Frequently Asked Questions
Is a business partnership agreement required by law in Kenya?
No, but it is strongly recommended. Under the Partnerships Act 2012 (which replaced Cap. 29), a partnership can exist without a written agreement, but the Act's default rules will apply — equal profit sharing, equal management rights, and unanimous consent for major decisions — which may not reflect what the partners actually intended.
What is the liability of partners in a Kenyan business partnership?
In a general partnership, all partners have unlimited joint and several liability for the partnership's debts and obligations. This means a creditor can pursue any partner for the full debt. A limited liability partnership (LLP) under the Limited Liability Partnerships Act 2011 limits partners' personal liability.
Is a business partnership agreement valid in common law countries?
Yes. Partnership agreements are enforceable across all common law jurisdictions. The governing legislation varies (UK Partnership Act 1890, Australian partnership statutes, Kenya's Partnerships Act 2012), but the core principles are similar. Specify the governing law if partners are in different countries.
What are the default rules if a partnership agreement is silent in Kenya?
Under the Partnerships Act 2012, if the agreement does not address a specific issue, the default rules apply: partners share profits and losses equally, all partners have equal management rights, no partner can receive a salary from the partnership, and unanimous consent is required for major decisions. These defaults often do not reflect what partners actually intended.
How is a partnership dissolved in Kenya?
A partnership can be dissolved by agreement, by a partner giving notice (for partnerships of no fixed term), by the death or bankruptcy of a partner (unless the agreement provides otherwise), or by court order. The agreement should specify dissolution procedures, including valuation of the business and settlement of liabilities, to avoid disputes.
Is a business partnership agreement valid internationally?
Yes. Partnership agreements using common law principles are enforceable across the UK, Australia, India, Nigeria, and other common law countries. Each jurisdiction has its own Partnership Act, but the core concepts are consistent. For cross-border partnerships, specify governing law and the jurisdiction of dispute resolution.
Do partners in Kenya have unlimited personal liability?
Yes, in a general partnership. Each partner is personally liable for all debts and obligations of the partnership — a creditor can pursue any partner for the full amount. A Limited Liability Partnership (LLP) under the Limited Liability Partnerships Act 2011 limits liability to each partner's agreed contribution.