Partnership Agreement (Kenya)

A Partnership Agreement in Kenya is a written contract between two or more persons who carry on a business in common with a view to profit, governed by the Partnership Act (Cap. 29) — Kenya's codified partnership statute based on the English Partnership Act 1890 as received through the Judicature Act (Cap. 8). A general partnership has no separate legal personality: the partners collectively own the business assets, share profits and losses, and are jointly and severally liable for the partnership's debts and obligations to creditors.

The Partnership Act (Cap. 29) defines a partnership in Section 3 as the relationship which subsists between persons carrying on a business in common with a view of profit, explicitly excluding companies registered under companies legislation and other bodies incorporated by or under any other act. Each partner is an agent of the firm and of the other partners under Section 8 — meaning any partner can bind the firm to contracts entered in the ordinary course of business, a rule of immense practical importance for creditors and third parties dealing with Kenyan partnerships.

A general partnership in Kenya is registered with the Business Registration Service (BRS) as a 'firm name' under the Registration of Business Names Act (Cap. 499) if the business is carried on under a name other than the true surnames of all the partners. Registration is mandatory under Cap. 499 and must be completed within 28 days of the business commencing under the firm name. The registration fee is approximately KES 950. Business name registration does not create a separate legal entity — it merely confirms the firm's trading identity is publicly recorded via the eCitizen portal.

A Limited Liability Partnership (LLP) — available under the Limited Liability Partnership Act No. 6 of 2012 — is a separate legal entity offering limited liability to its partners and is registered with BRS for a fee of KES 25,000. An LLP is a distinct alternative to a general partnership for professional service firms, management consultants, and other businesses where partners wish to limit their personal exposure to the firm's liabilities.

A Kenya Partnership Agreement is essential even where only two partners are involved, because without a written agreement the default rules of the Partnership Act apply — including equal profit sharing regardless of contribution, and the right of any partner to dissolve the partnership at will by notice under Section 26, which could force an unwanted break-up. The partnership's tax obligations are administered by the Kenya Revenue Authority (KRA) — each partner pays income tax on their share of the partnership's profits under the Income Tax Act (Cap. 470), and the partnership itself files a partnership return with KRA annually.

Partnership disputes in Kenya are adjudicated by the High Court (Civil Division) in Nairobi, Mombasa, Kisumu, or the relevant commercial centre, or by arbitration at the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995 (revised 2022).

The legal framework governing the Partnership Agreement (Kenya) in Kenya draws on several key statutes and regulatory bodies. Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Parties executing a Partnership Agreement (Kenya) in Kenya should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Partnership Act Cap. 29 sets the foundational requirements.

A Kenya Partnership Agreement is required at the formation of any business venture involving two or more persons who will share profits and management responsibilities.

A Partnership Agreement is required when two or more professionals — advocates registered with the Law Society of Kenya (LSK), certified public accountants registered with ICPAK, architects, or engineers registered with the Engineers Board of Kenya (EBK) — wish to practise together under a shared firm name. Professional partnerships are the dominant business structure in Kenya's legal, accounting, and engineering sectors, and a written agreement is essential for managing partner admission, capital accounts, and retirement.

A Partnership Agreement is needed when two or more entrepreneurs in Nairobi, Mombasa, Nakuru, or any Kenyan city pool capital to start a business — a retail shop, a technology company, an agricultural enterprise, or a consultancy. Without a written agreement, the default Partnership Act rules impose equal profit sharing and equal voting regardless of unequal capital contributions or unequal work input, which will inevitably cause resentment.

A Partnership Agreement is required when the business will carry on under a firm name registered with the Business Registration Service (BRS) under the Registration of Business Names Act (Cap. 499). The BRS registration establishes the public identity of the firm, while the Partnership Agreement governs the internal relationship between the partners.

A Partnership Agreement is needed when the partners wish to restrict the right of any individual partner to dissolve the partnership at will — Section 26 of the Partnership Act Cap. 29 allows a partner in a partnership at will to dissolve the firm by notice, which can be commercially devastating. A fixed-term Partnership Agreement or one requiring cause for dissolution provides essential business continuity protection.

A Partnership Agreement is required when the partnership will engage with commercial banks, the Kenya Revenue Authority (KRA), or government procurement authorities under the Public Procurement and Asset Disposal Act No. 33 of 2015. These bodies require a signed partnership agreement to confirm each partner's authority and the firm's financial and governance structure.

Parties in Kenya should prepare a Partnership Agreement (Kenya) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A Kenya Partnership Agreement under the Partnership Act Cap. 29 must include the following essential provisions.

Parties and Firm Name: Full legal names, National Identity Card (NIC) numbers, and addresses of all partners. The firm's trading name registered under the Registration of Business Names Act (Cap. 499) and the BRS Business Name registration number. The commencement date of the partnership.

Business Purpose: A description of the business the partnership will carry on — the nature of the products or services, the target market, and the geographic area of operations in Kenya. The scope should be broad enough to accommodate reasonable business growth but specific enough to prevent partners from unilaterally diverting the firm's resources to unrelated activities.

Capital Contributions: The amount each partner contributes to the initial capital, the medium of contribution (cash, property, services, intellectual property), and the procedure for making additional capital calls. The capital accounts of each partner must be separately maintained in the firm's books and reconciled with the KRA partnership tax return.

Profit and Loss Sharing: The ratio in which the partners share profits and losses. This may differ from the capital contribution ratio — for example, a partner contributing operational expertise but less capital may be allocated a larger profit share in recognition of their working input. The default under Section 24 of the Partnership Act Cap. 29 is equal sharing, which the written agreement should modify to reflect the parties' actual intention.

Management and Decision-Making: Which partners have authority to manage the day-to-day business, what decisions require unanimous consent (admission of new partners, sale of major assets, taking on significant debt), and the voting procedure for ordinary and extraordinary resolutions. Section 8 of the Partnership Act makes every partner an agent of the firm, so clear authority limits are essential.

Accounts, Banking, and KRA Compliance: The firm's financial year, the name of the bank and account signatories, the obligation to maintain proper books of account, and the requirement to file an annual partnership return with KRA under the Income Tax Act (Cap. 470). Each partner's share of profit is taxable in their hands under their individual PAYE or personal income tax assessment.

Partner Admission and Exit: The procedure for admitting a new partner (typically requiring unanimous consent), the procedure for a partner's voluntary retirement, and the basis for compulsory expulsion. On a partner's exit, the Partnership Act default is dissolution of the old partnership — the agreement should provide instead for a purchase of the departing partner's interest by the continuing partners.

Non-Competition and Confidentiality: Obligations on partners not to engage in competing business activities during the partnership and for a reasonable period after exit, and obligations to protect the firm's confidential information, client relationships, and trade secrets.

Dispute Resolution: A tiered procedure for resolving partner disputes — first, negotiation; second, mediation; third, arbitration at the Nairobi Centre for International Arbitration (NCIA) or before the High Court of Kenya.

Governing Law: Kenya law shall govern the agreement, with disputes subject to the jurisdiction of the courts of Kenya or NCIA arbitration. Forms-legal.com provides this Partnership Agreement template as a starting point for Kenyan business partnerships.

Additional compliance elements for a Partnership Agreement (Kenya) used in Kenya include: Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Forms-legal.com provides this template as a starting point for Kenya-compliant documentation.