Commercial Transactions
PARTNERSHIPS
|Date: 18.1.2021 | Time: 8 - 10 pm |Location: Virtual
Partnership definition
“partnership” means the relationship which
exists between persons who carry on
business in common with a view to making a
profit;
TYPES OF PARTNERSHIPS ACT 2012
PARTNERSH
1. General Partnerships
IPS
2. Limited Partnerships
LIMITED LIABILITY
PARTNERSHIP ACT
1. Limited Liability Partnerships
Formation of Partnerships
The Partnership Agreement need not be in writing
However its encouraged to have a written Partnership
Agreement (Deed) which will provide for the rights
and obligation of the Partners.
NB. The provisions of the Deed should not contravene
the Provisions of the Partnership Act.
in the absence of a Partnership Deed the Partnership
will be governed by the Provisions of the Partnerships
Act 2012
I. GENERAL PARTNERSHIPS
Each partner in a general partnership has unlimited
liability.
Each partner shall be an agent of the partnership for
the purpose of the business of the partnership.
The Partnership is capable of suing and being sued
in its own name;entering into contracts and
owning property and
subject to the partnership agreement, providing
continuity for the partnership business despite a
change in the partners.
1. Rights and Obligations of Partners
1. A partner has a duty to act in good faith towards the
partnership; and the other partners in the
partnership in relation to all matters affecting the
partnership.
2. Duty of disclosure on forming or joining a
partnership.
3. right to share in the profits and take part in the
management of the business of the partnership.
a) Share of Profits and Losses
A partner is entitled to share equally in the profits of
the partnership and is liable to contribute equally
towards the losses incurred by the partnership in equal
proportions.
A partner is not entitled to a share in the profits of the
partnership, and is not liable to contribute to any
losses incurred by the partnership, before he became a
partner.
The estate of a partner who dies is liable for debts and
obligations incurred by the partnership after becoming
partner
b) Accounting Records
it is the responsibility of each partner to ensure that
the accounting records of transactions affecting the
partnership in which he is involved are properly
kept; and
the records are, on request, made available to the
partnership or to any partner.
NB
There is no obligation to make financial
returns
c) Management of Partnership Business
A partner is entitled to participate part in the
management of the business of the partnership.
Differences arising out of an ordinary matter
connected with the business of the partnership shall
be decided by the vote of a majority of the partners.
Differences arising out of other matters connected
with the business of the partnership shall be decided
by the unanimous decision of all the partners.
2. Partnership Property S. 18
property acquired on behalf of the partnership or for
the purpose and in the course of business of the
partnership.
Property which is held in the name of the partners
and which is—
(a) acquired on behalf of the partnership; or
(b) contributed to the partnership as capital, is held in
trust for the partnership by the partner who
acquired the property or contributed the capital.
3. Assignment of shares
An assignment of a share in a partnership shall not
entitle the assignee to—
(a) participate in the management or administration of
the partnership business or affairs; or
(b) inspect the partnership records.
An assignee of a share in a partnership shall be entitled
to receive—
a) a share in the partnership profits if any, to which the
assigning partner would be entitled; or
b) in the case of a dissolution of the partnership, the share of
the entitlement of the assigning partner.
II. LIMITED PARTNERSHIP
A partnership is a limited partnership if it has
(a) one or more general partners, each of whom has
unlimited liability; and
(b) one or more limited partners, each of whom has
limited liability.
A general partner shall he liable for all debts and
obligations of the partnership.
A limited partner shall be liable for the debts or
obligations of the partnership to the extent of the
amount contributed the partnership at the time of
joining the partnership.
Application of the Act
All the provisions of the Partnership Act will apply to
general Partnerships also apply to Limited
partnerships .
This is however subject to a few exceptions.
Exceptions
1. A limited partner shall not take part in the
management of the partnership business.
2. change in partners
a. A person may become a partner in an existing
partnership if all the general partners in the
partnership agree to the person’s admission into
the partnership
b. an assignee of shares becomes a partner in place of
the assignor if all the general partners agree to the
substitution.
Termination of Partnerships
Resignation by issuing at least 3 months notice
death
Dissolution by Agreement
Lapse of time
LIMITED LIABILITY
PARTNERSHIPS
WHY LLP?
Introduction
governed by the LLP Act, the LLP Regulations 2014
and the Partnerships Act 2012.
LLP is a hybrid of Limited Liability Company and
Partnership.
It therefore combines the best features of the above
vehicles into one entity.
General Features of LLP's
1. an LLP is a separate legal person from its partners
with the power to hold property and to sue and be
sued in its own name.
2. it has a perpetual succession.
3. a person becomes a partner by contributing capital.
4. must have at least two or more partners.
5. Both natural ans artificial persons can becomes
partners in an LLP.
6. it must have a manager.
LLP AGREEMENT
It is not mandatory to have an LLP Agreement.
It is however encouraged to have an LLP Agreement
which should provide for the obligations, rights
duties of the partners; management and control of
the LLP.
In absence of an LLP agreement the LLP will be
governed by the First Schedule of the LLP Act.
Management of an LLP
General Rule
Every partner is entitled to take part in the
management of the LPP.
However the Act provides that every LLP must have
a manager who will be charged with the day to day
running of the LLP.
the manager must be a natural person of sound mind
mind and of at least 18 years of age.
Capital
a person becomes a partner in an LLP by
contributing Capital.
The LLP Agreement should therefore specify the
amount and mode of capital contribution.
In the absence of an LLP Agreement or where the
Agreement does not specify these details 1st
Schedule of the Act provides that every partner will
contribute equal amount of capital.
In LLP partners can assign or transfer their capital.
The mechanism for such transfer should be provided
for in the LLP Agreement.
Accounts and Records
Every LLP is under an obligation to keep accurate,
complete and upto date accounts and reports that
can help it prepare the annual financial statements.
The records are the kept by the manager.
Every partner by a notice can inspect the records and
accounts.
At the end of the financial year, every LLP should
prepare a solvency statement and submit the same to
the registrar.
Accounts & Records Cont'
Every time there is a change in the structure of an
LLP such as change in Partners, Capital, the location
of the registered office or the manager, the manager
must notify the registrar
MEMBERSHIP
a person becomes a partner in an LLP by
contributing capital.
a partner can resign by giving a 90 days notice.
NB
The bankruptcy of a partner does not automatically
make a person to stop being a partner. the interest of
such a partner will henceforth be represented by a
trustee in bankruptcy. The partner cannot take part in
the management of the LLP
Death of a partner
The death of a partner does not make such a partner
to loose his/her rights , instead his/her estate will
take his/her proceeds.
Conclusion
Questions Answers
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EMMANUEL Managing Partner
OTIENO OO Centre,
OUMA Centre for Research, Policy &
LLB Hons Moi Consultancy
(2018)
[Link]@[Link]
PGD KSL (2019)
