The concept of partnership is well employed in the business sphere. Due to the delicate nature of business relations, it is common to find two or more individuals who agree to do business based on certain stipulated terms and conditions. It is not as though the individuals do not trust themselves, it is just that it is usually safer to have partnership agreements in black and white to avoid potentials issues that could escalate into full-blown disputes.
Due to the inherent intricacies of partnerships in business, legal systems all around the world have legal and regulatory frameworks for the formation and running of partnerships. One of the key developments introduced to the Nigerian business sphere by the Companies and Allied Matters Act (CAMA) 2020 was the introduction of a Limited Liability Partnership (LLP) as an entity that can be set up in all states in Nigeria.
This article provides a comprehensive guide into the legal requirements for the existence of an LLP in Nigeria.
LLP UNDER CAMA 2020
By virtue of Section 746 of CAMA 2020, a limited liability partnership is a body corporate formed and incorporated under the Act as a legal entity separate from the named partners. The major purport of having an LLP is to reduce personal liability on the Partners and this is achieved through the recognition of the LLP as a legal personality.
WHO MAY BE A PARTNER?
At least two partners are required to join in the incorporation of an LLP. There is no maximum. The partners may either be an individual or a body corporate.
By virtue of section 747 of CAMA, an individual shall be disqualified from joining in the formation of an LLP if he is of unsound mind and has been so found by a court in Nigeria or elsewhere, or an undischarged bankrupt.
This means that for an individual to qualify as a Partner in an LLP, he must be of sound mind and also have the financial capacity.
A body corporate is an establishment that is recognized by law as a legal personality. A body corporate could be any of the following:
- Companies registered under part B of CAMA
- Incorporated Trustees registered under Part F of CAMA
- Limited Liability Partnerships registered under Part of CAMA
- Statutory bodies established under an Act of the National Assembly.
It is pertinent to state that such body corporate must be a going concern with the capacity to join in the formation of such LLP.
REQUIREMENT OF DESIGNATED PARTNERS
Section 749 (1) CAMA requires that every LLP shall have at least two designated partners with at least one resident in Nigeria.
A designated partner is a partner who is responsible for the doing of all acts, matters, and things as are required to be done by the limited liability partnership in respect of compliance with the provisions of CAMA including the filing of any document, return, statement and other reports under the Act and as may be specified in the limited liability partnership agreement; and is liable to all penalties imposed on the limited liability partnership for any contravention of those provisions.
In essence, the designated partner is the front-liner in the LLP who takes major responsibility for the LLP. At every material time, an individual must be named as the designated partner. Where all partners or corporate bodies, nominees of the body corporate will act as designated partners.
Due to the delicate nature of this responsibility, before an individual can be named as a designated partner, such an individual must have given prior written consent to act in that capacity. The particulars of such an individual would subsequently be filed with the CAC.
THE REGISTRATION PROCESS SIMPLIFIED
For a limited liability partnership to be incorporated, two or more persons associated for carrying on a lawful business with a view to profit shall subscribe their names to an incorporation document; and the incorporation documents shall be filed with the Commission
INFORMATION REQUIRED IN THE INCORPORATION DOCUMENTS
Section 753 CAMA
- The name of the limited liability partnership
- The proposed business of the limited liability partnership
- The address of the registered office of the limited liability partnership
- The name and address of each of the persons who are partners of the limited liability partnership on incorporation, and their contribution.
- The name and address of the persons who are to be designated partners of the limited liability partnership on incorporation
- Details of any partner in the LLP that will have significant control (i.e., an individual, company, or other entity that directly or indirectly holds at least 5% of the interest or voting rights or holds the right to appoint or remove a majority of the partners or has the right to exercise significant control or influence over the LLP);
- Other information concerning the proposed limited liability partnership as the Commission may prescribe.
It is important to note that where any person knowingly makes a false statement with respect to the above, it constitutes an offence that could lead to conviction to imprisonment or fine, or both.
THE REGISTRATION PROCEDURE
- A name availability check should be conducted at the CAC and when the proposed name is available, the name is to be reserved.
- The LLP registration will be completed with the information listed above.
- The required registration fee is to be paid to the CAC.
- Where the above requirements have been complied with, the CAC shall within 14 days of the submission of the application register the LLP and issue a certificate of incorporation stating the name, date, and registration number of the LLP.
LEGAL EFFECTS OF THE INCORPORATION OF LLP
- The limited liability partnership has perpetual succession.
- The named partners have limited personal liability. Thus, any change in the partners of a limited liability partnership does not affect the existence, rights, or liabilities of the limited liability partnership.
- It can sue and be sued in its name.
- It can acquire, own, hold and develop or dispose of all kinds of property.
- It can have a common seal if it so decides.
- The LLP can do other acts and things as bodies corporate may lawfully do and suffer.
DETERMINATION OF RIGHTS AND OBLIGATIONS OF THE PARTNERS
Generally, the rights, duties, and obligations of partners in an LLP are determined by the LLP agreement executed by the partners. What this implies is that before incorporation, partners should have set out in writing, several terms binding their agreement to execute the partnership. It is particularly important to state that the expertise of a legal practitioner is indispensable here as partners should ensure that they understand the implications of the LLP agreement.
However, where there is no such agreement, the provisions of the Fifteenth Schedule to CAMA 2020 shall apply, with respect to Capital, profit and loss sharing, Indemnity, Management, Admission of new partners, Decision making, Recordkeeping and accounting, Dispute Resolution, among others.
NOTABLE MENTION: FOREIGN LIMITED LIABILITY PARTNERSHIP
The legal regime for business in Nigeria also encourages foreign participation for LLPs. To this end, CAMA requires that a foreign LLP incorporated outside Nigeria, intending to carry on business in Nigeria, shall take all steps necessary to be incorporated as a separate entity in Nigeria for that purpose.
In addition, a foreign LLP may apply to the Minister of Industry, Trade and Investment for exemption from incorporation in Nigeria in any of the following instances:
- Where the LLP is invited by the Federal Government to execute a specified individual project
- Where the LLP is in Nigeria to execute a specific individual loan project on behalf of a donor country or international organisation
- Where the LLP is owned by a foreign government and engages solely in export promotion activities
- Where the LLP is an engineering and technical expert engaged by any government of the federation or its agencies to carry out any individual specialist project.
Even after the incorporation of a limited liability partnership, visible efforts must be put in to ensure that the LLP maintains an active status on the CAC portal. This means that the annual returns of the LLP must be up to date and all subsequent alterations and amendments must be filed with the CAC. For instance, alteration of the LLP agreement, notice of cessation of partnership, change in the name or address of a partner, etc.
In this regard, regulatory compliance is something that should be a top priority for LLPs and it is advised that professional services of lawyers/law firms should be retained in order to ensure maximum attention to extant and subsequent regulatory requirements.
 Section 747 CAMA
 Section 750 CAMA
 Section 749 (1) CAMA
 Section 749 (3) CAMA
 Section 762 of CAMA
 Section 788 (1) CAMA
 Section 762 CAMA
 Section 764 CAMA
 Section 764 (2) CAMA