Nigerian Partnership Law Explained — General vs Limited Partnership and Dispute Rules
Home › Business & Law › Nigerian Partnership Law Explained
Editorial Research Notice — July 9, 2026: This article is built from verified primary and high-authority secondary legal sources including the Companies and Allied Matters Act 2020 (CAMA 2020, Act No. 3); the Partnership Law of Lagos State CAP P1 2015; the Nigerian judicial decision in Ugorji v. Uzoukwu (1972) 1 All NLR (pt 1) 289; the Arbitration and Mediation Act 2023; analysis published by SPA Ajibade & Co (December 2021), SIAO Legal (March 2026), Ekosolicitors (March 2026), Mondaq Nigeria, IFLR, and the Nnamdi Azikiwe University Journal of International Law and Jurisprudence (Vol. 17 No. 1, 2026). This article is for educational and informational purposes only. It does not constitute legal advice. Consult a qualified Nigerian legal practitioner before making any partnership or business structuring decision.
🚨 Most Nigerian partnerships are built on trust and verbal agreements — until the money gets big enough to fight over.
Under the Partnership Law of Lagos State and CAMA 2020, a Nigerian partnership can exist without any written agreement. But without a written agreement, the law fills in every blank with default rules that neither partner may want. This article explains exactly what those rules are, what they cost you when they apply, and what you must put in writing before a dispute makes it irrelevant.
The Legal Framework for Nigerian Partnerships — General Partnership vs Limited Partnership, Profit Sharing Rules, and What Happens When Partners Disagree
A complete breakdown of Nigerian partnership law under CAMA 2020 and the Partnership Law of Lagos State — the three types of partnerships, what your profit rights are by default, what unlimited liability actually means for your personal assets, and the legal options available when co-founders reach a breaking point.
You Are Reading Daily Reality NG
Daily Reality NG is an independent Nigerian digital publication from Warri, Delta State. This article was built by reading the primary legal sources — CAMA 2020, the Partnership Law of Lagos State, Nigerian judicial decisions — not by summarising secondary commentary. Every section reference is to a named, verifiable legal provision. This is not legal advice; it is the map you need to understand your legal position before you speak to a lawyer. It may also tell you things your existing partnership arrangement is silently getting wrong right now.
🎯 Clear Promise
By the end of this article, you will know exactly which type of partnership structure fits your situation, what the law says about profit sharing when your agreement is silent, and what legal options exist when a partner relationship breaks down.
👥 Who This Is For
Nigerian co-founders running informal business partnerships, entrepreneurs about to formalise a collaboration, lawyers seeking a client-ready primer, and business school students studying Nigerian corporate law.
⏱ Reading Time
Approximately 26 minutes for the full guide. The partnership comparison table is in Section 4 and the dispute resolution section begins at Section 8 if you need to jump there immediately.
💡 Here is what most Nigerian entrepreneurs do not know: Under Section 23(i) of the Partnership Law of Lagos State, if your written agreement is silent on profit sharing — or if you have no written agreement at all — the law presumes you and every other partner are entitled to exactly equal shares of profit and loss. Not based on who contributed more capital. Not based on who works harder. Equal. And under Section 23(vi) of the same law, no working partner is legally entitled to a salary — unless your agreement says otherwise. These two default rules destroy more Nigerian partnerships than any business failure.
✅ Quick Answer: The 3 Partnership Types, Profit Rules, and What to Do in a Dispute
General Partnership: Two or more persons, unlimited joint and several personal liability for all debts, no separate legal personality, no mandatory CAC registration. Default profit split: equal (Section 23(i) Partnership Law Lagos). Default salary: none (Section 23(vi)).
Limited Partnership (LP): At least one general partner (unlimited liability) + at least one limited partner (liability capped at capital contribution). Limited partners cannot manage the business without losing their protection. Must be registered with CAC under Section 795, CAMA 2020. No separate legal personality.
Limited Liability Partnership (LLP): Separate legal entity (Section 746(1) CAMA 2020). All partners protected. Survives death of a partner. Must be registered with CAC. Best for professional services and structured ventures.
When partners disagree: The partnership agreement governs first. If it provides for mediation or arbitration (under the Arbitration and Mediation Act 2023), use that path. If not, approach a State High Court or Federal High Court. Courts can order dissolution under Section 34 of the Partnership Law of Lagos State on just and equitable grounds.
📍 Find Your Situation
| Your Current Situation | Your Legal Risk | What You Need Most | Go To Section |
|---|---|---|---|
| Informal verbal partnership — no written agreement | Law presumes equal profit split and no salary. Personal assets at risk for all partnership debts. | Written partnership agreement immediately | Sections 5 & 6 |
| Written agreement but silent on profit sharing | Section 23(i) Partnership Law Lagos imposes equal split regardless of capital contribution | Understand the default rule; add profit clause | Section 5 |
| Currently a general partner and worried about personal liability | Unlimited joint and several liability for all partnership debts; creditors can pursue personal assets | Understand your exposure; consider converting to LLP | Section 3 |
| Investor in a partnership — not involved in management | If structured as LP, limited liability applies unless you manage (Section 806 CAMA 2020). If general partnership, unlimited liability. | Understand Limited Partnership structure and Section 806 risks | Section 4 |
| Currently in a partnership dispute | Resolution path depends on what your agreement says. Without an agreement, court dissolution may be the only option. | Understand dispute options — negotiation, ADR, court dissolution | Sections 8 & 9 |
| Considering a professional partnership (law firm, accounting firm) | General partnership exposes all partners to each other’s professional liabilities; LLP is the preferred structure | Understand the LLP as a separate legal entity under Section 746(1) CAMA | Section 4 |
| This table is a general informational guide only. Individual circumstances vary. Consult a qualified Nigerian legal practitioner before making any structuring decision. | |||
🚫 PRECHECK — Three Questions Before You Continue
- Do you currently operate a business with another person, sharing profits, with no written agreement? If yes, you already have a partnership under Nigerian law — whether or not you called it that. The Partnership Law of Lagos State and CAMA 2020 apply to you right now, including their default rules on profit splitting, liability, and dissolution. This article tells you exactly what those rules say.
- Does your existing partnership agreement address what happens if one partner dies, goes bankrupt, or wants to leave? If not, the law’s default answer may destroy the business even though the surviving partners want it to continue. This default rule has ended more viable Nigerian businesses than any market downturn.
- Do you know the difference between a Limited Partnership (LP) and a Limited Liability Partnership (LLP) under CAMA 2020? They sound identical but have fundamentally different legal structures, liability protections, and registration requirements. Choosing the wrong one — or assuming you are protected when you are not — is one of the most consequential legal mistakes Nigerian entrepreneurs make.
