “LP” by person
or persons carrying on business under any name or title which falsely suggest that a limited
partnership business is being carried, such persons in default, shall be liable to payment of a fine
as prescribed by the Commission in its regulations (Section 804).
(q) The Commission shall maintain at its registry, proper books of register and index of all the
limited partnerships registered together with all statements registered in relation to such
partnership. Section 805.
(r) Inspection of document: Upon payment of such fees as a prescribed by the Commission, a
person may apply to conduct searches in the registry of the Commission for the purposes of
inspecting the statement filed by the Commission; or for the purposes of requesting a certificate of
registration of a limited partnership; or for obtaining a certified true copy of an extract from any
registered statement and for no other purpose - Section 809 (1).
(s) Presumption of regularity of secondary documents certified by the Registrar: Where a
certificate of registration of a limited partnership is obtained under subsection (1) of Section 809,
or a certified true copy of an extract from any registered statement is presumably made under the
hand of the Registrar, it shall not be necessary to prove due execution by the Registrar for the
purposes of receiving such documents in evidence in all legal proceedings, whether civil or
criminal - Section 809 (2).
(t) Liability for false statements: Where any statement required to be furnished under the Part D of
the Act is found to contain any matter which is knowingly false in any material particular by the
person signing such statement, the latter is deemed to have committed an offence under the Act
and is liable upon conviction to imprisonment for a term not exceeding one year or to the payment
of a fine as the Court shall deem fit which shall be in addition to such fines as may be specified by
the Commission in its Regulations - Section 810.

LIMITED LIABILITY PARTNERSHIP

A limited liability partnership (LLP) has the following attributes under (Sections 746-769 of the
CAMA, 2020:
(a) Upon registration under the CAMA, the LLP becomes a body corporate and a legal
entity separate from the partners of the LLP;
(b) It has perpetual succession so that like an incorporated company, any changes in the
partners of a limited liability partnership will not adversely terminate its existence, rights or
liabilities (Section 746);

(c) With the exception of an insane person who has been so adjudged by a court of law and
an undischarged bankrupt, any individual or body corporate may be a partner in an LLP (Section
747);

(d) A LLP is duly formed by at least two and more partners and whenever this number is reduced
below two in a limited liability partnership and the LLP continues to carry on

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 business for more than six months after the reduction, the only partner left during the six
months period will be personally liable for the obligations of the LLP during the period as long as
it can be proved that the partner has knowledge of the reduction (Section 748);

(e) There shall be at least two designated partners of the LLP who are natural persons with
at least one of them resident in Nigeria. If, however all the partners of the LLP are bodies corporate
or one or more of them are individuals and bodies corporate, the individual partners of the LLP or
the nominees of the body corporate partners shall act as designated partners;

(f) The name of the partnership must end with ‘LLP’ or ‘Llp’.

Designated partners
(a) The status of designated partners may be specified in the incorporation documents and
persons so named shall become known as designated partners of the LLP on incorporation.
Alternatively, the LLP may state in the incorporation documents that each of the partners in the
LLP is to be designated partner and every such partner is taken as a designated partner.
(b) A partner may be made a designated partner in the LLP agreement and the same
agreement may contain circumstances where he will be relieved of the status.
(c) No individual can become a designated partner in an LLP except a written consent of
the individual is obtained prior to the appointment and within 30 days of appointment, an LLP
shall file returns with the CAC of particulars of every individual who has given consent to act as
designated partners.
(d) A person automatically loses a designated partner status if he ceases to be a partner in
the LLP.
(e) In the absence of any express provisions to the contrary in the Act, a designated partner
has the responsibility to do the following:
i. Perform all the things that are required to be carried out by the LLP in the area of complying
with the provisions of the CAMA. Such acts referred to include the filing
i of any document, returns, statement and any other report under the Act and as may be
specified in the LLP agreement; and

ii ii. Be liable to pay all penalties that are imposed on the LLP for contravening any of the
provisions of the CAMA. Section 750 (1) & (2).

iii (f) Where there is a vacancy in the position of a designated partner in an LLP, the vacancy
shall be filled within 30 days of its occurrence and the Commission shall be duly notified of the
filling of the vacancy as well as the consent of the newly appointed designated partner; and

iv (g) Where the LLP defaults in complying with the provisions of sections 749 – 751 (on
designated partners; their liabilities; communication of changes in designated partners to the
Commission), both the LLP and each of its partners is liable to pay a penalty as determined and
specified in the CAC’s regulation.

