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Friday 1 March 2013

WINDING-UP OF BUSINESS AND NON-BUSINESS ORGANIZATION II (PARTNERSHIP, INCORPORATED TRUSTEE)



PARTNERSHIP
Partnership is the relationship which subsists between persons carrying on business in common with a view of profit – section 3(1) of Partnership Law of Lagos Cap. PI 2009
According to section 1(1) of Partnership Act, 1890, partnership is the relationship which subsists between persons carrying on a business in common with making a view. That is, it involves not less than two persons to start a partnership but not more than twenty (20) persons. A partnership of more than 20 persons will, as a general rule, be an illegal association – Akinlose v. A. I. T. Co. Ltd (1961) WNLR 503.
It lacks legal capacity and the partners are personally liable for the debts and liabilities of the partnership unless it is a limited partnership. The formation and terms may be evidenced by partnership articles under seal or by mere agreement which may be written or oral – Ojemen v. Okoafuda (1977) NCLR 192 at 197 – 198.
A partnership does not have perpetual succession like incorporated companies. Equality is the rule in partnership unless otherwise expressly stated. Though, every partner is also jointly and severally liable for the liability of the firm because there is no separate legal personality.
Partnership is based largely on the agreement of the parties. As such, there are several essential elements of partnership which are agreement, contribution to capital, and sharing of profit.
Thus, an association in existence must have 3 (three) characteristics before it can qualify as a partnership. These are –
1.      There must be a business – Henshaw v. Roberts (1966) NNLR 158; Uredi v. Dada (1988) 1 NWLR (Pt. 69) 237.
2.      The business must be carried on in common by two or more persons; and
3.      The intention must be to make profit – Ugorji v. Uzuokwu (1972) 1 All NLR (Pt. 1) 289.
Finally, every partner has a right to participate in the management of the firm except a sleeping partner (that is, one who is not active in the management of partnership) – section 5 and 24(5) of the Partnership Act. And, a partnership is not limited or circumcised by the ultra vires doctrine as they are empowered to undertake any kind of legitimate business of their choice.
DISSOLUTION OF PARTNERSHIP
This can be caused by any of the partners in the following ways –
1.      By act of the parties. This can be done either –
(i)                  By giving notice of intention to dissolve the partnership if provided for in the agreement – section 33(1)(c) of Partnership Law of Lagos; or
(ii)                By reason of ill-health making a partner permanently incapacitated and the partnership not being able to continue; or
(iii)               Where a partner creates a charge on his or her share of the partnership property – section 34(b) of Partnership Law of Lagos; or
(iv)              By providing for a clause like power of expulsion in the agreement.
2.      By operation of law if –
(i)                  It is for a fixed term at the expiration of the term – section 33(1) of Partnership Law of Lagos.
(ii)                It is for an undertaking at the performance of the undertaking – Ureli v. Dada (1988) NWLR (Pt. 69) 237.
(iii)               It is supervening illegality – section 35 of Partnership Law of Lagos.
(iv)              It is for death or bankruptcy of a partner – section 34(a) of Partnership Law of Lagos.
3.      By order of Court, in which a partner can apply that the partnership be dissolved based on –
(i)                  Mental ground; or
(ii)                Breach of agreement; or
(iii)               Permanent incapacity; or
(iv)              Carrying on the business at a loss or on any equitable ground – section 36 of Partnership Law of Lagos.
PROCEDURE
1.      Notice of requirement, dissolution, or expulsion is served on another partner referring to the appropriate clause in the partnership agreement.
2.      The partners prepare the dissolution agreement.
3.      Notice of dissolution is given to Corporate Affairs Commission, if registered.
4.      Notice of dissolution is published in the gazette and national newspapers.
5.      Notice of dissolution is given to clients or customers.
BUSINESS NAME
These are names registered by individuals and partners when carrying out business. Such business names are to be registered with the Companies and Allied Matters Act, Cap C 20 LFN 2004.
The registration of business names is administered by the Corporate Affairs Commission. Section 570 of CAMA provides that “there shall be established in each State of the Federation, a register office of business names where there shall be kept a register in the prescribed form in which shall be entered such matters as are required by this Act or any regulation made thereunder to be entered in it.”
DISSOLUTION OF BUSINESS NAMES
The Registrar has power to remove a business name from the register if the firm, individual or company is no longer carrying on business under the following circumstances –
1.      If the firm, company or individual ceases to carry on business in the business name.
2.      A notice shall be delivered or posted to the Registrar within three (3) months after the business has ceased to be carried on, stating that the firm or individual has ceased to carry on business – section 578(1) of CAMA.
3.      Upon delivery of the notice to the Registrar, the Registrar may remove the firm, company or individual from the register.
4.      If the Registrar has reasonable cause to believe that the firm, company or individual is not carrying on business, the Registrar may send a notice to the firm, company or individual enquiring whether or not the business is being carried on. Where there is no response within two (2) months, or the answer to this is that there is no business being carried on, the Registrar may remove the business name from the Register – section 578(3) and (4) of CAMA.
INCORPORATED TRUSTEES
This is provided for under PART ‘C’ of CAMA. It is any class of persons bound together by custom, kinship, nationality or any association for educational, literary, cultural or charitable purpose – section 590 of CAMA. It must not be profit oriented.