📋 What This Article Covers
- The Legal Foundation — What Governs Nigerian Partnerships in 2026
- What Constitutes a Partnership Under Nigerian Law
- General Partnership — Definition, Liability, and Default Rules
- Limited Partnership vs Limited Liability Partnership — The Critical Differences
- Profit Sharing Rules — What the Law Presumes When Your Agreement Is Silent
- Partner Rights and Obligations Under Nigerian Law
- What Every Nigerian Partnership Agreement Must Contain
- When Partners Disagree — The Legal Options Available
- Dissolution — How Nigerian Partnerships End and What Happens Next
- How to Register Your Partnership with the CAC in 2026
- Complete Comparison Table — All Three Partnership Types Side by Side
- Reader’s Legal Impact: What Getting This Wrong Can Cost You
- Key Takeaways
- FAQ — 15 Questions Answered
Tunde and Emeka started their Abuja fashion brand with a handshake. Tunde provided the capital — ₦2.5 million of his savings — and Emeka provided the design talent. They agreed to build it together and split whatever it made. That agreement lived in their heads.
Two years later, the business was turning ₦8 million monthly. And that is exactly when the argument started. Emeka said 50-50, as agreed. Tunde said his ₦2.5 million investment entitled him to a larger share — at least 70-30. Neither was lying about what they remembered. But neither had put anything in writing.
When they eventually consulted a lawyer, they discovered something that changed everything: under Section 23(i) of the Partnership Law of Lagos State, the law had already decided the matter. In the absence of any written agreement to the contrary, profits are split equally. Emeka was legally right — even though Tunde had contributed all the startup capital. And that same law said neither of them was entitled to a salary for the time they had invested in running the business.
This article is written so that Tunde and Emeka’s situation does not have to be yours. The law that governs Nigerian partnerships is not secret. It is written in CAMA 2020, in the Partnership Law of each state, and in decades of Nigerian judicial decisions. This guide translates it into language that a co-founder — not a lawyer — can act on.
📋 Section 1: The Legal Foundation — What Governs Nigerian Partnerships in 2026
Understanding Nigerian partnership law requires understanding that it comes from multiple sources operating simultaneously. Unlike company law, which is almost entirely federal and codified in a single statute (CAMA 2020), partnership law in Nigeria is a layered system combining federal legislation, state legislation, received colonial-era English law, and judicial decisions.
| Legal Source | What It Governs | Jurisdiction / Application | Key Provisions |
|---|---|---|---|
| Companies and Allied Matters Act 2020 (CAMA 2020, Act No. 3) | Formal registration of business names, Limited Partnerships (LP), and Limited Liability Partnerships (LLP); maximum partner numbers; LLP governance and dissolution | Federal — applies across all 36 states and FCT | Section 19 (max 20 partners); Part D Sections 746–795 (LLP); Section 795 (LP); Sections 814–829 (business names); Section 806 (limited partner management rule) |
| Partnership Law of Lagos State CAP P1 2015 | Definition of partnership; implied and express terms; profit sharing; partner rights and duties; dissolution grounds; court-ordered dissolution | Lagos State (and similar laws in other states) | Section 1(1) (definition); Section 23(i) (equal profit share default); Section 23(vi) (no remuneration default); Section 20 (partnership property); Section 34 (dissolution grounds) |
| Partnership Act 1890 (UK) | Applied as a statute of general application in some Nigerian states that adopted English law pre-1900 through the colonial reception mechanism | States in the southern part of Nigeria as a default law where state partnership legislation has not been enacted or is incomplete | General partnership principles, mutual agency, profit sharing rules |
| Nigerian Judicial Decisions | Interpretation of partnership elements; implied partnerships; liability rules; dissolution grounds | Binding across Nigeria through the court hierarchy | Ugorji v. Uzoukwu (1972) 1 All NLR (pt 1) 289 — elements of a valid partnership |
| Arbitration and Mediation Act 2023 (AMA 2023) | Arbitration and mediation for resolving commercial disputes, including partnership disputes | Federal — applies across Nigeria | Modernised framework replacing Arbitration and Conciliation Act 1988; recognises emergency arbitrators, interim measures, and arbitral autonomy; Section 76 on mediation confidentiality |
| Sources: CAMA 2020 (cac.gov.ng); Partnership Law of Lagos State CAP P1 2015 (Lagos State Laws); IFLR analysis of CAMA 2020 partnership provisions (June 2022); Chambers & Partners Nigeria International Arbitration 2025. Nigerian partnerships can be subject to more than one set of legal rules simultaneously. | |||
📌 The Critical Point: State Laws Fill in What Federal Law Does Not Specify
CAMA 2020 provides the framework for formal registration and the modern structures (LP and LLP). But the day-to-day rules of a general partnership — how profits are divided, what a partner can be paid, when a partner can force dissolution — are primarily governed by the Partnership Law of each state. Lagos State has the most developed body of partnership law in Nigeria. Businesses operating in other states should verify which partnership legislation applies in their state of operation. In states where no specific partnership legislation exists, the old UK Partnership Act 1890 may apply as a statute of general application.
👨🤝👨 Section 2: What Constitutes a Partnership Under Nigerian Law
Section 1(1) of the Partnership Law of Lagos State CAP P1 2015 defines a partnership as an organisation structure entered into by two or more people to form and carry on business to make a profit. The Nigerian Supreme Court and lower courts have consistently applied this definition since Ugorji v. Uzoukwu (1972) 1 All NLR (pt 1) 289, which established the essential elements that must be present.
The Three Essential Elements
👥 Element 1: Two or More Persons
A partnership requires at least two parties. Under Section 19 of CAMA 2020, a partnership may not consist of more than twenty (20) persons. Exceptions apply to law firms and accounting firms, which may exceed twenty partners. Corporate entities can be partners in a Limited Partnership or LLP. Persons must be of legal capacity — Section 20 of CAMA 2020 restricts minors and persons of unsound mind from participating in certain partnership structures.
🏭 Element 2: Carrying On a Business in Common
The parties must be conducting a business together. A single isolated transaction is generally not a partnership. There must be an ongoing commercial activity, mutual participation, and a shared operational arrangement. The Nigerian courts have held that a business can be carried on “in common” even where parties have different roles — one providing capital and another providing services, for example — as long as they are both participating in the common enterprise.
💰 Element 3: View to Profit
The parties must intend to make a profit. Non-profit ventures, charitable collaborations, and cost-sharing arrangements without a profit motive do not constitute partnerships. However, the courts have found partnerships in the absence of an explicit agreement where the profit motive is evident from the conduct of the parties.
🚫 Critical Warning: You May Already Have a Partnership You Did Not Intend to Create
Under Nigerian law, where all three elements above are present, a partnership may be implied by law even in the complete absence of a written agreement. This is not a hypothetical risk. Nigerian courts have found that two people who were “just working together” informally were legally partners — meaning one partner’s debts became the other’s personal obligation. If you are sharing profits with another person while running a business together, the law may already see you as partners, with all the liability consequences that entails.
🏭 Section 3: General Partnership — Definition, Liability, and How It Works
A general partnership is the traditional, default form of partnership in Nigeria. It is what exists when two or more people go into business together, share profits and losses, and have not deliberately structured their arrangement as a Limited Partnership or Limited Liability Partnership. No formal registration is required for a general partnership to exist — it can arise by verbal agreement, by conduct, or by a written document.
The Defining Feature: Unlimited Joint and Several Liability
The most legally significant characteristic of a general partnership is unlimited liability. Each partner is jointly and severally liable for every debt and obligation of the partnership incurred while they are a partner. This statement has two practical consequences that most Nigerian entrepreneurs underestimate.