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Incorporation of limited liability partnership
Before an LLP can be registered under the Act, at least two or more persons must combine to carry
on lawful business with a view to profit and shall subscribe their name to incorporation documents
which shall be filed with the Commission upon the payment of the fee prescribed by the
Commission from time to time.
At the incorporation of the LLP the documents of incorporation shall contain detailed information
on the proposed name of the LLP, the proposed business of the LLP; the address of the registered
office of the LLP; name and address of each of the partners of the LLP on incorporation; name
and address of each of the partners of the LLP on incorporation; name and address of the persons
who are to be called designated partners of the LLP; and information concerning the proposed LLP
as the CAC may prescribe.
Where information in respect of the statement referred to above are deliberately made falsely, the
maker will be deemed to have committed an offence and if convicted will be punished by a term
of imprisonment for not more than three months or to the payment of a fine or to both imprisonment
and fine as the court may decide.
Upon receipt of incorporation documents by the CAC, the latter shall, within a period of 14 days,
register the LLP and issue a certificate of incorporation in the name specified in the certificate to
the LLP.
The certificate of registration shall contain the name of the LLP, its registration number, the date
of registration and the fact that the LLP has been registered as an LLP. The certificate constitutes
prima facie evidence that the LLP is in existence as at the date of the registration. Section 754.
The name of an LLP written on the certificate shall end with either the words “limited liability
partnership” or the acronym “LLP” and just like limited liability company under Part B of CAMA
2020, where in the opinion of the Commission, the proposed name by which an LLP is to be
registered is undesirable, or identical or too nearly resembling that of any other partnership,
business name, limited liability partnership, body corporate, or a registered trade mark, the
Commission shall decline to register the LLP by that name - Section 757 (2).
The provisions of sections 30 and 31 of the Act in respect of reservation of name of companies
registrable under Part B of the Act are also applicable to the reservation of name or change of name
of an LLP. Section 758.
Improper use of the words limited liability partnership or ‘LLP’ is prohibited. This happens where
a person carries on business under a name or title with the words “limited liability partnership” or
“LLP” without being duly incorporated as a LLP. The offender shall be liable to a penalty in the
amount specified by the CAC in its regulation - Section 759.

Effect of registration of LLP – Section 756

As from the date of registration of an LLP, the LLP may sue and be sued in its name, acquire, own,
hold and develop or dispose of property, whether movable or immovable, tangible or intangible,
and may if it decides, have a common seal and be entitled to do or permit the doing of any other
acts and things as bodies corporate may lawfully do and permit to be done.
Every LLP duly registered under the Act shall ensure that its registered name, address of
registered office, and registration number of the LLP together with a statement that it is registered
with limited liability shall be published on all its invoices, official correspondence and publication.
Where any LLP defaults in complying with the obligation to publish, both the LLP and every
partner shall be liable to a penalty for every day the default continues in the amount as the
Commission shall specify in the regulation.

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Registered office of LLP and change therein
It is imperative that every limited liability partnership should have a registered office to which all
communications and notices may be addressed to and received by the LLP. And any document
may be served on the LLP or on any of its partners or designated partners at the registered office
or any other address specifically declared by the LP for that purpose, by post, registered post or
any other manner as may be prescribed.
A LLP may by resolution change the place of its registered office and the resolution must be
delivered to the Commission within 14 days of its passing otherwise, the change will be of no
effect. Where an LLP defaults in complying with the provisions of the section on registered office
and change therein, each partner and the LLP shall be liable for every day that the default continues
and the penalty payable shall be in the amount specified by the Commission in the regulations.

