LAWS
OF KENYA
The PartnershipAct
Chapter 29
Revised Edition 2010 (1981)
Published by the National Council for Law Reporting
with the Authority of the Attorney General
CHAPTER
29
THE PARTNERSHIP ACT
Commencement: 1st July, 1934
An Act of Parliament to declare the law of partnership
Part I—Preliminary
1. This Act may be cited as
the Partnership Act.
2. In this Act, except
where inconsistent with the context—
“business” includes every
trade, occupation or profession;
“court” means the High Court
or, where the gross assets of a partnership do not exceed fifty thousand
shillings, the Resident Magistrate’s Court.
Part II—Nature of Partnership
3. (1) Partnership is the
relation which subsists between persons carrying on a business in common with a
view of profit.
(2) The relation between
members of any company or association which is—
(a) registered as a
company under the Companies Act or any other Act for the time being in force
and relating to the registration of joint stock companies; or
(b) formed or
incorporated by or in pursuance of any other Act or of any Order in Council, or
Act of the United Kingdom Parliament, or Letters Patent, or Royal Charter,
is not a partnership
within the meaning of this Act.
4. In determining whether a
partnership does or does not exist, regard shall be had to the following rules—
(a) joint tenancy,
tenancy in common, joint property, common property or part ownership does not
of itself create a partnership as to anything so held or owned, whether the
tenants or owners do or do not share any profits made by the use thereof;
(b) the sharing of gross returns does
not of itself create a partnership, whether the persons sharing those returns
have or have not a joint or common right or interest in any property from
which, or from the use of which, the returns are derived;
(c) the receipt by
a person of a share of the profits of a business is prima facie evidence that
he is a partner in the business, but the receipt of such a share, or of a payment
contingent on or varying with the profits of a business, does not of itself
make him a partner in the business; and in particular—
(i)
the receipt by a person of a debt or other liquidated amount by instalments or
otherwise, out of the
accruing profits of a business, does not of itself make him a
partner in the business or liable as such;
(ii) a contract for the
remuneration of a servant or agent of a person engaged in a business by a share
of the profits of the business does not of itself make the servant or agent a
partner in the business or liable as such;
(iii) a person being the
widow or child of a deceased partner and receiving by way of annuity a portion
of the profits made in the business in which the deceased person was a partner
is not, by reason only of that receipt, a partner in the business or liable as
such;
(iv) the advance of money
by way of loan to a person engaged, or about to engage, in any business on a
contract with that person that the lender shall receive a rate of interest
varying with the profits, or shall receive a share of the profits arising from
carrying on the business, does not of itself make the lender a partner with the
person or persons carrying on the business or liable as such, provided that the
contract is in writing, and signed by or on behalf of all the parties thereto;
(v) a person receiving, by
way of annuity or otherwise, a portion of the profits of a business in
consideration of the sale by him of the goodwill of the business is not, by
reason only of that receipt, a partner in the business or liable as such.
5. In the
event of any person to whom money has been advanced by way of loan upon such a
contract as is mentioned in section 4, or of any buyer of a goodwill in
consideration of a share of the profits of
Postponement
of rights of persons lending or selling CAP. 29 Partnership 6 [ R e v . 2010
the business, being adjudged a bankrupt, entering into an arrangement
to pay his creditors less than twenty shillings in the pound, or dying in
insolvent circumstances, the lender of the loan shall not be entitled to
recover anything in respect of his loan, and the seller of the goodwill shall
not be entitled to recover anything in respect of the share of profits
contracted for, until the claims of the other creditors of the borrower or
buyer for valuable consideration in money or money’s worth have been satisfied.
6. Persons who have entered
into partnership with one another are, for the purposes of this Act, called
collectively a firm, and the name under which their business is carried on is
called the firm-name.
