Partnerships Act

Section 1. Short title. Section This Act may be cited as the Partnerships Act.

Section 2. Interpretation. Section 2(1)(a) for an individual, the usual residential and postal address of that individual; Section 2(1)(b) for a company or a limited partnership, means the registered office of the company or limited partnership; and Section 2(1)(c) for a partnership which is not a limited partnership, the principal place of business of the partnership; Section 2(1)(a) constituted under the law of a country other than Kenya; and Section 2(1)(b) in which one or more of the partners has limited liability in respect of a partnership obligation; Section 2(1)(a) a business letter; Section 2(1)(b) a written order for goods or services to be supplied to the partnership; Section 2(1)(c) an invoice or receipt issued in the course of the partnership business; or Section 2(1)(d) a written demand for payment of a debt arising in the course of the partnership business; Section 2(1)(a) a partnership debt; or Section 2(1)(b) any partnership liability; Section 2(1)(a) on the expiry of a specified period; or Section 2(1)(b) on the completion of a venture that the partnership was formed to undertake; Section 2(1)(a) a person who ceases to be a partner on or after the break up; Sectio...

Section 3. Bodies excluded from scope of this Act. Section a limited liability partnership;

Section 4. Liability of partners. Section 4(1) Each partner in a partnership has unlimited liability. Section 4(2)(a) one or more general partners, each with unlimited liability; and Section 4(2)(b) one or more registered limited partners, each with limited liability.

Section 5. Variation of partnership agreement. Section before the formation of the partnership, with the agreement of all proposed partners; or

Section 6. When default rule applies. Section 6(1) Where a default rule applies in relation to a partnership, it shall be treated as a term of the partnership agreement. Section 6(2)(a) in accordance with the terms of the partnership agreement; or Section 6(2)(b) with the agreement of all the partners.

Section 7. The carrying on of partnership business. Section 7(1) Each partner in a partnership shall have responsibility for the business of the partnership. Section 7(2)(a) suing and being sued in its own name; Section 7(2)(b) entering into contracts and owning or holding property for the purposes of the business of the partnership; and Section 7(2)(c) subject to the partnership agreement, providing continuity for the partnership business despite a change in the partners. Section 7(3) Each partner shall be an agent of the partnership for the purpose of the business of the partnership. Section 7(4) A change in the nature of the business of a partnership shall require the agreement of all the partners.

Section 8. Partnership to have unlimited capacity. Section 8(1) Subject to section 9 , the capacity of a partnership as a legal person is unlimited. Section 8(2) A partnership shall not employ a partner as an employee of the firm.

Section 9. Incapacity to commit offences

Section 10. Duty of good faith. Section 10(1)(a) the partnership; and Section 10(1)(b) the other partners in the partnership, Section 10(2)(a) keep each of the other partners or their legal representatives informed of all matters affecting the partnership; Section 10(2)(b) account to the partnership for any profits or benefits derived by the partner without the consent of the other partners, from any business of the partnership or the use by the partner of the property of the partnership, the name of the partnership or business connection; and Section 10(2)(c) account to the partnership for any profits derived by the partner from a business carried on by the partner without the consent of the other partners, which competes with and is of the same nature as the partnership business. Section 10(3) The mutual rights and duties of the partners, and the mutual rights and duties of the partnership and the partners, whether arising under this Act or the partnership agreement, are subject to the duty imposed on a partner by subsection (1). Section 10(4) This section applies to all transactions undertaken by a partner after a partnership has broken up and before the affairs of the partnersh...

Section 11. Duty of disclosure on forming or joining a partnership. Section 11(1) A person shall, before forming a partnership, disclose to a prospective partner anything known to the person which would reasonably be expected to influence the decision of the prospective partner to form the partnership. Section 11(2) An existing partner in a partnership shall, before admitting a prospective partner into the partnership, disclose anything known to the partner which would reasonably be expected to influence the decision of a prospective partner to join the partnership. Section 11(3) A prospective partner shall, before entering into a partnership disclose anything known to the partner which would reasonably be expected to influence the decision of the existing partners in a partnership to admit the partner into the partnership. Section 11(4) The duty of a partner under this section may be waived in whole or in part by agreement between the prospective partners, or between the prospective partner and the existing partners.