🔴 What “Joint” Liability Means
All partners can be sued together as a group for any debt of the partnership. A creditor can file a single lawsuit against the partnership and have the judgment enforced against any of the partners individually. You do not have to have personally incurred the debt to be jointly liable for it.
🔴 What “Several” Liability Means
A creditor can choose to sue just one partner for the entire amount of the partnership debt — even if that partner did not personally take on or authorize the debt. If your partner borrowed money for the business without your knowledge, you are personally liable for that debt. The creditor can use your personal bank accounts, property, and assets to satisfy the partnership’s obligation.
No Separate Legal Personality
A general partnership in Nigeria has no separate legal personality distinct from its partners. This means the partnership cannot own property in its own name, cannot enter contracts in its own name independently of the partners, and cannot sue or be sued in the partnership name without the individual partners being named. All partnership property is technically owned collectively by the partners. This is in direct contrast to an LLP or an incorporated company, which have full legal personality.
📌 CAMA 2020 Section 19 — The 20-Partner Limit
Section 19 of CAMA 2020 sets an upper limit of twenty (20) persons for any partnership. Where a business partnership operates with more than twenty partners without being registered as a company or LLP, it is operating unlawfully. Exceptions under Section 19 apply specifically to law firms and accounting firms, which may exceed the twenty-partner cap. If your general partnership grows beyond twenty members, Nigerian law requires you to either incorporate as a company or register as an LLP.
General Partnership: Practical Consequences Summary
| Aspect | What the Law Says | What This Means in Practice | Source |
|---|---|---|---|
| Liability for debts | Joint and several — all partners personally liable for all partnership debts | Your personal assets (home, savings, car) can be seized to pay partnership debts you did not personally create | Partnership Law Lagos State; common law |
| Legal personality | None — no separate entity from partners | Partnership cannot own property or enter contracts independently in its own name | Nigerian common law |
| Maximum partners | 20 persons (except law/accounting) | Growing beyond 20 partners without incorporation violates CAMA 2020 | Section 19, CAMA 2020 |
| Profit share default | Equal division if agreement is silent | Even if you invested more capital, you get 50% without an express agreement | Section 23(i) Partnership Law Lagos |
| Remuneration default | No salary unless agreement says otherwise | Working partners get no legal entitlement to pay for their time without an express clause | Section 23(vi) Partnership Law Lagos |
| Dissolution trigger | Death, bankruptcy, or insanity of any partner dissolves the partnership by default | Business can be legally ended overnight by the death of one partner unless the agreement says otherwise | Partnership Law Lagos State |
| Registration requirement | Not mandatory but strongly advisable | Can operate legally without CAC registration, but unregistered partnership has limited legal standing | Part E, Sections 814–829, CAMA 2020 |
| Source: CAMA 2020 (cac.gov.ng); Partnership Law of Lagos State CAP P1 2015; Ekosolicitors partnership guide (March 2026); SIAO Legal analysis (March 2026). | |||
💡 Did You Know? Every Partner in a General Partnership Can Bind the Others to Contracts
Under the law of agency that underlies Nigerian partnership law, every general partner acts as an agent of both the partnership and all other partners. This means any partner can legally bind the partnership — and therefore all other partners — to contracts, agreements, and financial obligations, even without consulting the other partners first. A partner who signs a ₦10 million supply contract for the business has bound every other general partner to that obligation. The only protection against this is an express limitation in the partnership agreement specifying which decisions require the consent of all partners — and even then, third parties who were unaware of the limitation may still be able to enforce the contract against the partnership. This principle of mutual agency makes a written partnership agreement that limits individual partner authority one of the most important legal protections available to Nigerian co-founders.
📌 Section 4: Limited Partnership vs Limited Liability Partnership — The Critical Differences
CAMA 2020 introduced two distinct structures for partners who want some form of liability protection: the Limited Partnership (LP) and the Limited Liability Partnership (LLP). These are not the same structure, and confusing them is one of the most consequential legal errors a Nigerian entrepreneur can make.
The Limited Partnership (LP) Under Section 795, CAMA 2020
📌 The Core Rule: Section 795(3) CAMA 2020
“Every Limited Partnership must have at least one General Partner and one Limited Partner.” — Section 795(3), Companies and Allied Matters Act 2020. The general partner retains unlimited liability for all partnership debts. The limited partner’s liability is capped at the amount they agreed to contribute as capital.
The Limited Partnership is commonly used in Nigeria for investment fund structures, private equity, and ventures where one party contributes capital but does not wish to participate in operations. The LP structure was made significantly more practical by CAMA 2020, which provided specific and elaborated provisions under Part D Section 795 that the old CAMA lacked.
The most important risk rule in an LP: Section 806 of CAMA 2020 provides that if a limited partner participates in the management of the partnership business, they become liable for all the debts and obligations incurred during the period they participated in management — as though they were a general partner. This is sometimes called the “limited partner management trap.” An investor who starts giving operational instructions, attending client meetings in a decision-making capacity, or directing employees can inadvertently destroy their limited liability protection.
An LP has no separate legal personality — it is not a distinct legal entity like a company or LLP. Corporate entities can become limited partners in an LP, and this is commonly used in fund structures where a fund manager is the general partner and investors are limited partners.
The Limited Liability Partnership (LLP) Under Sections 746–795, CAMA 2020
📌 Section 746(1) CAMA 2020 — Separate Legal Entity
“An LLP is recognised as a separate legal entity distinct from its partners.” — Section 746(1), CAMA 2020. This single sentence is what makes an LLP fundamentally different from every other partnership structure in Nigeria. An LLP can enter contracts, own property, sue and be sued in its own name. It exists as an entity independent of the people who are its partners.
Under Section 766(3) and (4) of CAMA 2020, any contractual or other obligation of an LLP is solely that of the LLP itself. The LLP’s own assets must be used to satisfy its liabilities — creditors cannot routinely pursue the personal assets of the partners. This is a fundamentally different protection from an LP, where at least one partner still has unlimited personal liability.
In an LLP, all partners may participate in management without losing their liability protection — a significant advantage over the LP, where a limited partner who manages loses their protection under Section 806.
Designated Partners: Every LLP must have at least two designated partners who are natural persons, with at least one resident in Nigeria. Section 750 of CAMA 2020 imposes an important qualification: designated partners bear personal liability for any statutory penalties imposed on the LLP for non-compliance with the law. This is a limited personal liability — it applies only to regulatory penalties, not to the LLP’s commercial debts.
The Nnamdi Azikiwe University Journal of International Law and Jurisprudence (Vol. 17 No. 1, 2026) confirmed that the LLP has significantly altered Nigeria’s business law landscape by providing “separate legal personality, limited liability for its members, and perpetual succession” within a partnership framework — making it particularly attractive to professional service firms.
₦ Section 5: Profit Sharing Rules — What the Law Presumes When Your Agreement Is Silent
This is the section that most directly addresses the Tunde-and-Emeka scenario — and the section that most Nigerian co-founders wish they had read before starting their business. The default rules that apply when a partnership agreement is silent on profit sharing are both clear and frequently disruptive.