Part III—Relations of Partners
to Persons Dealing With Them
7. Every partner is an
agent of the firm and his other partners for the purpose of the business of the
partnership; and the acts of every partner who does any act for carrying on in
the usual way business of the kind carried on by the firm of which he is a
member bind the firm and his partners, unless the partner so acting has in fact
no authority to act for the firm in the particular matter, and the person with
whom he is dealing either knows that he has no authority or does not know or
believe him to be a partner.
8. An act or instrument relating
to the business of the firm, and done or executed in the firm-name, or in any
other manner showing an intention to bind the firm, by any person thereto
authorized, whether a partner or not, is binding on the firm and all the
partners:
Provided that this section
shall not affect any general rule of law relating to the execution of deeds or
negotiable instruments.
9. Where one partner
pledges the credit of the firm for a purpose apparently not connected with the
firm’s ordinary course of business, the firm is not bound, unless that partner
is in fact specially authorized by the other partners; but this section does
not affect any personal liability incurred by an individual partner.
10. If it has been agreed
between the partners that any restriction shall be placed on the power of any
one or more of them to bind the firm, no act done in contravention of the
agreement is binding on the firm with respect to persons having notice of the
agreement.
11. Every partner in a firm
is liable jointly with the other partners for all debts and obligations of the
firm incurred while he is a partner, but a person who is admitted as a partner
into an existing firm does not thereby become liable to the creditors of the
firm for anything done before he became a partner; and after his death his
estate is also severally liable in the due course of administration for those
debts and obligations, so far as they remain unsatisfied, but subject to the
prior payment of his separate debts.
12. A person who is under
the age of majority according to the law to which he is subject may be admitted
to the benefits of partnership, but cannot be made personally liable for any
obligation of the firm; but the share of the minor in the property of the firm
is liable for the obligations of the firm.
13. A person who has been
admitted to the benefits of partnership under the age of majority becomes, on
attaining that age, liable for all obligations incurred by the partnership
since he was so admitted, unless he gives public notice within a reasonable
time of his repudiation of the partnership.
14. Where, by any wrongful
act or omission of any partner acting in the ordinary course of the business of
the firm, or with the authority of his co-partners, loss or injury is caused to
any person not being a partner in the firm, or any penalty is incurred, the
firm is liable therefor to the same extent as the partner so acting or omitting
to act.
15. In the following cases—
(a) where one
partner, acting within the scope of his apparent authority, receives the money
or property of a third person, and misapplies it; and
(b) where a firm in
the course of its business receives money or property of a third person, and
the money or property so received is misapplied by one or more of the partners
while it is in the custody of the firm,
the firm is liable to make good the loss.
16. Every partner is liable
jointly with his co-partners and also severally for everything for which the
firm, while he is a partner therein, becomes liable under section 14 or 15.
17. If a partner, being a
trustee, improperly employs trust property in the business or on the account of
the partnership, no other partner is liable for the trust property to the
persons beneficially interested therein:
Provided that—
Minor
partner not personally liable, but his share is.
Liability
of minor partner on attaining majority.
Liability
of the firm for wrongs of partners.
Misapplication
of money or property received for or in custody of the firm.
Liability
for wrongs joint and several.
Improper employment of trust property for partnership
purposes.CAP.
29 Partnership
8 [ R
e v . 2010
(i) this section shall not affect any
liability incurred by any partner by reason of his having notice of a breach of
trust; and
(ii) nothing in this
section shall prevent trust money from being followed and recovered from the
firm if still in its possession or under its control.
18. Any person who, by words
spoken or written or by conduct, represents himself, or who knowingly suffers
himself to be represented, as a partner in a particular firm is liable as a
partner to anyone who has, on the faith of any such representation, given
credit to the firm, whether the representation has or has not been made or
communicated to the person so giving credit by or with the knowledge of the
apparent partner making the representation or suffering it to be made:
Provided that where, after
a partner’s death, the partnership business is continued in the old firm-name,
the continued use of that name or of the deceased partner’s name as part
thereof shall not of itself make his executors or administrators, estate or
effects liable for any partnership debts contracted after his death.