Section 12. Share of profits and losses. Section 12(1) A partner is entitled to share equally in the profits of the partnership and is liable to contribute equally towards the losses incurred by the partnership in equal proportions. Section 12(2) A partner is not entitled to a share in the profits of the partnership, and is not liable to contribute to any losses incurred by the partnership, before he became a partner. Section 12(3) The estate of a partner who dies is liable for debts and obligations incurred by the partnership after becoming partner.

Section 13. Remuneration, expenses, personal liabilities. Section 13(1) A partner is not entitled to remuneration from the partnership for acting in the business of the partnership. Section 13(2)(a) in the ordinary and proper conduct of the partnership business, or in connection with anything done for the preservation of the partnership business or property; or Section 13(2)(b) to discharge the whole or a part of the partner’s personal liability for a partnership obligation. Section 13(3) An indemnity under subsection (2) shall not affect any claim, which the partnership or another partner may have against the partner. Section 13(4) Where the partnership fails to indemnify a partner under subsection (2), the partner shall be entitled to contribution from any partner in the partnership on the same basis as if the amount unpaid were a debt for which each of the partners was a co-guarantor in the same proportion as they would be liable to bear any partnership loss. Section 13(5) Where a partnership fails to pay a partner any other amount for which it is liable to account to the partner under section 10 (2), the partner shall be entitled to contributions from the other partners in the...

Section 14. Capital contribution by partner. Section 14(1)(a) contribute capital to the partnership; or Section 14(1)(b) vary the amount of the partner’s capital contribution to the partnership, where all partners in the partnership agree. Section 14(2) A partner who contributes to the capital of a partnership is not entitled to interest on the contribution. Section 14(3) A partner who makes an advance to a partnership of an amount beyond his contribution to the capital of the partnership is entitled to receive interest from the partnership at the rate of three percent per annum with effect from the date of the advance where prevailing economic circumstances permit.

Section 15. Management of partnership business and affairs. Section 15(1) A partner is entitled to participate part in the management of the business of the partnership. Section 15(2) Differences arising out of an ordinary matter connected with the business of the partnership shall be decided by the vote of a majority of the partners. Section 15(3) Differences arising out of other matters connected with the business of the partnership shall be decided by the unanimous decision of all the partners. Section 15(4) The question on whether a partnership should take legal or arbitral proceedings against, or defend proceedings brought by a person is an ordinary matter. Section 15(5) The partners may not, by an agreement whether orally or in writing, vary the provisions of subsections (2), (3) or (4).

Section 16. Accounting and partnership records. Section 16(1)(a) accounting records of transactions affecting the partnership in which he is involved are properly kept; and Section 16(1)(b) the records are, on request, made available to the partnership or to any partner. Section 16(2) A partner shall have the duty to co-operate with the person responsible for keeping records of the partnership or drawing up the accounts of the partnership on behalf of the partnership.

Section 17. Partnership bound by acts of partners carrying on business in usual manner. Section 17(1) A partnership is bound by an act done by a partner who is carrying on the business of the partnership. Section 17(2)(a) the partner has no authority to act on behalf of the partnership; and Section 17(2)(b) has notice that the partner does not have authority to act on behalf of the partnership; or Section 17(2)(b)(i) has notice that the partner does not have authority to act on behalf of the partnership; or Section 17(2)(b)(ii) does not know that the partner is a partner in the partnership or does not believe that the partner is a partner in the partnership.

Section 18. Rules for identifying partnership property. Section 18(1) All rights and interest in the property acquired on behalf of the partnership or for the purpose and in the course of business of the partnership, and acquired on behalf of the partnership, is partnership property. Section 18(2)(a) acquired on behalf of the partnership; or Section 18(2)(b) contributed to the partnership as capital, is held in trust for the partnership by the partner who acquired the property or contributed the capital.