Limited liability partners and their relations inter se

Upon the incorporation of a limited liability partnership, the subscribers to the incorporation
documents shall be the partners of the LLP and any other person who desires to become a partner
of the LLP shall be so regarded upon compliance with and in accordance with an LLP agreement
- Section 761.
The mutual rights and duties of the partners of an LLP and the mutual rights and duties of the LLP
and its partners shall be regulated by the LLP agreement entered into between the partners or
between the LLP and its partners except contrary provisions exist in the Act.
Where there is any change in the affairs of the LLP, such changes shall be filed with the CAC in
the required form or manner and accompanied with the prescribed fees - Section 762 (2).
Where there is an agreement in writing made before the incorporation of an LLP between the
persons who subscribed their names to the incorporation documents and the agreement imposes
obligations on the LLP subsequent to its incorporation, the LLP may have no choice than to carry
out the obligations, where all the partners ratified the agreement after the incorporation of the LLP
- Section 762 (3).

The mutual rights and duties of the partners and the mutual rights and duties of the LLP
and the partners
(a) That mutual rights and duties of the partners and that of the LLP and its partners shall be
determined first in accordance with the LLP agreement (where such an agreement exists) or
otherwise by the provision of the fifteenth schedule;
(b) All partners of the LLP are entitled to share equally in the capital profits and losses of
the LLP;
(c) The limited liability partnership shall indemnify each partner in respect of payments
made and personal liability incurred by him (a) in the ordinary and proper conduct of the limited
liability partnership; or (b) in or about anything necessarily done for the preservation of business
or property of the limited liability partnership;
(d) Every partner shall indemnify the limited liability partnership for any loss caused to it
by his fraud in the conduct of the business of the limited liability partnership;
(e) Every partner may take part in the management of the limited liability partnership;

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 (f) No partner shall be entitled to remuneration for acting in the business or management
of the limited liability partnership;
(g) No person may be introduced as a partner without the consent of all the existing
partners;
(h) Any matter or issue relating to the limited liability partnership shall be decided by a
resolution passed by a majority in number of the partners, and for this purpose, each partner shall
have one vote. However, no change may be made in the nature of the business of the limited
liability partnership without the consent of all the partners;
(i) Every limited liability partnership shall ensure that decisions taken by it are recorded in
the minutes within 30 days of taking such decisions and the minute books are kept and maintained
in the registered office of the limited liability partnership;

(j) Each partner shall render true accounts and full information of all things affecting the
limited liability partnership to any partner or his legal representative;
(k) If a partner, without the consent of the limited liability partnership, carries on business
of the same nature as and competing with the limited liability partnership, he must account for and
pay over to the limited liability partnership all profits made by him in that business;
(l) Every partner shall account to the limited liability partnership for any benefit derived
by him without the consent of the limited liability partnership from any transaction concerning the
limited liability partnership, or from any use by him of the property, name or any business
connection of the limited liability partnership;
(m) No majority of the partners can expel any partner unless a power to do so has been
conferred by express agreement between the partners;
(n) All disputes between the partners arising out of the limited liability partnership
agreement which cannot be resolved in terms of such agreement shall be referred for arbitration as
per the provisions of the Arbitration and Conciliation Act;
(o) The limited liability partnership shall not, without the consent of all partners, sell assets
having a value of more than 50% of the total value of assets of the limited liability partnership;
(p) A partner shall not sell or agree to sell his interest in the partnership to a non-partner
without first offering his interest to existing partners; and
(q) A partner or group of partners acting together, shall not sell or agree to sell more than
50% of interest or combined interest in the partnership unless that non-partner has offered to buy
all of the partners’ interests and on the same terms.

Cessation of partnership interest in the LLP – Section 763

A person may withdraw his membership of a limited liability partnership in accordance with a
prior agreement with the other partners and in the absence of such a prior agreement, a person
withdrawing is expected to give a notice in writing of not less than 30 days to the other partners.
Apart from cessation of membership through intention of parties, a person shall cease to be a
partner of a limited liability partnership upon his death, or dissolution of the partnership;

