Validity Questions: Nigeria's Companies And Allied Matters Act 2020 (CAMA) And Limited Partnerships (LPs)

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Following the enactment of CAMA, some commentators recently raised the question, whether CAMA's limited partnership provisions establishing LP as a nationally available business vehicle, are constitutional.
Nigeria Corporate/Commercial Law
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Following the enactment of the Companies and Allied Matters Act 20201 (CAMA), some commentators recently raised the question, whether CAMA's limited partnership (LP) provisions establishing LP as a nationally available business vehicle, are constitutional.2 Given the serious implications of the outcome for business, vis a vis regulatory policy objectives, this article seeks to consider the above enquiry in more detail, especially as there does not appear to have been any previous exercise in this regard.

If the dispassionate analysis confirms the constitutionality of CAMA's LP vehicle, then there is no cause for concern; however, a contrary finding will entail further questions and remedial steps - in order to ensure that the LP regulatory framework does not make businesses (such as funds in the private equity (PE) industry), nervous.3 Incidentally, CAMA's limited liability partnership (LLP) provisions do not appear to have any questions of constitutional validity, but may impact the LLP provisions of the Partnership Law of Lagos State4 (PLLS), which appears to be the only State Law with LLP provisions.5

It is not in contention that matters revolving around LP had always been for the States' Houses of Assembly (SHAs) to legislate on pre-CAMA;6 hence, the absence of Nigerian federal legislation on partnership until CAMA.7 However, CAMA's new provisions on LP have arguably further obfuscated the legislative boundary issues between the National Assembly (NA) and SHAs and may thus require judicial interpretation for clarity. The historic trajectory of Nigeria's federalism cum constitutional development, shows that there had always been legislative boundaries friction between the NA and SHAs.8

Whether Nigeria's federalism started in 1946 (with the Richard's Constitution) or with the 1953 McPherson Constitution, federalism as a system of government is now very well understood in Nigeria, even though some posit that we are practising 'unitary-federalism',9 which is a hangover from military rule. Notably, the conflict may even arise from executive action or decisions – where the FG, rather than the NA exercises powers that the States believes is ultra vires the FG, and therefore unconstitutional.10

CAMA, whilst positioning itself as the federal enactment governing partnership in Nigeria;11 limits the applicability of the Partnership Act 1890 (vide its section 808), without referencing any State Law on LP. The dual LP and LLP regimes under CAMA and PLLS12 therefore raises the question of whether the NA has the legislative competence to enact CAMA's LP provisions?13 We discuss the related issues under the respective subheadings below.

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1. Act No. 3 of 2020.

2. Afolabi Elebiju, et al, 'Choices and Preferences: Corporate Versus Partnership Vehicles under the Companies and Allied Matters Act 2020 – What Are the Relevant Business Considerations?' LeLaw Thought Leadership, April 2022, p.1: (accessed 29. 09.2022). See excerpts from footnote 8 (at p.2): "One query though, is whether the [NA] is competent to legislate on LPs? This is because Items 32 and 62(f), Part I (Exclusive Legislative List), 2nd Schedule 1999 Constitution covers 'incorporation, regulation and winding up of bodies corporate, other than co-operative societies, local government councils and bodies corporate established directly by any Law enacted by a House of Assembly of a State' and 'Trade and commerce – in particular registration of business names' ".

3. "Most PE firms are structured as limited partnerships, where the fund manager is the general partner (GP) and the fund's investors are limited partners (LP). The GP has management control over the fund and is jointly liable for all debts. The LPs have limited liability; they do not risk more than the amount of their investment in the fund. Two core functions of the GP are: To raise funds. To manage investments." See IFT, 'Essential Concept 86: Private Equity Fund Structures, Valuation and Due Diligence':

4. Cap.P1, Laws of Lagos State (LLS) 2015.

5. The legislative history of the PLLS is as follows: The Western Region (WR) of which Lagos State was part, enacted its Partnership Law Cap.86, WR Laws of Nigeria 1959 to displace the received UK Partnership Act 1890 (PA) vide being a statute of general application in effect as at 1st January 1900: section 32(1) Interpretation Act Cap. I23, LFN 2004). Lagos State partnership legislation thus took many forms: Partnership Law of Lagos State Cap. 88, LLS 1973 (a codification of its predecessor, domesticated from the WR legislation), which in turn became Partnership Law of Lagos State Cap. 139, LLS 1994 before transmuting into Partnership Law of Lagos State Cap. P1, LLS 2003. Subsequent amendment in 2006, inserted the LP vehicle in Part 2; whilst in 2009, further amendments introduced LLP provisions (as Part 3) into the PLLS.

