Is There Sufficient Justification for Limited Partner Liability in Limited Liability Partnerships? Lessons from Nigeria

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ABSTRACT

Is There Sufficient Justification for Limited Partner Liability in Limited Liability Partnerships? Lessons from Nigeria

Dr Pereowei Subai*

This article questions whether there are sufficient justifications for granting limited liability to partners who trade under the limited liability partnership form in the light of the fact that partnerships operate under different situations from companies. While noting that the traditional justifications for conferring limited liability do not exist in the limited liability partnership, it nonetheless argues that some justifications may still exist for conferring the protection on partners who trade under it, one of which may be the need to shield professional partners from the misjudgment of their colleagues. Another, being the fact that in practice, the owner-manager fusion for which the general partnership is known, may not always exist in limited liability partnerships. Using the novel Nigerian limited liability partnership as provided for under the Companies and Allied Matters Act 2020 as a case study, the article will suggest that in conferring the protection of limited liability, it is equally necessary to subject the form to regulatory requirements aimed at protecting the interests of creditors and ensuring that partners do not abuse the extensive protections conferred by the Act.

Keywords: Limited, Liability, Partnership, Company, Nigeria

INTRODUCTION
Nigeria’s 30-year wait for a holistic reform of its companies’ regime ended with the passage of the Companies and Allied Matters Act in July 2020 (‘CAMA’). The Act modernizes Nigeria’s company law by incorporating aspects of digital technology to improve the ease of doing business in the country. It also contains elaborate provisions aimed at rescuing financially troubled companies such as netting and administration while also codifying aspects of corporate governance which had hitherto been left within the realm of corporate ethics. However, of relevance to this article is the fact that CAMA provides for the registration of limited liability partnerships (LLP) under Part C.₁ The LLP is a hybrid of the general partnership and aspects of the company.₂ It operates with the internal flexibilities of the partnership, but at the same time, it is conferred with a separate legal personality,₃ perpetual succession, entity shielding,₄ and the partners in the LLP are shielded from…

* PhD (Newcastle University), ACIS. Senior Lecturer, Faculty of Law, Niger Delta University, Wilberforce Island, Nigeria. Email: pe***********@nd*.ng; +234(0)8033503374.

1. CAMA, ss 746-794.
2. YH Ying, ‘Nature and Liability Shield of Limited Liability Partnerships in Singapore’ (2007) 19 SAcLJ 409, 423.
3. CAMA, ss 746 and 756. Furthermore, partners in the LLP may trade with it and retain the same rights and obligations against it as any non-partner, s 792.
4. This concept refers to the fact that the incorporated entity is shielded from its partners or members’
   personal creditors.
   

THE GRAVITAS REVIEW OF BUSINESS & PROPERTY LAW VOL.12 NO.1