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or if he is of unsound mind and declared so by a competent court, or if he has applied to be adjudged
as and insolvent and or bankrupt and a competent court has pronounced him as such. Section 763
(2). Where a person has ceased from being a partner, he is still regarded as a partner in the limited
liability partnership for all purposes and in relation to any person dealing with the limited liability
partnership, unless the latter has notice that the former partner has ceased to be a partner of the
limited liability partnership or that the person dealing with the partnership has notice that the fact
of cessation of former partner in the limited liability partnership has been communicated to the
Commission - Section 763 (3).
Cessation of a partner from a limited liability partnership does not operate ipso facto to discharge
him from any obligation to the limited liability partnership, or discharge him from his liability to
other partners and to any other person, incurred while he was still a partner in the limited liability
partnership - Section 763 (4).
In the case of a former partner, unless there is a contrary provision in the limited liability
partnership agreement, his cessation of membership of the does not adversely affect his own - right
or that of a person entitled to his hare due to death or insolvency - to preclude him from receiving
from the limited liability partnership, an amount equal to the capital contribution the former partner
actually made to the partnership, his right to participate both in the accumulated profits of the
partnership after the deduction of accumulated losses of the partnership, determined as at the date
the former partner ceased to be a partner.
However, a former partner’s personal representatives or beneficiaries of his estate shall not be
entitled to interfere or participate in the management of the limited liability partnership - Section
763 (6).

Registration of change in particulars of partners – Section 764

If any changes occur in the name and address of a partner during the subsistence of his membership
of the partnership, the partner shall inform the limited liability partnership within a period of 15
days of the change.
On the part of the limited liability partnership, where a member joins or a member leaves the
partnership, or there is a change in the name and or address of a partner, the limited liability
partnership has 30 days within which it must communicate the development to the Commission.
The notice of changes in the status of a partner or of any changes in his name and address shall be
filed in the form and accompanied by such fees as prescribed by the Commission and duly signed
by all designated partners of the partnership. If the filing relates to the status of an incoming
partner, the statement of consent signed by the incoming partner shall also be filed with the
Commission.
Where there is a default on the part of the limited liability partnership to transmit the requisite
notices under this section on an incoming partner to the Commission, both the limited liability
partnership and every designated partner of the partnership, shall be liable to a penalty as fixed by
the Commission, for each day of the default.
Where the default is on the part of a partner to communicate changes in his name and address to
the limited liability partnership within 15 days of such changes, such a defaulting partner is liable
to a penalty as fixed by the Commission.
Any partner who withdraws his partnership from a limited liability partnership, and acting upon
the belief that the limited liability partnership may not take steps to inform the Commission or
without waiting for limited liability partnership to take any steps may file a notice of his
circumstance with the Commission. The Commission shall confirm the veracity of the information

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from the limited liability partnership unless the limited liability partnership has in the meantime
filed such notice. Where the limited liability partnership fails to give the information requested to
the Commission within 15 days, the Commission shall register the notice made by the partner
withdrawing his membership from the limited liability partnership.

Extent of limitation of liability of the LLP and its partners - Sections 765 – 769
(a) For the purposes of the business of the limited liability partnership, a partner of a limited
liability partnership is an agent of the limited liability partnership, but not of other partners.
(b) A limited liability partnership is not bound by anything done by a partner, in the partner’s
relationship with a third party, if the partner does not possess in fact, any authority to act for the
limited liability partnership in respect of any particular act, and the third party with whom the
partner is dealing is aware that the partner has no such authority in fact, or the third party does not
know or believe the partner to be a member of the partnership.
(c) The limited liability partnership will be liable to a third party for the wrongful act or omission
made by a partner and incurred to a third party, if such wrongful act or omission were done by the
partner in the course of the business of the limited liability partnership or with the latter’s authority.
(d) Where any obligation of the limited liability partnership arises in contract or otherwise, such
obligation shall be regarded as that of the limited liability partnership solely.
(e) The liabilities of the limited liability partnership shall be defrayed out of the property of the
limited liability partnership.
(f) A partner in a limited liability partnership is not personally liable directly or indirectly for an
obligation of the limited liability partnership only by reason that he is a partner of the limited
liability partnership.
(g) The fact that the obligation of a limited liability partnership shall be borne solely by it, does
not absolve a partner therein of personal liability for his own wrongful act or omission; and a
partner shall not be personally liable for the wrongful act or omission of any other partner of the
partnership.
(h) A person who through his spoken or written words, or by his conduct hold out himself or
knowingly allows himself to be represented as a partner in a limited liability partnership, will be
liable to another person who relies on the representation to give credit to the limited liability
partnership, notwithstanding that the person representing himself or represented to be a partner
does or does not know that the representation has reached the person giving the credit. Section 768
(1).
And where any credit is received by the limited liability partnership as a result of the representation
in subsection (1), the limited liability partnership shall, in addition to the liability of the person
holding out, be liable to the extent of the credit received by it or any financial benefit derived from
the false representation.
(i) Where, subsequent to the demise of a partner in a limited liability partnership, his name
continues to feature as part of the partnership of the business in continued in the partnership’s
name, this fact shall not of itself make the deceased personal representatives or his estate
responsible for any act of the limited liability partnership done subsequent to the partner’s death.
(j) Where a limited liability partnership or any of its partners carries out an act with the intent to
defraud creditors of the limited liability partnership or any other person, or the act is carried out
for any fraudulent purpose, the liability of both the limited liability partnership and its partners
who acted with intent to defraud shall be unlimited for all or any of the debts or other liability of
the partnership.

