FEATURES OF A LIMITED LIABILITY PARTNERSHIP
1. Perpetual Succession
According to CAMA 2020 Sections 746 (2) and (3), an LLP is a business entity with Perpetual succession. Perpetual succession under the Act means that an LLP’s continuous existence is unaffected by changes in its membership or the death of any of its partners.
2. Designated Members
According to Section 749 of CAMA 2020, an LLP must have at least two designated partners who are individuals and at least one of them shall be a resident in Nigeria. The designated partners are partners who have the same rights and responsibilities as other partners of the LLP, but with additional responsibilities that include: Signing and delivering accounts, filing yearly returns, and alerting the Commission of any changes in membership, registered office address, or name; and failure to carry out these legal tasks by designated members is punishable under the law.
3. A Separate Legal Entity From Their Members
Section 746 (1) of CAMA 2020 states that an LLP is a legal entity distinct from the partners. Just like a company, the commission issues an LLP with a distinctive registration number upon incorporation. This registration number remains the same throughout its existence, even when the name is changed. Also, an LLP possesses the powers of a natural person and an incorporation, meaning it can sue and be sued. It can also enter contracts and explore property management options, such as owning and developing.
4. Name And Change Of Name
Section 757 of the CAMA 2020 mandates that the name of an LLP must end with “Limited Liability Partnership” or the acronym “LLP“. It should be noted that provisions regarding reservation of name or change of name as contained in Sections 30 and 31 of CAMA 2020 as highlighted by Section 758 are also applicable to limited liability partnerships, and Section 759 also provides for the penalty for improper use of the name or acronym.
5. The Partners Have Limited Liability
Under Sections 765–767 of CAMA 2020, a partner of an LLP is an agent of the LLP, not of the other partners. A partner also cannot be held accountable for an obligation fulfilled in line with the partnership agreement, either directly or indirectly, and cannot be held accountable for the improper acts or omissions of other partners of the LLP. Like shareholders of a limited liability company, partners of an LLP act as its agents and are only liable for the amount they contributed to the LLP, encompassing their capital contribution and undrawn earnings.
This is a substantial benefit over a typical partnership, where the partners’ liability is generally unlimited. Partners of an LLP may be personally liable if they allow the LLP to continue trading, with logical knowledge that it had no reasonable possibility of avoiding insolvency; or if they allow it to continue trading with the intent of deceiving creditors. The extent to which each person was active as well as their level of influence over the business will be important considerations. A partner in an LLP is liable for his or her wrongful acts, omissions, and fraudulent activities, and he or she would have unlimited liability in such instances.
6. Transfer Of Partnership Rights
The rights of a partner to receive distributions and to share in the profits and losses can be transferred following the provisions of the LLP Agreement.
7. Cessation Of Partnership
Subject to Section 763 of CAMA 2020, a person may cease to be a partner of a limited liability partnership under the partnership agreement with the other partners. In the absence of an agreement with the other partners as to the cessation of being a partner, the partner is required to give notice in writing of not less than thirty (30) days to the other partners of his intention to resign as a partner. Furthermore, a person shall cease to be a partner of a Limited Liability Partnership on his death, or the dissolution of the Limited Liability Partnership, or if he is declared to be insolvent or a person of unsound mind by a competent Court.
The Dissolution of an LLP may be done through the Courts or voluntarily as stipulated under Section 789 of CAMA.