Introduction

A partnership is simply defined as a business enterprise entered into for profit which is owned by more than one person, each of whom is a partner¹. Prior to the recent enactment of the Companies and Allied Matters Act 2020 (CAMA 2020), the CAMA 1990 only provided for a general partnership which was previously registered as a business name. In 2009, an attempt to expand the scope of the partnership law was made by the Lagos State government with the enactment of the Partnership (Amendment) Law of Lagos State, (“Partnership Law”). The Partnership Law was however only applicable in Lagos state. The CAMA 2020 now includes provision for the creation of two additional forms of partnership namely the Limited Partnership (LP) and Limited Liability Partnership (LLP) as part of the Federal government’s “ease of doing business in Nigeria” initiatives.

LLP and LP under CAMA 2020

LLP

The provisions of CAMA 2020²defines a LLP as a body corporate formed and incorporated as a legal entity separate from the partners. An LLP may be incorporated by two or more persons in a manner prescribed by the regulations of the Corporate Affairs Commission (CAC). In addition to the requirement of at least two (2) persons as partners, an LLP shall also have at least two designated partners with at least one of them resident in Nigeria³, a designated partner is a person appointed as such at incorporation. Where a person ceases to be a partner, his position as a designated partner comes to an end. By implication, the liabilities of the partners are limited, and partners are not exposed to unlimited liabilities, except in cases of fraud or illegal activities. Some of the features of an LLP include:

1. perpetual succession;
2. a right to sue and be sued in its corporate name;
3. right to own property, either movable or immovable, tangible or intangible;
4. a change in the partners does not affect the existence, rights, or liabilities of the LLP; and
5. the use of a common seal, if preferred.

LP⁴

By the provisions of CAMA 2020, LPs on the other hand shall consist of at least one or more persons called general partners and limited partners. The liabilities of a general partner extend to the debts and obligations of the firm, while the liabilities of a limited partner remain limited to the amount so contributed or agreed to be contributed to the firm. Such contribution may also not be drawn down during the subsistence of the partnership. LPs are regulated by the provisions of the Partnership Act 1890 and CAMA 2020, where there are any inconsistencies between the provisions of the Partnership Act 1890 and CAMA 2020, the latter takes precedence.

Conclusion

The introduction of LPs and LLPs is a welcome development in Nigeria. The LLP in particular is a viable option for foreign companies who wish to carry on business in Nigeria but do not want to register a limited liability company. This is due to its benefits of limited liability, tax transparency and structural flexibility. In addition, the registration process for both forms of partnerships is relatively easy and can be concluded within a few days.

1. Law.com Legal Dictionary
2. Section 746(1) CAMA 2020
3. Section 749 (1) CAMA 2020
4. Section 795(3) CAMA 2020