Partnership in Nigeria:

Many partnerships begin with excitement and trust, but run into problems because the legal realities were never properly understood. Partnership is one of the simplest ways to start a business in Nigeria, yet it is also one of the easiest ways to assume serious legal risks unknowingly. Understanding how partnerships are formed, the types recognised by law, the rights and duties of partners, and the protections available is therefore not just legal knowledge,it is business survival knowledge. This article explains, in clear and practical terms, how partnerships operate in Nigeria and what every business owner should know before entering one.

MEANING AND NATURE OF PARTNERSHIP IN NIGERIA

A partnership is generally defined as the relationship between persons carrying on a business in common with a view to profit. This definition reflects the common law position and has been consistently applied by Nigerian courts.[1]

The essential elements of a partnership include:

1. An agreement between two or more persons;
2. The carrying on of a business;
3. Business conducted in common; and
4. An intention to make profit.

Where these elements are present, a partnership may be implied by law, even in the absence of a written agreement. This clearly signifies the importance of understanding that parties may incur partnership liabilities unintentionally. The law can presume there is an existence of a partnership once the essential elements of a partnership are present in the partnership agreement.

LEGAL FRAMEWORK GOVERNING PARTNERSHIP IN NIGERIA

The regulation of partnerships in Nigeria is derived from a combination of statutory provisions and common law principles. The principal legal sources include:

A) The Companies and Allied Matters Act (CAMA);[2]

B) The received English law on partnerships as applicable in Nigeria;

C) Partnership Law of each State of the Federation; and

D) Judicial decisions interpreting partnership relationships.

Section 1(1) of the Partnership Law of Lagos State CAP P1 2015 defines partnership as an organisation structure entered into by two or more people to form and carry on business to make a profit. Section 19 of the Companies and Allied Matters Act 2020 gave a maximum number of persons required to operate a partnership agreement with the exceptions to law firms and accounting firms.[3]

• No company, association, or partnership consisting of more than 20 persons shall be formed for the purpose of  carrying on any business for profit or gain by the company, association, or partnership, or by the individual  members thereof, unless it is registered as a company under this Act, or is formed in pursuance of some other  enactment in force in Nigeria. 
•  Nothing in this section shall apply to‐ 

(a) any co‐operative society registered under the provisions of any enactment in force m Nigeria; or  

(b) any partnership for the purpose of carrying on practice

(i) as legal practitioners, by persons each of whom is a legal practitioner; or  

 (ii) as accountants by persons each of whom is entitled by law to practise as an accountant. 

CAMA represents a major reform by formally recognising modern partnership structures, particularly the Limited Liability Partnership (LLP), thereby expanding the options available to business operators.

TYPES OF PARTNERSHIPS IN NIGERIA

1. GENERAL PARTNERSHIP

A general partnership is the traditional form of partnership in which all partners participate in the management of the business and share profits and losses according to agreement or, in default, equally.[4]A defining feature of a general partnership is unlimited liability. Each partner is jointly and severally liable for the debts and obligations of the partnership incurred while he or she is a partner.[5] Consequently, the personal assets of partners may be used to satisfy partnership debts.

Furthermore, a general partnership has no separate legal personality distinct from its partners. This means the partnership cannot own property or sue in its own name independently of the partners.

• 2. LIMITED LIABILITY PARTNERSHIP (LLP)

The introduction of the Limited Liability Partnership under CAMA 2020 marks a significant development in Nigerian business law.[6] An LLP combines features of a partnership and a company.

Key characteristics of an LLP include:

1. Separate legal personality distinct from its partners;[7]
2. Perpetual succession;
3. Limited liability of partners to the extent of their agreed contribution; and
4. Flexibility in internal management arrangements.

Unlike a general partnership, an LLP is not automatically dissolved by the death or withdrawal of a partner. This makes it particularly attractive to organisations and growing businesses seeking continuity and risk protection.

FORMATION AND REGISTRATION OF PARTNERSHIPS

While a general partnership may arise informally, registration with the Corporate Affairs Commission (CAC) as a business name is advisable to ensure legal recognition and regulatory compliance.[8]

In contrast, an LLP must be formally registered under CAMA 2020 before it can operate as such. Failure to register deprives the partnership of the statutory benefits of limited liability and legal personality.