19. An admission or
representation made by any partner concerning the partnership affairs, and in
the ordinary course of its business, is evidence against the firm.
20. Notice to any partner
who habitually acts in the partnership business of any matter relating to
partnership affairs operates as notice to the firm, except in the case of a
fraud on the firm committed by or with the consent of that partner.
21. (1) A person who is
admitted as a partner into an existing firm does not thereby become liable to
the creditors of the firm for anything done before he became a partner.
(2) A partner who retires
from a firm does not thereby cease to be liable for partnership debts or
obligations incurred before his retirement.
(3) A retiring partner may
be discharged from any existing liabilities by an agreement to that effect
between himself and the members of the firm as newly constituted and the creditors,
and this agreement may be either express or inferred as a fact from the course
of dealing between the creditors and the firm as newly constituted.
22. A continuing guaranty or
cautionary obligation given either to a firm or to a third person in respect of
the transactions of a firm
Persons
liable by “holding out.”
Admissions
and representations of partners.
Notice
to acting partner to be notice to the firm.
Liabilities
of incoming and outgoing partners.
Revocation
of continuing guaranty by change in firm.Partnership CAP. 29 9 R e v . 2 0 1 0 ]
is, in the absence of agreement to the contrary, revoked as
to future transactions by any change in the constitution of the firm to which, or
of the firm in respect of the transactions of which, the guaranty or obligation
was given.
Part IV—Relations of Partners
to One Another
23. The
mutual rights and duties of partners, whether ascertained by agreement or
defined by this Act, may be varied by the consent of all the partners, and that
consent may be either expressed or inferred from a course of dealing.
24. (1) All property and
rights and interests in property originally brought into the partnership stock
or acquired, whether by purchase or otherwise, on account of the firm, or for
the purposes and in the course of the partnership business, are called in this
Act partnership property, and must be held and applied by the partners
exclusively for the purposes of the partnership and in accordance with the
partnership agreement:
Provided that the legal
estate or interest in any land which belongs to the partnership shall devolve
according to the nature and tenure thereof and the general rules of law
applicable thereto, but in trust, so far as necessary, for the persons
beneficially interested in the land under this section.
(2) Where co-owners of an
estate or interest in any land, not being itself partnership property, are partners
as to profits made by the use of that land or estate, and purchase other land
or estate out of the profits to be used in the same manner, the land or estate
so purchased belongs to them, in the absence of an agreement to the contrary,
not as partners but as co-owners for the same respective estates and interests
as are held by them in the land or estate first mentioned at the date of the
purchase.
25. Unless the contrary
intention appears, property bought with money belonging to the firm is deemed
to have been bought on account of the firm.
26. Where land or any
interest therein has become partnership property, it shall, unless the contrary
intention appears, be treated as between the partners (including the
representatives of a deceased partner) and also as between the heirs of a
deceased partner and his executors or administrators as personal and not real
estate.
27. (1) Execution of a
decree shall not issue against any partnership property except on a judgment
against the firm.
Variation
by consent of terms of partnership.
Partnership
property.
Property
bought with partnership money.
Conversion
into personal estate of land held as partnership property.
Execution
against partnership property.CAP. 29 Partnership 1 0 [ R e v . 2010
(2) The court may, on the application by summons of any
judgment creditor of a partner, make an order charging that partner’s interest
in the partnership property and profits with payment of the amount of the
judgment debt and interest thereon, and may by the same or a subsequent order
appoint a receiver of that partner’s share of profits (whether already declared
or accruing), and of any other money which may be coming to him in respect of
the partnership, and direct all accounts and inquiries, and give all other
orders and directions which might have been directed or given if the charge had
been made in favour of the judgment creditor by the partner, or which the
circumstances of the case may require.
(3) The other partner or
partners shall be at liberty at any time to redeem the interest charged, or, in
case of a sale being directed, to purchase the same.