The Default Rule: Equal Division
📌 Section 23(i) of the Partnership Law of Lagos State — The Equaliser
“All partners are entitled to share equally in the capital and profits of the business and must contribute equally toward the losses sustained.” — Section 23(i), Partnership Law of Lagos State CAP P1 2015. This default applies whenever the partnership agreement does not expressly state a different sharing formula.
This rule means that if Partner A contributed ₦5 million and Partner B contributed ₦500,000, but their agreement is silent on profit splitting, both partners are entitled to exactly equal shares of any profit. The capital disparity is legally irrelevant to the profit question unless the agreement expressly addresses it.
Similarly, if the business makes a loss, both partners are equally obligated to contribute toward covering that loss — regardless of who contributed more to the original capital.
The Remuneration Default: No Salary for Partners
📌 Section 23(vi) of the Partnership Law of Lagos State — No Salary
“The law presumes that partners are not entitled to any form of remuneration for acting in the conduct of the partnership business.” — Section 23(vi), Partnership Law of Lagos State. A partner who works full-time in the business has no legal claim to a salary unless the agreement expressly provides one.
This rule reflects the legal premise that a partner’s compensation is their share of the profits — not a wage. The logic is that partners are co-owners, not employees. But in practice, this creates significant inequality in partnerships where one partner contributes active labour and another contributes only capital. The working partner is legally entitled to exactly the same profit share as the capital provider, and nothing more, unless the agreement creates a salary entitlement.
The Property Default: Everything Used by the Business Belongs to the Business
📌 Section 20 of the Partnership Law of Lagos State — Property Presumption
All property used by the partnership is presumed to have been bought with partnership money and belongs to the partnership collectively — unless a contrary intention appears expressly. This means if a partner brings in their personal laptop, phone, or vehicle for use in the business without expressly reserving it as personal property, it may be treated as partnership property.
| If Your Agreement Is Silent On... | The Law Presumes... | Legal Source | How to Avoid This Default |
|---|---|---|---|
| How profits are divided | Equal division regardless of capital contributed | Section 23(i), Partnership Law Lagos | Insert an express profit-sharing clause with exact percentages |
| How losses are divided | Equal contribution toward losses | Section 23(i), Partnership Law Lagos | Insert an express loss-allocation clause |
| Partner salaries or remuneration | No partner is entitled to any salary | Section 23(vi), Partnership Law Lagos | Insert an express remuneration or management fee clause |
| Who owns property used in the business | All property is partnership property | Section 20, Partnership Law Lagos | List each partner’s personal property specifically in the agreement, with a reservation of personal ownership |
| What happens when a partner dies or goes bankrupt | The partnership is dissolved immediately | Partnership Law Lagos State | Insert a continuity clause specifying that the surviving partners may buy out the deceased partner’s estate and continue the business |
| How new partners are admitted | Unanimous consent of all existing partners required | Partnership law principle | Insert a clear admission process with majority or supermajority voting rules |
| These defaults are not absolute — partners can contract out of each one by including an express clause in the written partnership agreement. The defaults only apply where the agreement is silent. Source: Partnership Law of Lagos State CAP P1 2015; Lexology/Mondaq Nigerian partnership analysis (2021, updated 2026). | |||
✅ Section 6: Partner Rights and Obligations Under Nigerian Law
Nigerian partnership law creates a set of rights and obligations that exist between partners whether or not they are written into the agreement. These rights derive from both the statutory framework (CAMA 2020, Partnership Law) and the general principle that partners are fiduciaries of one another.
Default Rights of Every Partner (Where Agreement Is Silent)
- Right to share in profits equally: Section 23(i) Partnership Law Lagos — each partner is entitled to an equal share of profits in the absence of a contrary agreement.
- Right to participate in management: Every general partner has an equal right to participate in the management of the partnership business. No single partner has superior management authority over others unless the agreement creates it.
- Right to inspect books and records: Every partner has the right to inspect and copy partnership books and accounts at any time. This right cannot be restricted by majority vote of partners — it belongs to each partner individually.
- Right to indemnification: Every partner is entitled to be indemnified by the partnership for any payment made or liability incurred by that partner in the ordinary and proper conduct of the partnership business.
- Right to interest on capital contributions beyond initial contribution: Where a partner contributes capital beyond what was agreed (for example, to rescue the business from debt), that partner is entitled to interest on the excess at 5% per annum.
Fiduciary Duties: What Partners Owe Each Other
Partners in a Nigerian partnership are fiduciaries of one another — they owe each other the highest duties of loyalty, honesty, and good faith. This fiduciary relationship has practical legal consequences that Nigerian co-founders frequently underestimate.
⚖ Duty of Loyalty
Partners must not pursue business opportunities that should belong to the partnership for their own personal benefit. If Emeka in our example discovers a lucrative contract that falls within the partnership’s business line and pursues it personally through a separate company without disclosing it to Tunde, this is a breach of fiduciary duty. Tunde can recover the profit Emeka made.
⚖ Duty of Full Disclosure
Partners must disclose to other partners any information relevant to partnership affairs. Concealing financial information, hiding liabilities, or misrepresenting the state of the business to a fellow partner are all breaches of this duty that can be remedied through the courts.
⚖ Duty to Account
Every partner must account to the partnership for any profit they personally derive from any transaction concerning the partnership or from any use of the partnership name or business connection. Personal side-deals using the partnership’s reputation or relationships must be disclosed and any profits surrendered to the partnership unless all partners have agreed otherwise.
📝 Section 7: What Every Nigerian Partnership Agreement Must Contain
A partnership agreement is not just good practice — it is the mechanism by which partners contract out of the statutory defaults that would otherwise apply. Every element below is something that the law presumes if the agreement is silent. Include them all or risk the default applying at the worst possible moment.
💡 Did You Know? A Verbal Partnership Agreement Is Still Legally Binding Under Nigerian Law — but Impossible to Enforce Predictably
Under Nigerian law, a general partnership can arise and be fully valid through oral agreement or even by conduct — without any written document at all. As Ekosolicitors confirmed in their March 2026 analysis of Nigerian partnership law: “A general partnership can come into effect orally, by acts of the parties or by writing. The terms of a general partnership which is in writing may even be expanded by conduct.” The problem is not the validity of a verbal partnership — it is the enforceability of its specific terms. When partners disagree about what was agreed verbally, the courts have no document to consult. They must hear the competing recollections of the partners, evaluate credibility, and then apply whatever statutory default rules apply to the matters not proven. In almost every case, a written agreement produces better outcomes for all parties than a verbal one, simply because it eliminates ambiguity about what was agreed.
⚖ Section 8: When Partners Disagree — The Legal Options Available
Partner disputes are inevitable in long-running business relationships. The legal options available when a Nigerian partnership dispute cannot be resolved through direct conversation depend on what the partnership agreement says — and if there is no agreement, the structure of what is legally available.