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(k) If any business is carried on by the limited liability partnership with such intent to defraud or
for any fraudulent purpose, every person who knowingly participate in the business in the manner
of carrying it out will be deemed an offender and liable on conviction to a term of imprisonment
not exceeding two years or a fine or to both imprisonment and fine as the court may deem fit.
(l) Where the limited liability partnership or any partner or designated partner or employee of the
limited liability partnership has conducted the business or affairs of the partnership in a fraudulent
manner, such a delinquent party shall, notwithstanding his subjection to criminal proceedings
which may arise under any law for the time being in force, still be liable to pay compensation to
any person who has suffered any loss or damage by reason of the conduct, provided that the limited
liability partnership shall not be liable if it can prove that any such partner or designated partner
or employee acted without the knowledge of the limited liability partnership.

Accounts, audit, annual returns and assignability of partners’ interest in limited partnership
and limited liability partnership
In all cases where there are no special provisions in respect of the limited partnership under the
Companies and Allied Matters Act 2020, Section 807 of the Act has expressly extended the
application of Part C on limited liability partnership to Part D, on the limited partnership.
Therefore, the provisions of the CAMA in respect of the subject-matter of this subhead, which are
made applicable to limited liability partnership will also apply mutatis mutandis to limited
partnership also by virtue of the provisions of Section 807.

Accounts: Financial disclosures under the CAMA are imperative for the LLP which has the
statutory responsibility to maintain such prior books of account from year to year in relation to its
affairs, throughout of its existence. The books of account which shall be maintained in the
registered office of the LLP, shall be kept in two major accounting models; being cash or accrual
basis in accordance to the double entry system of accounting. Section 772 (1).
Within a period of six months from the end of each financial year, every registered LLP is
mandated to prepare and file with Commission, a statement of account and solvency which shall
be duly signed by the designated partners of the LLP. Section 772 (2).

Audit: The book of account of every registered LLP shall be audited in line with the rules of audit
prescribed by the Minister of Trade and the Minister may publish in any regulation, an exemption
of any class or classes of LLP from the requirement of the subsection on audit.
Where an LLP defaults in complying with the provisions of the law relating to audit – and such an
LLP has not been exempted from complying with the subsection – such defaulting LLP and each
designated partner therein, shall be liable to a penalty in such amount as the Commission shall
specify in its regulations.

Annual returns: At a period not later than 60 days after its financial year, an LLP shall file an
annual return in the form and manner prescribed by the Commission accompanied by the payment
of the prescribed fee.
In the event of a default in the filing of the annual returns, both the LLP and each designated officer
shall be liable to a penalty in such amount as the Commission may by its regulations specify.

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Assignment and transfer of partnership rights
Except there is a contrary provision in the partnership articles of an LLP, the right of a partner to
participate in the sharing of the profits and losses of an LLP and to receive distributions therein in
accordance with the partnership agreement are transferrable either wholly or in part - Section
774(1).
The transfer of any such rights under subsection (1) does not ipso facto results in the dissociation
of the partner or a dissolution and winding up of the LLP. And the transfer of such rights does not
confer the right of management or conduct of the LLP activities or grant access to information
concerning the transactions of the LLP on the transferee or assignee.

