Get To Know – CAC Commences Registration of Limited Liability Partnerships (LLPs), Limited Partnerships (LPs) and Deployment of the Registration Solutions on Company Registration Portal (CRP)

2022-04-27

The Corporate Affairs Commission (the Commission) on August 31, 2021, released a circular notifying the public that it had commenced the registration of Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs). The Commission therefore deployed the registration interface for LLPs and LPs on the Company Registration Portal (CRP) and advised members of the public to commence the registrations of LLPs and LPs using the CRP.

Part D of the Companies and Allied Matters Act 2020 (CAMA) makes copious provisions for LP and LLPs. The LLP is a partnership arrangement with legal personality separate from the partners. By this, two or more persons desirous of carrying on a lawful business with a view to profit may form or incorporate a limited liability partnership under the Act as a legal entity separate from that of its partners, having perpetual succession. For such limited liability partnerships, at least one of the partners must be resident in Nigeria. Upon registration, a limited liability partnership becomes a body corporate that by its name is capable of suing and being sued, holding property, and having a common seal (if it decides to have one) among others.

The LP is a partnership arrangement consisting of one or more persons called general partners, who shall be liable for all debts and obligations of the firm, and one or more persons to be known as limited partners. The limited partner(s) is expected to contribute, or agree to contribute, thereto a sum or sums as capital or property valued at a stated amount and but will not be liable for the debts of obligations of the firm, beyond the amount so contributed or agreed to be contributed: with at least one general partner and at least one limited partner. The liabilities of a limited partner is limited (unless he takes part in the management of the partnership). Membership of an LP is limited to 20.

Features of LLPs and LPs

Limited Liability Partnerships (LLPs)

1. Corporate personality for limited liability partnerships

By Section 746 and 756 of the Companies and allied Matters Act 2020 (CAMA), an LLP is formed and incorporated with separate legal personality from its partners and with perpetual succession. It can sue and be sued in its name and can acquire, own, hold and develop or dispose of property, whether movable or immovable, tangible or intangible.

Generally, the partners have limited personal liabilities, i.e. their personal assets cannot be utilized or legally sequestrated in settlement of business debts and liabilities. Consequently, the liability of a partner will be met out of the assets of the LLP. However, according to the Act, in instances where the LLP or any of its partners act with the intent to defraud creditors of the LLP or any other person, the liability of the LLP and partners who acted in that manner shall be unlimited for all or any of debts or other liabilities of the LLP. See sections 766 and 767, CAMA 2020.

Membership of LLP and the existence of designated partner: LLPs may be registered with at least two designated partners, one of whom must be resident in Nigeria by section 748, CAMA 2020. Two designated partners are required where all or one of the partners is a body corporate. The incorporation document of the LLP or LLP Agreement may however provide otherwise. The designated partner is responsible for regulatory compliance with CAC and liable for all penalties imposed on the partnership for contravention of CAMA. A designated partner is expected to be appointed within 30 days of vacancy. See section 751, CAMA 2020.

3. Difference between Limited Liability Partnerships and Limited Partnerships

By Sect 795, CAMA 2020, whereas an LLP limits liability for all partners, an LP only limits it for some. In an LP, at least one owner must be on record as the general partner with unlimited liability, and at least one partner must be listed as a limited partner with limited liability. Section 795 (3) of the CAMA 2020 provides that a limited partnership shall consist of one or more persons called general partners, who shall be liable for all debts and obligations of the firm, and one or more persons called limited partners. The Act also limits the number of partners in an LP to a maximum of twenty (20), while an LLP does not any such restriction on membership. In addition, the limited partner cannot have significant money invested in or hold major decisionmaking power in the business. If they do, they risk losing their status as a limited partner and forfeiting their limited liability status. Section 796 CAMA 2020.

Formation of LLP – The Act provides a well-structured process for forming LLPs. This process is very simplified and as such, LLPs are relatively easy to form. It generally requires two or more persons associated for carrying on a lawful business to fill out the prescribed incorporation documents and file same with the CAC. Upon submission of the documents, the CAC shall register the documents and issue a certificate of incorporation. See section 753 and 754 CAMA 2020. The recent activation of the LLP registration function on the CRP implies that the registration can now be processed online.

As opposed to Section 60 Partnership Law of Lagos 2009, an existing partnership is not required to incorporate an LLP.