The Dispute Escalation Ladder in Nigerian Partnerships
Common Partnership Disputes and What the Law Provides
| Type of Dispute | What the Law Provides | Ideal Resolution Path | Source |
|---|---|---|---|
| Disagreement over profit distribution | Default: equal division (Section 23(i) Partnership Law Lagos). If express clause exists: enforcement of the clause. | Negotiation first; arbitration if failed | Section 23(i), Partnership Law Lagos |
| Partner claims unpaid salary | Default: no salary entitlement (Section 23(vi) Partnership Law Lagos). Partner must prove express remuneration agreement. | Produce written agreement evidence; litigation if disputed | Section 23(vi), Partnership Law Lagos |
| Partner misappropriating partnership funds | Breach of fiduciary duty (duty to account). Courts can order the partner to account for and restore funds. | Court action for accounting and damages; police report for criminal fraud | Nigerian common law (fiduciary duty) |
| Partner acting outside their authority | If authority was exceeded: partner personally liable for that act; partnership may avoid the contract if third party had notice of restriction. | Legal advice immediately; potential court action to void transaction | Agency principles in partnership law |
| Partner refuses to allow book inspection | Every partner has an unqualified right to inspect books — this cannot be overridden by majority vote. | Formal demand letter; court order for access if refused | Partnership law principle |
| Deadlock on major business decisions | Default rule: ordinary matters decided by majority; changes to partnership nature require unanimity. If 50/50 deadlock with no tie-breaking mechanism, judicial dissolution may be available. | Neutral arbiter in agreement; mediation; court dissolution if irreconcilable | Section 34 Partnership Law Lagos (just and equitable) |
| Partner competing against the partnership | Breach of fiduciary duty of loyalty. Partner must account for any profit made from the competing activity. | Court action; claim for account of profits | Fiduciary duty principles |
| Note: Resolution paths are general guidance. The appropriate legal strategy depends on the specific facts, the governing law, and what the partnership agreement says. Always consult a qualified Nigerian legal practitioner before taking legal action. | |||
🚫 Section 9: Dissolution — How Nigerian Partnerships End and What Happens Next
Dissolution is the legal process by which a partnership is terminated. In Nigeria, dissolution can occur in several ways — and each has different legal consequences for the partners’ liability and for the winding-up of the business. Critically, dissolution does not immediately end the partnership’s legal existence — it begins the winding-up phase, during which the partnership’s affairs are settled.
How Nigerian Partnerships Dissolve
🔴 Dissolution by Agreement
Partners may dissolve the partnership at any time by mutual agreement. If the partnership agreement specifies the duration of the partnership, it dissolves automatically at the end of that period. Consensual dissolution is the cleanest path — the partners agree on the value of assets, the settlement of liabilities, and the distribution of remaining funds before the partnership formally ends.
🔴 Dissolution by Notice (Partnership at Will)
Where no fixed term has been agreed, any partner can dissolve the partnership by giving notice of their intention to do so to all other partners. This is sometimes called a “partnership at will” dissolution. The notice takes effect immediately upon delivery unless the agreement requires a notice period. This is one of the most dangerous default rules in Nigerian partnership law — without an express notice period clause, a single partner can unilaterally end the business with immediate effect.
🔴 Automatic Dissolution — Death, Bankruptcy, Insanity
Unless the partnership agreement expressly prevents it, a general partnership is automatically dissolved by: the death of any partner; the bankruptcy of any partner; or the declaration of insanity of any partner by a court. This automatic dissolution rule is the reason why every partnership agreement must contain a continuity clause. For LLPs under Section 746(1) of CAMA 2020, this risk does not exist — an LLP does not dissolve upon the death or exit of any partner.
🔴 Court-Ordered Dissolution — Section 34
Any partner can apply to a court for a dissolution order. The court may grant dissolution on specific statutory grounds (see Section 4 below). Court dissolution is available even where the partnership agreement provides a different resolution mechanism, if the circumstances warrant judicial intervention. A court dissolution order is final but is followed by a winding-up phase managed either by the partners or by a court-appointed liquidator.
Grounds for Court-Ordered Dissolution Under Section 34, Partnership Law of Lagos State
- Permanent incapacity: A partner who has become permanently incapable of performing their part of the partnership agreement — for example, through serious illness or disability that is not temporary.
- Mental incapacity: A partner who has been adjudged of unsound mind by a court of competent jurisdiction in Nigeria or elsewhere.
- Prejudicial conduct: A partner guilty of conduct that is calculated to prejudicially affect the carrying on of the business — for example, criminal conviction that damages the firm’s reputation.
- Persistent breach of agreement: A partner who wilfully or persistently commits breaches of the partnership agreement, or who conducts themselves in matters relating to the partnership business in such a way that it is not reasonably practicable for the other partners to carry on business in partnership with them.
- Business can only be carried on at a loss: Where the partnership business can only be carried on at a loss — this is a practical rather than punitive ground for dissolution.
- Just and equitable: When the court considers it just and equitable that the partnership be dissolved. This is the broadest and most frequently used ground, applied where the relationship between partners has irretrievably broken down, even if no specific breach of the agreement has occurred. Courts have dissolved partnerships on this ground where trust between partners has been fundamentally destroyed.
What Happens During the Winding-Up Phase
After a dissolution order or agreement to dissolve, the partnership enters the winding-up phase. During this period: all partnership assets are valued and sold or distributed; all partnership debts and liabilities are settled from the partnership’s assets; any surplus assets are then distributed among the partners according to their agreed shares (or equally, if the agreement is silent); and if the assets are insufficient to cover liabilities, partners contribute from their personal assets in a general partnership (in proportion to their loss-sharing ratio under the agreement, or equally by default).
📋 Section 10: How to Register Your Partnership with the CAC in 2026
The Corporate Affairs Commission (CAC) manages all partnership registrations under CAMA 2020. Since September 2, 2021, the CAC has operated LP and LLP registrations through its Company Registration Portal (CRP) at cac.gov.ng. The registration process for each partnership type differs.
| Partnership Type | Registration Required? | CAC Registration Path | Key Documents Needed | CAMA 2020 Authority |
|---|---|---|---|---|
| General Partnership | ⚠️ Not mandatory but strongly advisable | Register as a Business Name under Part E, CAMA 2020, at cac.gov.ng | Partnership name availability search; names and addresses of all partners; nature of business; CAC forms | Sections 814–829, CAMA 2020 |
| Limited Partnership (LP) | ❌ Mandatory — no LP without CAC registration | Register as a Limited Partnership under Section 795, CAMA 2020, at cac.gov.ng CRP | Names/addresses of all general and limited partners; each partner’s capital contribution amount; nature of business; limited partnership agreement | Section 795, CAMA 2020 |
| Limited Liability Partnership (LLP) | ❌ Mandatory — no LLP without CAC registration | Register as a Limited Liability Partnership under Part D, Sections 746–795, CAMA 2020, at cac.gov.ng CRP | Names/addresses of all partners and designated partners; evidence that at least one designated partner is resident in Nigeria; LLP partnership agreement; Nigerian citizen partner confirmation | Sections 746–795, CAMA 2020 |
| Source: CAC official portal (cac.gov.ng); SPA Ajibade & Co LP registration guide (December 2021); Mondaq Nigeria partnership registration guide (June 2022). For current fees and specific form requirements, verify directly at cac.gov.ng as these are updated periodically. | ||||
🚫 Critical Reminder: Failure to Register an LP Means It Is Treated as a General Partnership
Under CAMA 2020, where a partnership is intended to operate as a Limited Partnership but is not formally registered with the CAC as such, it is deemed to be a general partnership — and every “limited partner” is deemed to be a general partner with unlimited personal liability. This is not a technical formality. A limited partner who relies on their limited liability protection but failed to ensure the LP was properly registered at the CAC may find that protection does not exist when a creditor comes calling.