Section 19. Land acquired out of partnership profits. Section is co-owned by the partners in the same manner as the original land was co-owned by them at the date of the acquisition; and

Section 20. Execution of deeds. Section 20(1)(a) executed by at least two partners, each with the authority of all the partners to execute on behalf of the partnership; Section 20(1)(b) expressed to be executed on behalf of the partnership; and Section 20(1)(c) delivered as a deed. Section 20(2)(i) the document is executed by the general partner; and Section 20(2)(ii) that partner has authority to execute the document on behalf of the partnership. Section 20(3) A document shall be presumed to be delivered for the purposes of subsection (1)(c) upon its being executed in accordance with subsection (2), unless a contrary intention is shown. Section 20(4)(a) a partnership is being wound up under section 42 ; and Section 20(4)(b) there is only one partner remaining in the partnership, Section 20(5) In the case of a partner who is not a natural person, a document is signed by a partner for the purposes of this section if it is signed by an individual who has authority to sign on behalf of the partner. Section 20(6)(a) as a partner; or Section 20(6)(b) as an individual who has authority to sign on behalf of a partner who not a natural person, is considered to have been signed in accordanc...

Section 21. Liability of partnership for loss or injury caused by partner. Section acting in the ordinary course of the business of the partnership; or

Section 22. Unlimited liability of partners. Section 22(1)(a) a judgment, order or arbitral award has been made against the partnership in the same or earlier proceedings, establishing the amount of the partnership obligation; or Section 22(1)(b) the Court has ordered the partnership to make payment in respect of the partnership obligation. Section 22(2) A partner is not liable under subsection (1) for a partnership obligation owed to a co-partner or former partner if the partnership agreement or any other agreement to which the partner and co-partner or former partner are parties provides otherwise. Section 22(3) Subsection (1) shall not affect the liability of the partnership for the partnership obligation. Section 22(4) If a partner pays an amount to discharge the whole or a part of his personal liability for a partnership obligation, the partnership obligation is discharged to the extent of the amount paid by the partner. Section 22(5)(a) discharged in whole or in part; or Section 22(5)(b) otherwise reduced or extinguished; Section 22(6)(a) a breach of a duty in tort; Section 22(6)(b) a breach of trust; or Section 22(6)(c) a breach of a fiduciary duty,

Section 23. Secondary nature of partner’s liability. Section there has been a judgment, order or arbitral award against the partnership in the same or earlier proceedings, establishing the amount of the partnership obligation; or

Section 24. Chief Justice may make rules on partner’s secondary liability. Section 24(1)(a) preventing a partner from defending; or Section 24(1)(b) restricting the extent to which, or the way in which, a partner may defend, Section 24(2) A judgment, order or arbitral award against a partnership in respect of a partnership obligation is not enforceable against the property of the partner. Section 24(3) The periods of limitation and prescription applicable to the personal liability of a partner for partnership obligations shall be those set out in the Second Schedule. Section 24(4) In this section, "related proceedings" means earlier proceedings in which a judgment or order has been made against the partnership establishing the existence or amount of the partnership obligation.

Section 25. Non-partners who are liable by "holding out". Section 25(1)(a) represents the partnership as a partner; or Section 25(1)(b) knowingly allows the partnership to be represented as a partner, Section 25(2) A person who was a partner at the time a representation was made is liable under subsection (1) even if the representation was not acted on until after the person ceased to be a partner. Section 25(3)(a) even if the former partner does not know that the representation has been made or communicated to a person; and Section 25(3)(b) whether the representation is made or communicated in writing, by conduct or otherwise. Section 25(4) A former partner shall be entitled to be indemnified by the partnership in respect of a payment made by the partner to discharge the whole or a part of personal liability under subsection (1) for a partnership obligation or in reasonable settlement of an alleged personal liability under subsection (1). Section 25(5) An indemnity under subsection (4) shall not affect any claim which the partnership or a partner may have against a former partner. Section 25(6) This section shall apply subject to section 33 .