Investigations and litigation in limited liability partnership and criminal proceedings

initiated by the Attorney General of the Federation

(a) Investigation ordered by Court

The affairs of an LLP can be a subject of investigation pursuant to an order or declaration by the
Federal High Court. The investigation shall be carried out by one or more competent persons
appointed by the Commission as inspectors for the purposes of such investigation - Section 775(1).
(b) Investigation carried out by the CAC
Apart from the Court, the Commission can suo motu appoint one or more competent persons as
inspectors to investigate the affairs of any LLP in such manner that the Commission directs.
Investigation carried out by the Commission of its own volition can be made only under the
circumstances that:

i. At least one-fifth (that is, 20%) of the total number of numbers of partners in the LLP have
applied formally to the Commission for investigation of the LLP. The applicants must be ready to
furnish the Commission with security for cost and the application must be supported by enough
evidence to show good reasons by the members for requesting the investigation;
ii. The LLP itself has applied to the Commission for self-investigation on grounds justifying the
application;
iii. The Commission itself has decided without the influence of members of or the LLP itself that
the LLP ought to be investigated on the existence of the following grounds:

• The LLP business is being conducted with the intent to defraud its creditors, partner or any other
person, or otherwise for an unlawful or fraudulent purpose;
• The LLP was formed for the advancement of any fraudulent purpose or that its business is being
or has been conducted in an oppressive or prejudicial manner to some or any of its partners;
• The LLP has deviated from the provisions of the CAMA in the conduct of its affairs; or
• There is sufficient reason contained in a report of the Commission or any other investigating or
regulatory agency which justify the conduct of an investigation into the affairs of the LLP.

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Criminal proceedings by the Attorney General of the Federation - AGF
- Civil proceedings can be instituted on the basis of the report and in the interest of justice
by the CAC itself, or any other corporate entity in the name and on behalf of the LLP or
the body corporate instituting the action.
- Where the final report indicts any person for a criminal liability, the report shall be referred
to the Attorney General of the Federation (AGF) and where the latter is of the opinion that
a prosecution ought to be instituted against the indicted persons, all past and present
officers and agents of the LLP or other body corporate save the defendants in the criminal
proceedings are expected to give reasonable assistance within their capabilities to the AGF
in connection with the prosecution.
- Where the final report contains grounds for the recovery of damages for fraud, misfeasance
and other misconduct in connection with the promotion or formation of that body corporate
or the management of its affairs or grounds for the recovery of any property of the corporate
body which has been misapplied or wrongfully retained, are contained in any report made
by the Inspector, such may be referred to the AGF for his opinion as to whether or not it is
appropriate to institute proceedings for that in the name of the body corporate. And where
proceedings are deemed appropriate to be initiated, all past and present officers and agents
of the LLP or other body corporate except the defendants in the proceedings are expected
to give their reasonable assistance within their capabilities in connection with the
proceedings.
- Where a body corporate has incurred any costs while taking any steps or participating in
the proceedings brought about as a result of the final report, all such costs and expenses
shall be recoverable in the first instance from the Commission and where this is impossible,
such shall be defrayed out of the consolidated revenue fund

Statutory requirements for foreign operation of a foreign limited liability partnership

A foreign LLP as defined under the CAMA is an LLP incorporated in another country apart from
Nigeria, before or after the commencement of the CAMA 2020. (Note that the commencement
date of the Act was 7th August, 2020, the day the Act was given assent by the President of the
Federal Republic of Nigeria).
Where such a foreign entity has the intention to carry on business in Nigeria, it must take certain
steps outlined in the Act as follows:
(a) It must be registered as a separate entity in Nigeria for the purposes of carrying on business in
Nigeria;
(b) It cannot exercise in Nigeria any powers of a corporate entity, until registered;
(c) It cannot have a place of business or an address for service in Nigeria, until registered, provided
that a temporary address for the sole purpose of service of processes or documents or notices for
the purposes of the registration of the entity under the Act may be granted it.
Note also that the Minister of Trade is empowered to exempt a foreign LLP from the requirement
of mandatory registration under the Act by the issuance of a regulation for the purpose.