📊 Section 11: Complete Comparison Table — All Three Partnership Types
| Feature | General Partnership (GP) | Limited Partnership (LP) | Limited Liability Partnership (LLP) |
|---|---|---|---|
| Legal personality | ❌ None — not a separate entity | ❌ None — not a separate entity | ✅ Yes — Section 746(1) CAMA 2020 |
| Partner liability | Unlimited joint and several for all partners | General partners: unlimited. Limited partners: capped at capital contribution | All partners limited to capital contribution (except designated partners for statutory penalties) |
| Management participation | All partners equally (unless agreement says otherwise) | Danger: Limited partners who manage lose limited liability (Section 806 CAMA 2020) | All partners may manage without losing liability protection |
| CAC registration | Not mandatory; advisable as business name | Mandatory — Section 795 CAMA 2020 | Mandatory — Sections 746–795 CAMA 2020 |
| Maximum partners | 20 (law/accounting firms exempt) | 20 (Section 19 CAMA 2020) | Minimum 2; no maximum |
| Minimum partners | 2 | 2 (at least 1 GP + 1 LP) | 2 (both must be designated partners) |
| Dissolution on partner death | 🚫 Yes — automatic unless agreement prevents it | ⚠️ If general partner dies (unless agreement prevents) | ✅ No — LLP continues despite partner death or exit |
| Profit sharing default | Equal division for all — Section 23(i) Partnership Law Lagos State applies to all three types unless express agreement overrides | ||
| Salary entitlement default | None — Section 23(vi) Partnership Law Lagos State. Must be expressly agreed in the partnership agreement. | ||
| Can own property | Not independently — partners own collectively | Not independently — partners own collectively | Yes — in its own name as a legal entity |
| Best suited for | Small businesses, sole traders collaborating, professional services (at low risk) | Investment funds, joint ventures with passive investors, structured collaborations with capital contributors | Law firms, accounting firms, professional partnerships, high-risk ventures, established businesses requiring continuity |
| Tax treatment | Tax transparent — partners taxed individually on their share of profits | Tax transparent — partners taxed individually on their share of profits | Generally treated as tax transparent — partners taxed on their income from the LLP |
| Key CAMA 2020 sections | Section 19 (partner limit); Sections 814–829 (business name registration) | Section 795 (LP structure); Section 806 (management trap); Part D Sections 795–830 | Sections 746–795; Section 746(1) (separate entity); Section 750 (designated partner liability); Section 766 (LLP obligations) |
| Sources: CAMA 2020 Act No. 3; Partnership Law of Lagos State CAP P1 2015; IFLR analysis (June 2022); SPA Ajibade & Co (December 2021); SIAO Legal (March 2026); Ekosolicitors (March 2026); Nnamdi Azikiwe University NAUJILJ Vol. 17 No. 1 (2026). All CAMA section references are to the Companies and Allied Matters Act 2020 (Act No. 3). | |||
💡 Did You Know? Nigeria’s Arbitration and Mediation Act 2023 Has Significantly Strengthened the Case for Arbitration Clauses in Partnership Agreements
The Arbitration and Mediation Act 2023 (AMA 2023) replaced Nigeria’s 35-year-old Arbitration and Conciliation Act 1988 and transformed the country’s dispute resolution landscape. According to Global Arbitration Review’s Nigeria analysis (April 2026), the AMA 2023 codified the presumption of arbitral autonomy, expressly recognised emergency arbitrators and interim measures, and modernised Nigeria’s framework to align with international standards. For Nigerian partnership agreements, this means an arbitration clause is now backed by a robust, modern legal framework. A well-drafted arbitration clause means a partnership dispute can be resolved privately, in a binding fashion, without going through the Nigerian court system — which, while improving, remains slower and more public than arbitration. The Lagos Court of Arbitration (LCA) and the Regional Centre for International Commercial Arbitration have both gained significant traction as domestic arbitration institutions.
⏱ Your 24-Hour Action: Do This Before You Sleep Tonight
If you are in a business partnership right now — whether formal or informal — answer three questions: (1) Do you have a written partnership agreement? (2) Does that agreement expressly state your profit-sharing ratio? (3) Does that agreement contain a continuity clause covering what happens if a partner dies or goes bankrupt? If the answer to any of these is no, you are operating under the law’s defaults — and you now know what those defaults say. The cost of a qualified Nigerian lawyer drafting a comprehensive partnership agreement is significantly less than the cost of a partnership dispute in court. Make the call tomorrow.
⚖ Reader’s Legal Impact — What Getting This Wrong Can Cost You
Consider three realistic scenarios for Nigerian partners operating without a written agreement:
| Scenario | What Happens Without a Written Agreement | What the Law Says | Financial Impact |
|---|---|---|---|
| Partner A contributed ₦5M capital, Partner B contributed ₦500K, no profit clause | Business generates ₦20M profit. Both partners claim different shares. | Section 23(i) Partnership Law Lagos: equal split. Both get ₦10M regardless of capital contribution. | Partner A receives ₦5M less than they expected. Partner B receives ₦9.5M more than their capital contribution justified. |
| Working partner demands salary for 3 years of full-time management, no remuneration clause | Partner claims ₦500K/month management fee for 3 years = ₦18M claim | Section 23(vi) Partnership Law Lagos: no salary entitlement without express agreement. Claim fails. | 3 years of full-time work receives no additional legal compensation. The only entitlement is the profit share. |
| One partner dies, no continuity clause in agreement | Partnership was generating ₦15M monthly revenue. Deceased partner’s family refuses to accept buyout terms. | Law automatically dissolves the partnership. Business must be wound up. All contracts, leases, and client relationships are terminated. | ₦15M/month business can be legally compelled to close. Assets must be liquidated. Goodwill, client relationships, and brand value all lost. |
| These scenarios are illustrative and are grounded in the actual default rules of Nigerian partnership law. They represent the practical cost of relying on implied terms rather than express written agreements. Consult a qualified Nigerian legal practitioner to structure your specific arrangement correctly. | |||
✅ Key Takeaways — Nigerian Partnership Law in 2026
- Nigerian partnerships are governed by CAMA 2020 (Act No. 3), the Partnership Law of each state (including the Partnership Law of Lagos State CAP P1 2015), the received UK Partnership Act 1890 in applicable states, and Nigerian judicial decisions. The Arbitration and Mediation Act 2023 governs partnership dispute resolution through ADR.
- Three partnership elements are required for a partnership to exist under Nigerian law: two or more persons; carrying on a business in common; and a view to profit (Ugorji v. Uzoukwu, 1972). A partnership can be implied by law even without a written agreement, creating binding liability for all parties.
- Section 19 of CAMA 2020 limits all partnerships to a maximum of 20 persons, except law firms and accounting firms. Exceeding this limit without incorporation violates federal law.