Section 26. Admission of new partners. Section 26(1) A person may become a partner in an existing partnership with the consent of all existing partners. Section 26(2) The consent referred to in subsection (1) may either be express in writing or inferred from the conduct of the existing partners, and in particular, from the fact that the person who is admitted as a partner starts to carry on the business of the partnership together with the existing partners with the object of making a profit.

Section 27. Ceasing to be a partner. Section the person dies;

Section 28. Resignation of a partner. Section 28(1) A partner may resign from a partnership only by giving to the other partners notice of intention to do so not less than three months before the resignation is to take effect. Section 28(2)(a) a partnership comprises three or more partners; and Section 28(2)(b) one partner gives a resignation notice under subsection (1),

Section 29. Power to expel partner. Section 29(1)(a) an order is made against the partner under section 44 ; or Section 29(1)(b) the whole or a part of the partner’s shares in the partnership is subject to an attachment in execution in respect of a debt which is not a partnership debt. Section 29(2) The partners in a partnership may only expel a partner under subsection (1) if they issue the partner with a notice of not less than three months of their intention to do so. Section 29(3)(a) the order referred to in section 44 is revoked; or Section 29(3)(b) the attachment referred to in subsection (1)(b) is recalled or withdrawn or otherwise ceases to have effect.

Section 30. Realization of shares of former partner (other than on winding up). Section the partnership had broken up;

Section 31. Liability of former partner for obligations incurred while a partner. Section 31(1) A person who ceases to be a partner does not cease to be personally liable under section 22 (1) for partnership obligations incurred while a partner. Section 31(2) An agreement between a former partner, the partnership and a creditor to discharge the former partner from personal liability for a partnership obligation shall not require valuable consideration.

Section 32. Former partners: indemnity and contribution, and return of property. Section 32(1) A partnership shall indemnify a former partner in respect of payment made by the partner to discharge the whole or part of his personal liability for a partnership obligation. Section 32(2) An indemnity under subsection (1) shall not affect any claim which the partnership or a partner may have against the former partner. Section 32(3)(a) indemnity from any person who was a partner at the time the partner ceased to be a partner and who continued to be a partner after he ceased to be a partner; or Section 32(3)(b) contribution from any person who was also liable for the obligation. Section 32(4) Subsection (3) shall not apply if the former partner ceased to be a partner on or after the break up of the partnership. Section 32(5)(a) the partnership; or Section 32(5)(b) a trustee for the partnership.

Section 33. Restrictions on liability of former partners or employees by "holding out". Section 33(1)(a) the representation is made to the person more than one year before the former partner ceased to be a partner; or Section 33(1)(b) a notice has been issued by the partnership prior to any dealings with the person that the former partner has ceased to be a partner. Section 33(2)(a) continues to be carried on in the same partnership name; or Section 33(2)(b) continues to include the former partner’s in its list of partners after he has ceased to be a partner. Section 33(3) In this section, references to a partner in a partnership include an employee of the partnership.

Section 34. Position of assignee of partner’s share. Section 34(1)(a) participate in the management or administration of the partnership business or affairs; or Section 34(1)(b) inspect the partnership records. Section 34(2)(a) a share in the partnership profits if any, to which the assigning partner would be entitled; or Section 34(2)(b) in the case of a dissolution of the partnership, the share of the entitlement of the assigning partner. Section 34(3) A person to whom an assigning partner has assigned his share in the partnership may replace the assigning a partner only with the agreement of all the other partners.