From the date of registration, the trustee(s) shall become a body corporate by the name prescribed in the certificate and shall have perpetual succession, common seal, legal capacity, and power to hold and dispose land – section 596(1) of CAMA. The common seal must have a device approved by the Commission, and any instrument to which the seal is affixed in apparent compliance with the regulation for the use of the seal is binding on the corporate body notwithstanding any defect or circumstance affecting the execution of such instrument – section 604 of CAMA. The corporate body may contract in the same form as an individual – section 605 of CAMA. Though, no portion of the property may be paid or transferred in any form to any of the members of the association – section 603(1); except as bona fide and reasonable payment for services – section 608(5) of CAMA.
The name or objects of the corporation may be altered or changed – section 597 of CAMA. the trustees shall apply to the commission in the prescribed form setting out the alterations desired and attaching a copy of the resolution approving the change and duly certified by the trustees. If satisfied that the proposed change is prima facie lawful, the committee shall cause it to be published in two daily newspapers in the same way as an application for incorporation, calling for objections. It shall also direct the corporation to display a notice for the proposed change or alteration in a conspicuous place at the corporation’s office and any such place where a majority of members are likely to see it for a period of at least 28 days – section 597(2) of CAMA. If the Commission assents to the application, the alteration shall be made and in the case of a change of name, the Commission shall issue a new certificate in the new name in place of the former certificate – section 597(4) of CAMA.
A trustee must not be –
1.      An infant,
2.      A person of unsound mind,
3.      An undischarged bankrupt, or
4.      A person who has been convicted of an offence involving fraud or dishonesty within five years of his proposed appointment – section 592(1) of CAMA.
The trustees of a corporation are required to deliver to the Commission an annual return showing, inter alia, the particulars of the corporation, that is, the name, address and occupations of the trustees, and members of council or governing body, etc. The return must be submitted not earlier than 30th June or later than 31st December of each year, but no return is required for the year in which trustees are incorporated – section 607(1) of CAMA.
The corporation may be dissolved by the court on a petition which may be brought for that purpose by the governing council or body, or by one or more of the trustees, or by members of the association constituting not less than fifty percent (50%) of the total membership or by the commission – section 608(1) of CAMA. It shall be dissolved if the aims and objectives have been fully realized and there is no longer need for its existence, or that its aims and objectives have become illegal or otherwise contrary to public policy, or that it is form for a specified period which has elapsed, or that it is just and equitable in all the circumstances that it should be dissolved – section 608(2) of CAMA.
After dissolution of the corporation, and satisfaction of its debts and liabilities, any remaining property of the corporation cannot be distributed to members of the association, but must be given or transferred to some other institutions having objects similar to those of the body – section 608(4) of CAMA. In cases where the property is not transferred to such institutions, it may be transferred to some charitable object – section 608(5) of CAMA.
DISSOLUTION OF INCORPORATED TRUSTEE
This may be dissolved through the following –
1.      Dissolved by the Federal High Court upon a petition brought for the purpose of dissolution by any of the following persons –
a)      The governing body or council; or
b)      One or more trustees; or
c)      Members of the association constituting not less than fifty per cent (50%) of the total membership; or
d)      The commission – section 608(1) of CAMA.
2.      At the hearing of the petition, all persons whose interest or rights may be affected, in the opinion of the court, shall be put on notice.
3.      If there remains after the satisfaction of all its debts and liabilities, any property whatsoever, such shall not be paid or distributed among the members of the association but shall be given or transferred to other institutions having similar objects to the objects of the body, such institutions to be determined by the members of the association at or before the time of dissolution or be transferred to some charitable object – section 608(3),(4) and (5) of CAMA.
The grounds upon which an application for dissolution can be done are –
1.      That the aims and objects for which it was established have been fully realised and no useful purpose would be served by keeping the corporation alive;
2.      That the body corporate is formed to exist for a specified period and that period has expired and it is not necessary for it to continue to exist;
3.      That all the aims and objects of the association have become illegal or otherwise contrary to public policy; and
4.      That it is just and equitable in all the circumstance that the body corporate be dissolved – section 608(2) of CAMA.
ETHICAL ISSUES
1.      Rule 14(1) of Rules of Professional Conduct (RPC), 2004 – A lawyer shall dedicate and devote his time to his client, to act in a manner consistent with the best interests of the client.
2.      Rule 16 of RPC – A lawyer shall represent his client competently.













(sample draft on notice of dissolution)
NOTICE OF DISSOLUTION
To ............................................................ (name of the partner to whom notice is to be given)
Pursuant to clause .................................... of our partnership agreement (or deed of partnership) dated the ........................................... day of ....................................
I hereby give you notice dissolving the partnership subsisting between us under the said agreement (or deed).
I hereby exercise my option to purchase on the date of dissolution your share in the partnership on the terms therein stipulated.
Dated this................. day of ................................. 20......

_____________________________
Signature of partner(s) giving notice.

2 comments:

Income Tax Return said...
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