Introduction to Registration of Limited Partnerships

 Nigeria, prior to the CAMA (Company and Allied Matters Act 2020) coming into force, partnerships were primarily regulated by state laws, such as the Lagos State Partnership Law 2003 as Amended, which recognized the various types of partnerships and provided guidelines for their operation.

The Companies and Allied Matters Act (CAMA) 2020 revolutionized the business landscape by introducing modern partnership structures. It provided centralized rules throughout Nigeria governing these types of business relationships.

Registration of limited partnerships: What is a Partnership Business?

A partnership is a business arrangement where two or more individuals (the “Partners”) voluntarily agree to share ownership, responsibilities, profits, and losses.

Registration of Limited Partnerships: Types of Partnership Business in Nigeria

The CAMA recognises three main types of partnership businesses in Nigeria, each with its unique characteristics and requirements:

1.  General Partnership (GP)

A General Partnership is the most common form of partnership in Nigeria. All partners are actively involved in managing the business, they agree to make a contribution to the business as specified in the partnership agreement and all partners have unlimited personal liability for the business’s debts, this means that the partners’ private property may be sought after by creditors.

The Partnership is not a separate entity from the partners.

Likewise, a partner’s death or resignation would also bring the partnership to an end.

A general partnership is suitable for small businesses where partners trust each other and want equal control, it is registered as a regular Business Name under Part E of CAMA 2020.

There can be no more than 20 people in a general partnership.

2. Limited Partnership (LP)

A Limited Partnership consists of one or more General Partners, whose liability is unlimited, and one or more Limited Partners, with limited liability. The general partners are responsible for the day-to-day operations of the business and share the profits and losses, while the limited partners are usually “silent investors”, they have a fixed return on investment and are not involved in the management of the business. Limited partners cannot interfere in day-to-day management without losing their limited liability status.

The Limited Partner’s liability is limited to a predetermined sum, and it does not extend past the contribution made in terms of debts or liabilities resulting from the partnership. LPs are not taxed as separate entities, but their partners are taxed on their personal income.

This type of partnership is appropriate for investors who want to fund a business without being actively involved, with a maximum of 20 partners. Real estate investors, hedge funds, investment partnerships, and other businesses commonly employ this company structure.

3.  Limited Liability Partnership (LLP)

A Limited Liability Partnership combines features of partnerships and companies. Section 746 (1) of the CAMA, 2020 defines a Limited Liability Partnership as a corporate individual, a separate legal entity from the partners, with the ability to sue and be sued in the name of the partnership, provided the Partnership is registered as such with the Corporate Affairs Commission.

All Partners’ liabilities, losses, and profits are limited to the amount contributed to the Partnership by each Partner.  In the event that the partnership fails, creditors are prohibited from going after the partner’s personal assets or income.

A Limited Liability Partnership must have at least two “designated partners” responsible for legal compliance and filings with CAMA, at least one of whom must be resident in Nigeria, and if no designated partner is appointed, all partners are deemed to be designated partners.

If at any time the number of partners of an LLP falls below two and the LLP carries on business for more than six months while the number is so reduced, the person, who is the only partner of the LLP during that time it carries on business after those six months with knowledge of the fact that it is carrying on business solely, will be personally liable for the obligations of the LLP incurred during that period.

This type of partnership is not subjected to tax in its name as the personal income of partners are taxed in accordance with the provisions of the Personal Income Tax Act.

The death of a Partner does not result in the dissolution of the partnership.

Professional services like law firms, consulting firms, and accounting practices are the most common users of this business form.

KEY DIFFERENCES BETWEEN GENERAL PARTNERSHIPS, LIMITED PARTNERSHIPS, AND LIMITED LIABILITY PARTNERSHIPS (LLPS).

1. Legal Personalty

This is the ability to be considered a person under the law. A legal person can sue and be sued, and it can enter into contracts in its own name. I can also acquire/own properties.

Unlike other types of partnerships, a registered LLP is considered a Legal Person, it can perform all the functions of a natural person.

In other forms of partnerships, the partners are agents of themselves, partners in a LLP, on the other hand, act as agents for the Partnership.

2. Management

In contrast from LPs, where limited partners are prohibited from managing the partnership’s affairs, the LLPs permit all partners t participate in the management and have the authority to bind the Partnership in the course of business.

While some partners may choose to play more active roles in the partnership’s management, others may choose to play a passive one.

3. Liability of Partners

This is a significant difference between the types of partnerships.

The partners’ liability in a LLP is limited to their contributions, their personal assets are protected from lawsuits and other claims. However, this limited liability veil would be lifted if the liability or lawsuit is the result of the partner’s intentional, fraudulent, unauthorized or illegal activity.

The liability of partners in a GP is unlimited, whereas in an LP, the liability of the limited partner is limited to his contributions while the liability of the general partner is unlimited.

4. Perpetual Succession

This is the continuing of an organisation’s existence notwithstanding a member’s or the organisation’s owner’s death, insanity, bankruptcy, or change o ownership.

Despite the passing of its partners, limited liability partnerships continue to operate, just like a limited liability company. According to section 763 (1) of CAMA 2020, a partner of a limited liability partnership may resign after reaching an agreement with the other partners or, in the absence of an agreement, by giving at least 30 days of written notice to the other partners of his desire to do so. Other forms of partnerships do not enjoy this feature.

5. Generational Wealth Transfer

The rights of a partner to a share of the Partnership’s profits and losses can be transferred entirely or partially in the LLP, subject to the provisions of the partnership deed, which is not available in other types of Partnerships.

Registering your partnership with the Corporate Affairs Commission (CAC) ensures your business is legally recognized. The registration process is now fully digital through the CAC Company Registration Portal (CRP) in the following steps:

Pre-Registration Requirements

1. Choose a Unique Name: Select a unique name for your partnership business that is not already in use by another business. The name must be distinct and not likely to be confused with another business.

2. Conduct a Name Search: Conduct a name search on the CAC website to ensure that your chosen name is not already registered.

Registration Process

Step 1: Prepare the Partnership Agreement

This is a legal document outlining profit-sharing ratios, capital contributions, and dispute resolution. For LLPs and LPs, this must be uploaded to the portal.

Step 2: Complete Pre-Registration Forms

Log in to the CAC Portal and fill in:

• Business Details: Nature of business and registered office address.
• Partner Details: Full names, residential addresses, and email addresses for all partners.

Step 3: Upload Required Documents

• Valid government-issued ID (NIN, Voter’s Card, Driver’s License, or International Passport).
• Passport photographs of all partners.
• Signed Partnership Agreement.
• Professional proficiency certificates (if registering a professional firm like law or accounting).

Step 4: Pay Filing Fees

Fees vary depending on the type of partnership. Payments are made online on the CAC portal via Remita.

Step 5: Submit Application

Review all details carefully and submit the application online.

Step 6: Download Your Certificate

Once the CAC reviews and approves your application, you can download your Certificate of Registration/Incorporation and Status Report directly from the portal.

Registering your partnership business with the Corporate Affairs Commission (CAC) in Nigeria is a crucial step that legitimizes your operations and safeguards both your personal and business interests. By understanding the different types of partnerships and the registration process, you can make an informed decision and ensure your business is fully compliant and properly established,

It is highly recommended that you consult a qualified legal practitioner who can provide expert advice on the most suitable partnership structure for your specific needs and circumstances.

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Contributors

Lead Partner, EKO SOLICITORS AND ADVOCATES

Counsel, EKO SOLICITORS AND ADVOCATES