PARTNERSHIP AGREEMENTS: IMPORTANCE AND KEY PROVISIONS

A partnership agreement is the foundation of a stable partnership relationship. In the absence of an express agreement, statutory and common law default rules apply, which may not reflect the parties’ intentions. Certain important clauses need to be present in a partnership agreement:

1. Name of the Partnership as registered under the Corporate Affairs Commission.
2. The full names and description of parties involved in the partnership.
3. Nature of the partnership business.
4. Place of business.
5. Time of the commencement of the partnership.
6. Share of capital and capital contribution.
7. Share of profits and losses.
8. Indication of every property used by the organisation (state whether the property is a personal property or bought with partnership moneey)
9. Renumertion of partner: Section 23(vi) of the Partnership Law of Lagos state presumes that partners are not entitled to any form of renumeration for acting in a partnership business.
10. Suspension and expulsion of partners.
11. Intention to bring new parties or not.
12. Dispute resolution
13. Retirement
14. Execution clause.

RIGHTS AND OBLIGATIONS OF PARTNERS IN PARTNERSHIP

Partners owe each other fiduciary duties arising from the relationship of mutual trust and confidence. These duties include:

1. The duty of utmost good faith;
2. The duty to account for profits; and
3. The duty not to compete with the partnership without consent.[9]

Each partner is also entitled to participate in management, access partnership books, and share in profits in accordance with the partnership agreement or by implication of law.[10]

LIABILITY OF PARTNERS IN PARTNERSHIP

In a general partnership, every partner is an agent of the organization and of the other partners for the business.[11]Accordingly, the acts of one partner, done in the ordinary course of business, bind the partnership and the other partners.

This principle exposes partners to significant risk, especially where one partner acts negligently or fraudulently. In contrast, the LLP structure limits such exposure by separating personal liability from partnership obligations, except in cases of fraud or wrongful acts personally committed by a partner.[12]

DISSOLUTION OF PARTNERSHIP IN NIGERIA

A partnership may be dissolved by:

1. Agreement of the partners;
2. Expiry of a fixed term;
3. Death or bankruptcy of a partner (in general partnerships);
4. Illegality of the business; or
5. Order of court.[13]

CONCLUSION

In everyday language, a partnership is simply “people doing business together,” but in law, it is much more than that. It is a relationship that can bind your income, your decisions, and sometimes even your personal property to the actions of others. Whether choosing a traditional partnership or the more protective Limited Liability Partnership, success does not depend only on trust between partners; it depends on clear agreements, proper registration, and a solid understanding of legal responsibilities.

When partners understand the rules guiding their relationship from the start, disputes are reduced, risks are controlled, and the business gains the stability it needs to grow. In the end, the smartest partnership is not the one formed the fastest, but the one built on clarity, structure, and informed legal planning.

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[1] Cox v Hickman (1860) 8 HL Cas 268.

[2] Companies and Allied Matters Act 2020 (As amended)

[3] Ibid, s. 19

[4] Companies and Allied Matters Act 2020 (As amended), S. 746

[5] ibid s 754

[6] Companies and Allied Matters Act 2020, s 746–810.

[7] ibid s 746(2).

[8] ibid s 814

[9] Helmore v Smith (1887) 35 Ch D 436

[10] Companies and Allied Matters Act 2020 s 753.

[11] ibid s 752

[12] ibid s 746(3).

[13] ibid s 783.

Contributors

OJIENOH SEGUN JUSTICE, ESQ.,

Lead Partner, EKO SOLICITORS & ADVOCATES

Rindap Nanjul Danjuma Esq.,

Counsel, EKO SOLICITORS AND ADVOCATES

Faith Ogunleye

Graduate Trainee, EKO SOLICITORS AND ADVOCATES

(Partnership in Nigeria, Partnership in Nigeria, Partner ship in Nigeria, Partnership in Nigeria, Partnership in Nigeria)