- The most dangerous default rule: Section 23(i) of the Partnership Law of Lagos State presumes equal profit and loss division in the absence of an express agreement. Capital contribution does not determine profit entitlement unless the agreement says so.
- The second most dangerous default rule: Section 23(vi) of the Partnership Law of Lagos State presumes partners are not entitled to any salary or remuneration for working in the business unless an express remuneration clause exists.
- Every general partner bears unlimited joint and several personal liability for all partnership debts. Any single partner can be sued for the entire debt, even if they did not personally incur it. Personal assets are at risk.
- Under Section 806 of CAMA 2020, a limited partner in an LP who participates in management loses their limited liability protection and becomes personally liable as a general partner for debts incurred during the management period. This is the LP’s most important risk.
- An LLP under Section 746(1) of CAMA 2020 is a separate legal entity. All partners’ liability is limited to capital contribution. The LLP does not dissolve on the death of a partner. This makes it the most protective partnership structure available in Nigeria.
- Both LP and LLP must be formally registered with the CAC before they can operate as such. A failed-registration LP is treated as a general partnership under CAMA 2020, with unlimited liability for all parties.
- The Arbitration and Mediation Act 2023 has modernised Nigeria’s dispute resolution framework. A well-drafted arbitration clause in a partnership agreement provides a faster, private, and binding alternative to court litigation. The Lagos Court of Arbitration and the Regional Centre for International Commercial Arbitration are the leading Nigerian domestic institutions.
- Section 34 of the Partnership Law of Lagos State gives courts the power to order dissolution on six grounds, including the broad “just and equitable” ground where the partner relationship has irretrievably broken down.
- A written partnership agreement is the primary mechanism for overriding every dangerous statutory default. Every partnership agreement must address: profit/loss sharing; remuneration; property ownership; continuity on death/bankruptcy; admission and exit of partners; and dispute resolution.
❓ FAQ — 15 Questions About Nigerian Partnership Law
What is a partnership under Nigerian law?
Under Nigerian law, a partnership is the relationship between persons carrying on a business in common with a view to profit. Section 1(1) of the Partnership Law of Lagos State CAP P1 2015 codifies this definition, and the Nigerian courts applied it consistently in Ugorji v. Uzoukwu (1972) 1 All NLR (pt 1) 289. Three elements must coexist: two or more persons, carrying on a business in common, with a view to profit. Where these are present, a partnership may be implied by law even without any written agreement.
What are the types of partnerships recognised in Nigeria?
Three partnership types are formally recognised under Nigerian law: (1) General Partnership — the traditional form with unlimited joint and several liability for all partners; no separate legal personality; no mandatory CAC registration. (2) Limited Partnership (LP) — under Section 795 of CAMA 2020; requires at least one general partner (unlimited liability) and one limited partner (liability capped at capital contribution); must be CAC-registered. (3) Limited Liability Partnership (LLP) — under Sections 746–795 of CAMA 2020; has separate legal personality; all partners’ liability is limited; must be CAC-registered.
What is the difference between a general partnership and a limited partnership in Nigeria?
In a general partnership, all partners bear unlimited joint and several liability for partnership debts and all have equal management rights. In a Limited Partnership (LP) under Section 795 of CAMA 2020, general partners retain unlimited liability while limited partners’ liability is capped at their agreed capital contribution. However, under Section 806 of CAMA 2020, a limited partner who participates in managing the business loses their limited liability protection and becomes fully personally liable as a general partner during the period of management. Neither structure has separate legal personality.
What is a Limited Liability Partnership (LLP) in Nigeria?
An LLP is a distinct partnership structure introduced by CAMA 2020 (Sections 746–795). Section 746(1) recognises an LLP as a separate legal entity that can contract, own property, sue, and be sued in its own name. All partners’ liability is limited to their capital contribution, and this protection is not lost even if partners participate in management — unlike in an LP. An LLP does not dissolve upon the death of any partner. Every LLP must have at least two designated partners, one of whom must be Nigerian-resident. The CAC commenced LLP registrations in September 2021.
How are profits shared in a Nigerian partnership by default?
By default, profits and losses are divided equally among all partners — regardless of how much each partner contributed as capital. This is mandated by Section 23(i) of the Partnership Law of Lagos State CAP P1 2015. If one partner contributed ₦5 million and another contributed ₦100,000 but the agreement is silent on profit sharing, both are entitled to equal profit shares. The only way to alter this is an express profit-sharing clause in the written partnership agreement specifying the exact ratio.
Can partners agree to unequal profit sharing in Nigeria?
Yes. The default of equal division under Section 23(i) of the Partnership Law of Lagos State only applies where the agreement is silent. Partners can contract into any profit-sharing formula they choose — 70:30, 60:40, proportional to capital contributions, or any other arrangement — as long as it is expressly stated in the written partnership agreement. Nigerian courts will enforce any expressly agreed profit-sharing clause that reflects the genuine intention of the parties.
Are partners entitled to salaries or remuneration in a Nigerian partnership?
No, by default. Section 23(vi) of the Partnership Law of Lagos State explicitly states the law presumes partners are not entitled to any form of remuneration for acting in the conduct of the partnership business. A partner who works full-time managing the business has no legal claim to a salary unless the partnership agreement expressly provides for it. This default rule is one of the most frequent sources of disputes in Nigerian partnerships and can only be avoided by inserting an express remuneration clause in the written agreement.
How does unlimited liability work in a Nigerian general partnership?
In a Nigerian general partnership, every partner is jointly and severally liable for all partnership debts. “Joint” means all partners can be sued together; “several” means any single partner can be sued individually for the entire debt. A creditor can pursue one partner’s personal assets (savings, property, vehicles) for the full amount of a partnership debt, even if that partner did not personally create the debt or was unaware of it. There is no legal cap or shield protecting personal assets in a general partnership.
What happens to a Nigerian partnership when a partner dies or goes bankrupt?
By default, a Nigerian general partnership is automatically dissolved upon the death, bankruptcy, or insanity of any partner. The business must be wound up unless the partnership agreement contains an express continuity clause. A continuity clause specifies that surviving partners may buy out the deceased partner’s interest at an agreed or expert-determined valuation and continue the business. This protection does not need to be built into an LLP — Section 746(1) of CAMA 2020 means an LLP does not dissolve on the death or exit of any partner.
How is a Nigerian partnership registered with the CAC?
General Partnerships register as business names under Part E (Sections 814–829) of CAMA 2020 at cac.gov.ng — not mandatory to create the partnership, but advisable. Limited Partnerships must be registered under Section 795 of CAMA 2020 at the CAC’s Company Registration Portal — mandatory, or the LP is treated as a general partnership. LLPs must be formally registered under Sections 746–795 of CAMA 2020 — mandatory, or no separate legal personality or limited liability exists. The CAC commenced LP and LLP registrations in September 2021.
What must a Nigerian partnership agreement contain?