Section 35. Break up of partnership. Section 35(1)(a) the number of partners falls below two; Section 35(1)(b) the partnership is for a fixed term and the term expires; Section 35(1)(c) an order to break up the partnership is made by the Court on the application of a partner; Section 35(1)(d) an order is made by a Court under section 51 (1) on the application of the Cabinet Secretary; or Section 35(1)(e) an order is made by a Court under section 51 (2) of this Act. Section 35(2)(a) whose term is not fixed; or Section 35(2)(b) that is for a fixed term and one or more partners has at any time in the course of the partnership, ceased to be partners, Section 35(3) The date at which the partnership breaks up under subsection 2(a) of this section shall be the date on which the partners agree to break up the partnership. Section 35(4) A partner who gives a resignation notice under section 29 shall not be taken to be a partner for the purposes of subsection (2). Section 35(5) If a partnership entered into for a fixed term continues after the expiration of the term without any express new agreement, the rights and duties of a partner shall remain the same as they were at the expiration of t...

Section 36. Effects of break up. Section 36(1)(a) the dissolution of the partnership; Section 36(1)(b) the winding up of the partnership by partners under section 40 ; or Section 36(1)(c) the winding up of the partnership by a liquidator. Section 36(2) The authority of a partner to bind the partnership and other rights and obligations of a partner continue notwithstanding the break up of the partnership in so far as may be necessary to dissolve the partnership and to complete transactions begun but unfinished at the time of the break up. Section 36(3) The partners may, by an agreement in writing, confer on one or more of the partners authority to carry on the partnership business for the purposes of subsection (1). Section 36(4) Subsection (2) shall not apply to a person who ceased to be a partner involuntarily.

Section 37. Restriction on ceasing to be a partner on or after break up. Section 37(1) A person who ceases to be a partner on the break up of a partnership is nevertheless to be treated as continuing to be a partner only for purposes of winding up the partnership. Section 37(2) Subsection (1) shall not apply to a person who ceases to be a partner involuntarily. Section 37(3)(a) dies; Section 37(3)(b) is declared insolvent; Section 37(3)(c) is expelled from the partnership; or Section 37(3)(d) is removed under an order made under section 45 (1)(a) or (b).

Section 38. Publicity for departure of partner or break up of partnership. Section 38(1)(a) may publish notice of the fact that he has ceased to be a partner; and Section 38(1)(b) may require the other partners to give any necessary consent. Section 38(2)(a) publish notice of the break up; and Section 38(2)(b) require the partnership or any other partner to give any necessary consents. Section 38(3) In this section, "necessary consent" means the consent to any act which is necessary or proper for the publication of the notice and cannot be done without the agreement of the partnership or partner.

Section 39. Protection for property acquired after break-up. Section 39(1)(a) formed on or after the break up of a partnership which has not been dissolved; and Section 39(1)(b) consisting of at least one person who was a partner in the former partnership. Section 39(2) The title to the property acquired by a person and that of any person to whom the property is subsequently transferred shall not be challenged on the ground that the property was in fact partnership property of a former partnership. Section 39(3)(a) acts in good faith; Section 39(3)(b) provides valuable consideration; and Section 39(3)(c) has no notice that the property is partnership property. Section 39(4) For the purposes of this section, the transfer of property to a person includes the grant to the partner of an interest created out of the property.

Section 40. Winding up by partners. Section 40(1) A partnership which breaks up may be wound up under this section by one or more partners in the partnership. Section 40(2) Differences arising as to matters connected with the winding up of the partnership shall be decided by a majority of the partners.

Section 41. Distribution of partner’s assets on winding up. Section 41(1)(a) each partner shall pay into the partnership any amounts which the partner owes to the partnership; Section 41(1)(b) the partnership shall pay all amounts it owes to persons other than partners; Section 41(1)(c) the partnership shall pay to each partner any amount owed to him, but excluding the partner’s contribution towards the capital of the partnership, on which it shall pay to each partner the amount, if any, which it owes to the partner in respect of capital; Section 41(1)(d) the partners shall share among themselves any surplus assets in the same proportion as they would be entitled to share the partnership profits, if any; Section 41(1)(e) if the partnership is unable to meet its obligations under paragraph (b), the partners shall contribute towards the deficiency in the same proportions as they would be liable to share any partnership losses in order to meet a partnership obligation; Section 41(1)(f) if a partnership is unable to pay to each partner the amount contributed by the partner towards the capital of the partnership, it shall transfer to the partners, the remaining assets of the partnership...

