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A partnership can be formed orally or in writing by executing a partnership agreement to stipulate the relationship between the parties to the agreement. A partnership agreement is a legal contract that contains the terms and conditions that governs the way the partnership will be operated between parties involved in starting a partnership structured business for the avoidance of any conflict between the partners. The law can presume there is an existence of a partnership once the essential elements of a partnership are present in the partnership agreement.
Partnerships in Nigeria are regulated by the Companies and Allied Matters Act 2020 (as amended) and the Partnership Law of each State of the Federation. Section 1(1) of the Partnership Law of Lagos State Cap P1 2015 defines partnership as an organization structure entered into by two or more people to form and carry on business to make a profit. The maximum number of persons required to operate a partnership agreement is twenty (20) as provided by Section 19 of the Companies and Allied Matters Act 2020, with exceptions to law firms and accounting firms.
Pursuant to the provisions of CAMA 2020, a partnership may be registered as a limited liability partnership or business name.
Content of a Partnership Agreement
Every partnership formed may differ in terms of the objectives and the agreement suitable to the parties, however, for drafting and executing a valid partnership agreement, certain terms and clauses should be expressly detailed in the agreement. The important clauses to be contained in a partnership agreement in Nigeria include the followings:
Implied Terms in Partnerships
Some of the implied terms in a partnership relationship where the partnership agreement is silent are:
In the absence of specific provisions to the contrary of the above in the partnership agreement, they would be implied into the agreement by common law. To modify or exclude their implications, it must be expressly provided for in the partnership agreement.
Dissolution of a partnership agreement
A partnership may be determined via any of the following ways;
Conclusion
Only legal persons, whether natural or artificial, of full legal age and capacity, without any form of legal disability can join in the formation of a partnership, this is because the partnership agreement covers the rights and responsibilities of each partner and all written partnership agreements are binding on the parties to it and in a case where a dispute arises from the relationship, the action will be enforced under the provisions of the executed agreement.
Finally, to reduce the potentiality of any form of conflict or complications between parties who intend to form a business structure and share proportionally in the business's capital, profit, and losses, it is essential to create a partnership agreement binding parties for that purpose.
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