28. The
interests of partners in the partnership property and their rights and duties
in relation to the partnership shall be determined, subject to any agreement
express or implied between the partners, by the following rules—
(a) all the
partners are entitled to share equally in the capital and profits of the
business and must contribute equally towards the losses whether of capital or
otherwise sustained by the firm;
(b) the firm must
indemnify every partner in respect of payments made and personal liabilities
incurred by him—
(i) in the ordinary and
proper conduct of the business of the firm; or
(ii) in or about anything
necessarily done for the preservation of the business or property of the firm;
(c) a partner
making, for the purpose of the partnership, any actual payment or advance
beyond the amount of capital which he has agreed to subscribe is entitled to
interest at the rate of six per centum per annum from the date of the payment
or advance;
(d) a partner is
not entitled, before the ascertainment of profits, to interest on the capital
subscribed by him;
(e) every partner may take
part in the management of the partnership business;
(f) no partner
shall be entitled to remuneration for acting in the partnership business;
Rules
as to interests and duties of partners.Partnership CAP. 29 11 R e v . 2 0 1 0 ]
(g) no person may be
introduced as a partner without the consent of all existing partners;
(h) any difference
arising as to ordinary matters connected with the partnership business may be
decided by a majority of the partners, but no change may be made in the nature
of the partnership business without the consent of all existing partners;
(i) the partnership books
are to be kept at the place of business of the partnership (or the principal
place, if there is more than one) and every partner may, at all reasonable
times, have access to and inspect and copy any of them.
29. No majority of the
partners can expel any partner unless a power to do so has been conferred by
express agreement between the partners.
30. (1) Where no fixed term
has been agreed upon for the duration of the partnership, any partner may
determine the partnership at any time on giving reasonable notice of his
intention so to do to all the other partners.
(2) Where the partnership
has originally been constituted by deed, a notice in writing, signed by the
partner giving it, shall be sufficient for this purpose.
31. (1) Where a partnership
entered into for a fixed term is continued after the term has expired, and
without any express new agreement, the rights and duties of the partners remain
the same as they were at the expiration of the term, so far as is consistent
with the incidents of a partnership at will.
(2) A continuance of the
business by the partners or such of them as habitually acted therein during the
term without any settlement or liquidation of the partnership affairs is
presumed to be a continuance of the partnership.
32. Partners are bound to
render true accounts and full information of all things affecting the
partnership to any partner or his legal representatives.
33. (1) Every partner must
account to the firm for any benefit derived by him without the consent of the
other partners from any transaction concerning the partnership, or from any use
by him of the partnership property, name or business connexion.
Expulsion
of partner.
Retirement from partnership at will.
Where
partnership for a term is continued over, continuance on old terms presumed.
Duty of partners to render accounts, etc.
Accountability
of partners for private profits.CAP. 29 Partnership 1 2 [ R e v . 2010
(2) This section applies also to transactions undertaken
after a partnership has been dissolved by the death of a partner and before the
affairs thereof have been completely wound up, either by any surviving partner
or by the representatives of the deceased partner.
34. If a
partner without the consent of the other partners carries on any business of
the same nature as and competing with that of the firm, he must account for and
pay over to the firm all profits made by him in that business.
35. (1) An assignment by any
partner of his share in the partnership, either absolute or by way of mortgage
or redeemable charge, does not, as against the other partners, entitle the
assignee, during the continuance of the partnership, to interfere in the
management or administration of the partnership business or affairs, or to
require any accounts of the partnership transactions, or to inspect the
partnership books, but entitles the assignee only to receive the share of
profits to which the assigning partner would otherwise be entitled, and the
assignee must accept the account of profits agreed to by the partners.
(2) In the case of a
dissolution of the partnership, whether as respects all the partners or as
respects the assigning partner, the assignee is entitled to receive the share
of the partnership assets to which the assigning partner is entitled as between
himself and the other partners, and, for the purpose of ascertaining that
share, to an account as from the date of the dissolution.
