Partnerships in Kenya

Partnerships in Kenya: Types, Features, and Registration

Section 2 of the Partnerships Act, 2012 defines a partnership as “…the relationship which exists between persons who carry on business in common with a view to making a profit.” Partnerships in Kenya fall into three categories:

1. General Partnership
2. Limited Partnership
3. Limited Liability Partnership (LLP)

1. General Partnership

A general partnership forms by default without requiring registration or documentation. Key features include:

• Management: All partners have equal authority to manage and make legally binding decisions unless a partnership agreement specifies otherwise.
• Liability: Partners are jointly and severally liable, meaning each partner is fully responsible for the debts of the business. Personal assets may be used to settle debts beyond the initial investment.
• Debt Responsibility: Creditors can pursue any partner for the full debt, regardless of individual contributions or prior payments.

2. Limited Partnership

A limited partnership requires a formal partnership agreement and registration with the Registrar under Section 68 of the Partnerships Act. Features include:

• Structure: Consists of general partners (manage and control) and limited partners (invest but lack management authority).
• Liability: Limited partners’ liability is capped at their capital contribution, protecting their personal assets. However, general partners have unlimited liability.
• Registration: Certain details, such as partner information and business nature, must be filed during registration.

3. Limited Liability Partnership (LLP)

An LLP is governed by the Limited Liability Partnership Act, Chapter 30A, enacted in March 2012. Features include:

• Hybrid Structure: Combines the flexibility of a traditional partnership with the limited liability protections of a corporation.
• Professional Focus: Often used by professional service providers like lawyers and accountants.
• Legal Personality: An LLP is a separate legal entity, distinct from its partners, and does not require a memorandum or articles of association.
• Agreement: Partners execute an LLP agreement outlining capital contributions, profit-sharing, roles, and management arrangements.

Distinguishing Features of Partnerships

Registration of Partnerships

Partnerships must register under the Registration of Business Names Act (2006) to operate legally. The registration process includes submitting the following to the Registrar:

1. Proposed Business Name: The name under which the partnership will operate.
2. Business Nature: A description of the intended activities.
3. Principal Address: Physical and postal addresses of the main business location.
4. Additional Locations: Addresses of other business premises, if any.
5. Partner Details: Names and addresses of individual partners or corporations.
6. Business Commencement Date: The date when operations began.

Prohibited Business Names

Under Section 17 of the Act, certain names are restricted, including:

• Names that mislead the public about the nationality, race, or religion of the owners.
• Names containing terms like “presidential,” “government,” “municipal,” or “co-operative.”
• Names identical to existing businesses or deemed undesirable by the Registrar.