A comprehensive Nigerian partnership agreement must expressly address: the partnership name and CAC registration details; full identification of all partners; nature and scope of business; each partner’s capital contribution; profit and loss sharing formula (to override the Section 23(i) equal split default); partner remuneration (to override the Section 23(vi) no-salary default); management structure and decision-making authority; ownership of property used in the business (to manage the Section 20 presumption); admission and exit procedures; a continuity clause for death and bankruptcy; a non-compete and confidentiality provision; and a dispute resolution clause specifying negotiation, mediation, arbitration (under the AMA 2023), or litigation.
What happens when Nigerian partners disagree and cannot resolve disputes?
The escalation ladder is: (1) Internal negotiation with a formal written notice of dispute; (2) Mediation at the Lagos Multi-Door Courthouse or a private ADR centre — non-binding but confidential and often effective; (3) Arbitration under the Arbitration and Mediation Act 2023 — binding, private, enforceable, faster than court; and (4) Litigation before the State High Court or Federal High Court, which can order accounting, damages, injunctions, or dissolution. If the partnership agreement contains an ADR clause, that path must be followed before litigation.
Can a court order the dissolution of a Nigerian partnership?
Yes. Under Section 34 of the Partnership Law of Lagos State, a partner can apply to court for a dissolution order. Courts may dissolve a partnership where: a partner is permanently incapacitated; a partner is declared of unsound mind; a partner engages in conduct prejudicial to the business; a partner persistently breaches the agreement; the business can only be carried on at a loss; or where it is just and equitable to do so. The just and equitable ground is a broad discretionary power that courts apply when the partner relationship has irretrievably broken down.
What are the grounds for court-ordered dissolution of a partnership in Nigeria?
Section 34 of the Partnership Law of Lagos State provides six grounds for court-ordered dissolution: (1) Permanent incapacity of a partner; (2) Mental incapacity (court-declared unsoundness of mind); (3) Conduct prejudicial to the business (e.g., criminal conviction damaging firm reputation); (4) Persistent breach of the partnership agreement or conduct making continued partnership unreasonable; (5) Business can only be carried on at a loss; and (6) Just and equitable grounds — the broadest ground, applied where the partnership relationship has fundamentally broken down even without a specific contractual breach.
What is the legal difference between a Limited Partnership and a Limited Liability Partnership in Nigeria?
The five key differences under CAMA 2020 are: (1) Legal personality — an LP has none; an LLP is a separate legal entity under Section 746(1). (2) Liability — an LP has at least one general partner with unlimited liability; all LLP partners’ liability is limited. (3) Management — LP limited partners who manage lose their protection under Section 806; LLP partners can manage without losing protection. (4) Continuity — an LP can dissolve on the death of a general partner; an LLP does not. (5) Property ownership — an LP cannot own property independently; an LLP can own property in its own name.
💬 15 Questions This Article Raises — Your Turn
- Do you currently operate a business with another person under a verbal agreement? After reading this article, what is your assessment of your legal position?
- If the default rule is that all partners share equally in profits regardless of capital contribution, is that what you intended when you started your partnership?
- Does your existing partnership agreement contain a continuity clause covering what happens if a partner dies? If not, what would happen to your business tomorrow if that occurred?
- Have you ever discussed with your co-founder what happens if either of you wants to leave the business? Do you have that conversation documented anywhere?
- If you are a limited partner in a partnership, have you ever participated in any management decisions? Do you understand the Section 806 risk this creates?
- Would you choose a General Partnership, Limited Partnership, or LLP for your current or planned business? What made you decide?
- Do you think Section 23(vi) of the Partnership Law Lagos State — which says working partners are not entitled to salary — is a fair default rule? Why or why not?
- Have you ever witnessed or experienced a Nigerian partnership dispute? What was the primary cause, and how was it resolved?
- Given that the Arbitration and Mediation Act 2023 now provides a modernised framework, would you prefer arbitration or court litigation for a serious partnership dispute? What drives your preference?
- Why do you think most Nigerian co-founders start partnerships without written agreements, despite the legal risks?
- If a partner dies and the law dissolves your partnership, but you have run the business for five years together — is the automatic dissolution rule a fair outcome? What would a better default rule look like?
- Professional service firms (law firms, accounting firms) are exempt from the 20-partner cap under CAMA 2020. Do you think this exemption makes sense? Should it be extended to other professions?
- Many Nigerian entrepreneurs choose to incorporate a private limited company rather than form a partnership. After reading this article, do you understand why — and do you think that is always the better choice?
- An LLP provides all the liability protection of a company combined with the management flexibility of a partnership. If this was available before 2020, would more Nigerian professional firms have used it instead of incorporating?
- What is the one thing about Nigerian partnership law that you wish you had known before you started your current business arrangement?
Tunde and Emeka’s dispute over profit sharing was resolved — not easily, and not without legal cost. The outcome was what Section 23(i) of the Partnership Law of Lagos State had always promised: an equal split, regardless of capital contribution. Tunde eventually understood why the law operates that way. What he did not understand was why no one had told him earlier. This article is that conversation — before you need it to be a legal argument.
— Samson Ese | Founder & Editor-in-Chief, Daily Reality NG | Warri, Delta State | July 9, 2026
Sources: Companies and Allied Matters Act 2020 (Act No. 3) — cac.gov.ng; Partnership Law of Lagos State CAP P1 2015; Ugorji v. Uzoukwu (1972) 1 All NLR (pt 1) 289; Arbitration and Mediation Act 2023; SPA Ajibade & Co LP Registration Guide (December 2021) — spaajibade.com; SIAO Legal Partnership Analysis (March 2026) — siao.ng; Ekosolicitors Partnership Guide (March 2026) — ekosolicitors.com; Mondaq Nigeria Partnership Registration Guide (June 2022) — mondaq.com; IFLR Nigeria LLP Investment Vehicle Analysis (June 2022) — iflr.com; Nnamdi Azikiwe University NAUJILJ Vol. 17 No. 1 (June 2026) — ajol.info; Chambers & Partners Nigeria International Arbitration 2025; Global Arbitration Review Nigeria National Arbitration Policy (April 2026). Innovation Village was not consulted or used.
Legal Disclaimer (distinct from top editorial notice): Nothing in this article constitutes legal advice. The information presented is for general educational and informational purposes only. Partnership law in Nigeria varies by state and is subject to ongoing judicial interpretation. The law described in this article reflects the position as at July 9, 2026. Always consult a qualified Nigerian legal practitioner licensed in your relevant state for advice specific to your situation. Daily Reality NG has no commercial or advisory relationship with any law firm, CAC service provider, or arbitration institution mentioned in this article.
📎 Related Daily Reality NG Business & Legal Coverage
I wrote this article because most Nigerian co-founder disputes I have read about, heard about, or observed did not arise from dishonesty. They arose from ignorance of what the law presumed in the absence of a clear agreement. The law is not trying to be unfair — it has default rules because most people do not write down their intentions clearly. This article is an attempt to make those defaults visible before a dispute makes them consequential. Every legal provision cited here is in a publicly available statute. Read them. Then get a proper written agreement.
📧 Get Daily Reality NG’s Business, Law & Finance Coverage
Primary-source verified analysis of Nigerian business law, fintech regulation, banking, and the economic realities that affect Nigerian entrepreneurs every day. No advertising. No sponsored content.
Subscribe to Daily Reality NG Newsletter →
Comments
Post a Comment