Part V—Dissolution of Partneship andits Consequences
36. (1) Subject to any
agreement between the partners, a partnership is dissolved -
(a) if entered into
for a fixed term, by the expiration of that term;
(b) if entered into
for a single adventure or undertaking, by the termination of that adventure or
undertaking;
(c) if entered into
for an undefined time, by any partner giving notice to the other or others of
his intention to dissolve the partnership.
(2) In the last-mentioned
case, the partnership is dissolved as from the date mentioned in the notice as
the date of dissolution, or, if no date is so mentioned, as from the date of
the communication of the notice.
Duty of
partner not to compete with firm.
Rights
of assignee of share in partnership.
Dissolution
by expiration or notice. Partnership CAP. 29 13 R e v . 2 0 1 0 ]
37. (1)
Subject to any agreement between the partners, every partnership is dissolved
as regards all the partners by the death or bankruptcy of any partner.
(2) A partnership may, at
the option of the other partners, be dissolved if any partner suffers his share
of the partnership property to be charged under this Act for his separate debt.
38. A partnership is in
every case dissolved by the happening of any event which makes it unlawful for
the business of the firm to be carried on or for the members of the firm to
carry it on in partnership.
39. On application by a
partner, the court may decree a dissolution of the partnership in any of the
following cases—
(a) when a partner
is adjudged a lunatic, or is shown to the satisfaction of the court to be of
permanently unsound mind, in either of which cases the application may be made
as well on behalf of that partner by his guardian ad litem or next
friend or person having title to intervene as by any other partner;
(b) when a partner,
other than the partner suing, becomes in any other way permanently incapable of
performing his part of the partnership contract;
(c) when a partner,
other than the partner suing, has been guilty of such conduct as, in the
opinion of the court, regard being had to the nature of the business, is
calculated to affect prejudicially the carrying on of the business;
(d) when a partner,
other than the partner suing, wilfully or persistently commits a breach of the
partnership agreement, or otherwise so conducts himself in matters relating to
the partnership business that it is not reasonably practicable for the other
partner or partners to carry on the business in partnership with him;
(e) when the business of
the partnership can only be carried on at a loss;
(f) whenever in any
case circumstances have arisen which, in the opinion of the court, render it
just and equitable that the partnership be dissolved.
40. (1) When a person deals
with a firm after a change in its constitution, he is entitled to treat all
apparent members of the old firm as still being members of the firm until he
has notice of the change.
Dissolution
by bankruptcy, death or charge.
Dissolution
by illegality of partnership.
Dissolution
by the court.
Change
in constitution of partnership.CAP. 29 Partnership 1 4 [ R e v . 2010
(2) An advertisement in the Gazette shall be notice as to
persons who had not dealings with the firm before the date of the dissolution
or change so advertised.
(3) The estate of a
partner who dies or who becomes bankrupt, or of a partner who, not having been
known to the person dealing with the firm to be a partner, retires from the
firm, is not liable for partnership debts contracted after the date of the
death, bankruptcy or retirement respectively.
41. On the dissolution of a
partnership or retirement of a partner, any partner may publicly notify the
same and may require the other partner or partners to concur for that purpose
in all necessary or proper acts, if any, which cannot be done without his or
their concurrence.
42. After the dissolution of
a partnership, the authority for each partner to bind the firm, and the other
rights and obligations of the partners, continue notwithstanding the
dissolution, so far as may be necessary to wind up the affairs of the
partnership, and to complete transactions begun but unfinished at the time of
the dissolution, but not otherwise:
Provided that the firm is
in no case bound by the acts of a partner who has become bankrupt; but this
proviso does not affect the liability of any person who has, after the
bankruptcy, represented himself or knowingly suffered himself to be represented
as a partner of the bankrupt.
43. On the dissolution of a
partnership, every partner is entitled, as against the other partners in the
firm, and all persons claiming through them in respect of their interests as
partners, to have the property of the partnership applied in payment of the
debts and liabilities of the firm, and to have the surplus assets after such
payment applied in payment of what may be due to the partners respectively
after deducting what may be due from them as partners to the firm; and for that
purpose any partner or his representatives may, on the termination of the
partnership, apply to the court to wind up the business and affairs of the
firm.