Limited Legal Liability of the Partners – One of the biggest benefits of forming an LLP is the limited legal liability. Unlike limited partnerships or general partnerships, an LLP does not expose its partners to unlimited legal liability. This way, the personal assets of the partners are secured from claims, because their liability will be limited to the amount that they contributed to the LLP for its formation. However, this limited legal liability shield will be broken if the liability or lawsuit stems from an intentional, fraudulent, unauthorised, or illegal act of the partner. Section 766, 767 CAMA 2020.

Profit sharing and succession – By Sect 763 (5) (a) CAMA 2020, the rights of a partner to a share of the profits and losses of an LLP and to receive distributions in accordance with the LLP agreement are transferable either wholly or in part, subject to provisions of the partnership deed or agreement. The LLP structure also has perpetual succession.

Procedure for registration of an LLP: to register an LLP, A name availability check should be conducted at the CAC and when the proposed name is available, the name will be reserved. A Form CAC/LLP 01 is to be completed with the following information:

The approved name of the LLP;
The proposed business of the LLP;
The proposed registered address of the LLP;
The full name and particulars of each partner and their contribution;
The full name and particulars of each person who is to be a designated partner (Note that there must be at least 2 (two) designated partners who are individuals and at least one of them must be resident in Nigeria); and
Any other information as may be prescribed by the CAC from time to time.

The required fee for registration is to be paid to the CAC. Where the above requirements have been complied with, the CAC shall within the specified timeline, register the LLP and issue a certificate of incorporation. An LLP is a hybrid between a limited liability company and a partnership.

Limited Partnerships (LPs)

Membership of limited partnerships: A limited partnership consists of one or more persons called general partners and they are liable for all debts and obligations of the firm and one or more persons called limited partners. Each limited partner shall contribute capital and shall not be liable beyond amount contributed or agreed to contribute. By section 795 CAMA 2020 however, a limited partner is not under obligation to contribute any capital or property to the partnership where the partners have so agreed in writing.

Limitations of LPs: In accordance with Section 795(4) of CAMA 2020, Limited Partners cannot withdraw part or all of their contributions to the Limited Partnership otherwise such Limited partner shall be liable for the debts and obligations of the partnership up to the amount so drawn out or received back. Corporate entities may also be limited partners or general partners and where they are limited partners, they may conveniently negotiate agreements with general partners on management of the Partnership. As general partners, corporate entities with limited liability still enjoy their status as such.

Procedure for registration of limited partnerships: By virtue of section 797 of CAMA 2020, all Limited Partnerships have to be registered in prescribed form with the Corporate Affairs Commission. Any Partnership which purports to be Limited but is not registered as prescribed by CAMA shall be deemed a general partnership and the liability of its partners shall be unlimited.

Registration under CAMA: As stated earlier, a Limited Partnership is deemed a general partnership until it is registered in accordance with the provisions of Part D of CAMA 2020. General Partners are responsible for complying with the provisions of CAMA on Limited Partnerships including its registration and post–registration matters. The Partners must endeavour to ensure that all information as filed with the Commission is accurate. An application for a Limited Partnership shall be in the prescribed form by the Commission and shall specify the name of the Limited Partnership. The name must end with the word Limited Partnership or the acronym LP otherwise it shall not be registered. (Sections 798 and 799 CAMA 2020) Included in the application is a statement signed by the partners containing the following details of the general nature of the Limited partnership:

The name of the Limited Partnership;
The general nature of the business of the Limited Partnership;
The principal place of business of the Limited Partnership;
The full name and address of each general partner;
The full name and address of each limited partner;
The term if any and commencement date of the Limited Partnership;
A statement that the Partnership is Limited and description of every limited partner as such;
The agreed contribution of each limited partner and whether such contribution has been paid or to be paid in cash or in another specified form.

In line with section 799 (4) of CAMA 2020, upon registration, a certificate shall be issued by the Corporate Affairs Commission which shall be prima facie evidence that a limited partnership has been formed on the date of registration.

CONCLUSION

An overview of the provisions governing the formation and registration of CAMA has been discussed. The new CRP facilitates the formation and registration process. This makes it easier for new investors desirous of running business entities to have a platform same as what is applicable to companies. These provisions are major improvements in company regulation and practice and will enhance productivity and promote ease of doing business in Nigeria.

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This notice is issued as part of our public service and awareness program

SIGNED PUNUKA Attorneys & Solicitors