Section 42. Dissolution of partnership which has broken up.

Section 43. Power of Court to make Order charging partner’s share. Section 43(1) The Court may, on the application by a judgment creditor of a partner, make an order charging that partner’s interest in the partnership property and profits with payment of the judgement debt and interest thereon. Section 43(2)(a) appoint a receiver of the partner’s share of profits and of any other money which may come to the partner in respect of the partnership; Section 43(2)(b) give such directions for the taking of accounts and inquiries as it could have given if the charge had been made in favour of the judgment creditor by the partner. Section 43(3) The other partners in the partnership may at any time redeem the interest charged, or, where a sale is directed by the Court, purchase the partner’s interest in the share.

Section 44. Power of Court to make order removing partner or breaking up partnership. Section 44(1)(a) removing the partner from the partnership; Section 44(1)(b) removing another partner from the partnership; or Section 44(1)(c) breaking up the partnership. Section 44(2)(a) the partner’s capability of performing a partner’s duties in the partnership; Section 44(2)(b) the effect of the partner’s conduct on the partnership business; Section 44(2)(c) any breach, by a partner, of a term of the partnership agreement; Section 44(2)(d) any fraud, misrepresentation or non-disclosure by any partner when the partners enter into a partnership or modify a partnership agreement; Section 44(2)(e) any event that occurs making it unlawful for the partner to remain a partner; Section 44(2)(f) any losses incurred by the partnership and the prospects of carrying on the business partnership profitably; Section 44(2)(g) any other ground the Court considers appropriate.

Section 45. Order to specify date of removal or break up. Section 45(1) An order under section 44 (1)(a) or (b) shall specify the date a partner ceases to be a partner, which may be any date not earlier than the date on which the applicant became partner. Section 45(2) An order under section 44 (1)(c) shall specify the date on which the partnership broke up or is expected to break up.

Section 46. Combination orders. Section 46(1) An application for an order breaking up a partnership under section 44 (1)(c) may include an application for an order under section 50 or 51 . Section 46(2) An order under section 44 (1)(c) may be combined with an order under section 54 or 55 , whether or not such an order was applied for in accordance with subparagraph (1).

Section 47. Court may give directions. Section 47(1)(a) directions as to the rights of a specified partner to realise the partner’s share in the partnership; and Section 47(1)(b) in the case of an order under section 51 , a direction restricting the rights conferred on a specified partner by section 42 or the Second Schedule. Section 47(2)(a) in the position they would have been in if the partner had in fact ceased to be a partner on that date; or Section 47(2)(b) so near that position as the Court considers just and equitable.

Section 48. Fraud, misrepresentation or non-disclosure. Section 48(1) Sections 50 and 51 shall apply, if the ground on which the Court makes an order under section 50 is that of fraud, misrepresentation or non-disclosure by a partner. Section 48(2) Each applicant for the order is entitled to be indemnified by the partner at fault in respect of any loss suffered by the applicant which is attributable to the fraud, misrepresentation or non-disclosure. Section 48(3) If an order is made under section 51 , each partner not at fault is entitled, when the partnership assets are distributed, to be paid all amounts which the partnership owes to the partner before any amount is paid to the partner at fault. Section 48(4) Subject to section 51 , a partner who ceases to be a partner under an order made under that section retains any rights he would otherwise have had to realise his share in the partnership.

Section 49. Meaning of "non-disclosure". Section under section 9 (2)(a) or 10 ; or

Section 50. Interim orders. Section In relation to an application made under section 44 (1)(a) or (b), the Court may make an order prohibiting or limiting the extent to which the partner sought to be removed takes part in the partnership business pending the determination of the application.