44. Where one partner has
paid a premium to another on entering into a partnership for a fixed term and
the partnership is dissolved before the expiration of that term otherwise than
by the death of a partner, the court may order the repayment of the premium, or
of such part thereof as it thinks just, having regard to the terms of the
partnership contract and to the length of time during which the partnership has
continued, unless -
Partner may notify dissolution.
Continuing
authority of partners for purposes of winding up.
Rights
of partners as to application of partnership property.
Apportionment
of premium where partnership prematurely dissolved.Partnership CAP. 29 15 R e v . 2 0 1 0
]
(a) the dissolution is, in
the judgment of the court, wholly or chiefly due to the misconduct of the
partner who paid the premium; or
(b) the partnership
has been dissolved by an agreement containing no provision for a return of any
part of the premium.
45. Where a partnership
contract is rescinded on the ground of the fraud or misrepresentation of one of
the parties thereto, the party entitled to rescind is, without prejudice to any
other right, entitled—
(a) to a lien on,
or right of retention of, the surplus of the partnership assets, after
satisfying the partnership liabilities, for any sum of money paid by him for
the purchase of a share in the partnership and for any capital contributed by
him; and
(b) to stand in the
place of the creditors of the firm for any payments made by him in respect of
the partnership liabilities; and
(c) to be
indemnified by the person guilty of the fraud or making the representation
against all the debts and liabilities of the firm.
46. Where any member of a
firm has died or otherwise ceased to be a partner, and the surviving or
continuing partners carry on the business of the firm with its capital or
assets without any final settlement of accounts as between the firm and the
outgoing partner or his estate, then, in the absence of any agreement to the
contrary, the outgoing partner or his estate is entitled at the option of
himself or his representatives to such share of the profits made since the
dissolution as the court may find to be attributable to the use of his share of
the partnership assets, or to interest at the rate of eight per centum per
annum on the amount of his share of the partnership assets:
Provided that where, by
the partnership contract, an option is given to surviving or continuing
partners to purchase the interest of a deceased or outgoing partner, and that
option is duly exercised, the estate of the deceased partner, or the outgoing
partner or his estate, as the case may be, is not entitled to any further or
other share of profits; but if any partner assuming to act in exercise of the
option does not in all material respects comply with the terms thereof, he is
liable to account under this section.
47. Subject to any agreement
between the parties, the amount due from surviving or continuing partners to an
outgoing partner or
Rights
where partnership dissolved for fraud or misrepresentation.
Right
of outgoing partner in certain cases to share profits made after dissolution.
Retiring
or deceased partner’s share to be a debt.CAP. 29 Partnership 1 6 [ R e v . 2010
the representatives of a deceased partner in respect of the
outgoing or deceased partner’s share is a debt accruing at the date of the
dissolution or death.
48. In
settling accounts between the partners after a dissolution of partnership, the
following rules shall, subject to any agreement, be observed—
(a) losses,
including losses and deficiencies of capital, shall be paid first out of
profits, next out of capital, and lastly, if necessary, by the partners
individually in the proportion in which they were entitled to share profits;
(b) the assets of
the firm, including the sums, if any, contributed by the partners to make up
losses or deficiencies of capital, shall be applied in the following manner and
order -
(i) in paying the debts
and liabilities of the firm to persons who are not partners therein;
(ii) in paying to each
partner rateably what is due from the firm to him for advances as distinguished
from capital;
(iii) in paying to each
partner rateably what is due from the firm to him in respect of capital;
(iv) the ultimate residue,
if any, shall be divided among the partners in the proportion in which profits
are divisible.
Part VI—General
49. The rules of equity and
common law applicable to partnerships in England shall apply to partnerships in
Kenya, except in so far as they are inconsistent with the provisions of this
Act.
Rule
for distribution of assets on final settlement of accounts.
Existing rules applicable to partnership.