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WINDING-UP AND DISSOLUTION OF PARTNERSHIPS (GENERAL, LIMITED, AND
LIMITED LIABILITY PARTNERSHIPS)

Winding-up and dissolution of general partnership

A general partnership may be dissolved by the order of the court notwithstanding that many other
situations for dissolution of the partnership may occur outside the purview of a court order.
Dissolution may occur without an order of the court in three major ways as follows:
i. By expiration or notice;
ii. Subject to any contrary agreement between the partners, a general partnership is dissolved in
the following situations:
• If entered into for a fixed term, by the expiration of that term;
• If entered into for a single adventure or undertaking, and that single adventure or undertaking is
terminated; or
• If entered into for an undefined term, by any partner giving notice the dissolution to the other
partner(s);
iii By Bankruptcy or Death: Subject to any contrary agreement between the partners, a general
partnership is dissolved by the death or bankruptcy of any partner;

iv. Charge: If one of the partners suffers his share to be charged for his separate debt, the others
have the option of dissolving the general partnership;
a. Illegality: Also, a general partnership is dissolved in the event of the occurrence of a situation
which makes it unlawful for the partnership to be carried on by the members;
b. Application by a partner, petitioning the court for a decree of dissolution: On an application by
a partner, the court may decree dissolution in the following circumstances:

• When a general partner becomes a lunatic by inquisition;

• When a partner other than the one suing, becomes in any other way permanently incapable of
performing his duties under the contract of general partnership;
• When a partner other than the one suing, has been guilty of a conduct calculated to prejudice the
carrying on of the general partnership business;
• When a partner other than the one suing, willfully or persistently commits a breach of the
partnership agreementor otherwise so conduct himself that it is not reasonably practicable for the
other partners to carry on the business in partnership with him;
• Where the general partnership business can only be caried on at a loss; or
• Whenever the court thinks it just and equitable to dissolve the general partnership.

Effect of dissolution
Basically, dissolution revokes the power of each partner to bind the firm. However, the partners
may complete the transactions, which they have commenced but not completed at the time of the
dissolution and also do whatever may be necessary to wind up the general partnership business.

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Application of general partnership property on dissolution
On dissolution, each partner is entitled to have the partnership property, including its goodwill,
sold and the proceeds applied in payment of the debts and liabilities of the firm.
The Partnership Act of 1890 and the Partnership Laws of some states provide that in settling
accounts, if the general partnership assets are insufficient to discharge the debts and liabilities of
the firm, subject to agreement, the partners must bear the deficiency in the proportion in which
they were entitled to share profits but in this order:
(a) Out of profits;

(b) Out of capital;

(c) By the partner individually, in the proportion in which they were entitled to share profits.

Apart from this, the assets of the general partnership, including any sums contributed by the
partners to make up the losses or deficiencies of capital, are applied in the following ways:
(a) Paying the debts and liabilities of the firm to persons who are not partners;
(b) Paying the debts and liabilities of the firm to persons who are partners;
(c) Paying each partner proportionately what is due to him in respect of capital; and
(d) The ultimate residue, if any is to be divided among the general partners in the proportion in
which profits are divisible.

Winding-up and dissolution of limited partnership

Provisions relating to the limited partnership are contained in Part D, Chapters 1 and 2) of the
Companies and Allied Matters Act, 2020, and nowhere in the provisions was the winding up and
dissolution of the limited partnership provided for.
In all cases where there are no special provisions in respect of the limited partnership under the
Companies and Allied Matters Act 2020, Section 807 of the Act has expressly extended the
application of Part C on limited liability partnership to Part D, on the limited partnership.
Therefore, the provisions of the CAMA in respect of the winding up and dissolution of the limited
liability partnership can be undertaken as they are contained in Sections 789 – 790 (both sections
inclusive) will also apply mutatis mutandis to limited partnership also by virtue of the provisions
of Section 807.

Winding up and dissolution of Limited Liability Partnership

A limited liability partnership may be dissolved in two ways: voluntarily, that is without any order
of court or by the order of court. Dissolution may occur by order of court in the following
situations:
i. Where all the members of the LLP are unanimously agreed that it be wound up;
ii. Where the number of the LLP falls below two (2) and the situation persists for more than six
months;
iii. Where the LLP is unable to pay its debts owed to its creditors;
iv. Where the LLP constituted a security risk to the sovereignty and or integrity of Nigeria or has
generally acted against the interests of her security and or public order;
v. Where there has been a default on the part of the LLP to file with the Commission, the Statement
of Account and Solvency and or annual returns for any 10 (ten) consecutive financial year; or
vi. In the opinion of the court, it is just and equitable that the LLP be wound up.

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