6. See footnote 4 above. For example, other States in former Western Nigeria either domesticated or inherited the WR Cap.86 legislation. Some other States either enacted their own partnership laws or continued to use the PA. See Nkem Amadike, 'The Introduction of Limited Liability Partnership Law in Lagos State of Nigeria as an Alternative to the Existing Forms of Business Organization: Echoes of A New Dawn?' Global Journal of Politics and Law Research, Vol. 8, No.1, January 2020, pp.68-89, at p. 71: See also Professor Joseph E.O Abugu, 'Principles of Corporate Law in Nigeria', (MIJ, Lagos, 2014), p. 17. See also, Afolabi Elebiju et al, (supra). In A-G Abia State v. A-G Federation [2022] 16 NWLR (Pt. 1856), 205 at 412-413H-D, the Supreme Court (SC) relying on other authorities held, per Muhammad, JSC held that in construing constitutional or statutory provisions, the historical antecedents of such provisions are important, to bring out the real intendment of the law or of the framers of the Constitution.

7.The predecessor legislation, namely Companies and Allied Matters Act Cap. C20, Laws of the Federation of Nigeria (LFN) 2004 (CAMA 2004) had no provision regulating partnerships apart from its section 19 which prohibited partnerships of more than twenty partners, upon pain of financial sanctions except for professional practice by lawyers and accountants. Businesses by more than twenty "partners" must therefore be carried out vide corporate vehicle or as cooperative societies; they could not be registered under CAMA 2004.

8. See for example, A-G Federation v. A-G Lagos State [2013] 16 NWLR (Pt. 1380), 249 where the SC variously held that whereas the NA can legislate on the regulation of tourist traffic pursuant to the listing in Item 60(d) Part I, Second Schedule 1999 Constitution, it lacked power to enact regulatory legislation on hotels and tourist related establishments given absence of such in the Exclusive and Concurrent Legislative Lists. Consequently, the Lagos State Laws in that regard were validly made. The legislation in issue were the Nigerian Tourism Development Corporation Act Cap. N137, LFN 2004 (NTDCA) vs. Hotel Licensing Law, Cap. H6, LLS 2003 (and its 2010 Amendment Law, both now comprised in Hotel Licensing Law, Cap. H7, LLS 2015) and Hotel Occupancy and Restaurant Consumption Law 2009 (now Cap. H8, LLS 2015). The SC also held (at 359-360E-A) that the NA lacked the vires to impose a duty State Governments (section 7 NTDCA purported to establish State Tourism Boards, and directed each State to appoint members to such Boards). This inability of either tier to impose burden on the other has been affirmed in A-G Abia v. A-G Federation [2022] 16 NWLR (Pt. 1856)205 at 434A-B. Earlier, in A-G Lagos v. A-G Federation [2003] 10 NWLR (Pt. 883), 1 the SC held that the Nigerian Urban and Regional Planning Act Cap. N138, LFN 2004 (originally enacted as Decree No. 88 of 1992) was invalid as against its Lagos State counterpart (now Urban and Regional Planning and Development Law, Cap. U2, LLS 2015), because urban and regional planning was a residual matter for States to legislate on. In Lakanmi v. A-G Western State (1970) SC.58/69 and (1970) LPELR-SC.58/69, the SC interpreting and relying on the unsuspended provisions of the 1963 Constitution during the military era, held that both the Public Officers and Other Persons (Investigation of Assets) Edict No.5 of 1967 and the Forfeiture of Assets, etc. (Validation) Decree No. 45 of 1968 were ultra vires. It was an unusual situation where rather than any conflict, ad hominem Decrees (military legislation equivalent of Acts) were being enacted to give cover to Edict No. 5 (equivalent of State Law) and orders issued by the Asset Recovery Tribunal under the Edict, although the SC decision was subsequently reversed by the Federal Military Government (Supremacy and Enforcement of Powers) Decree No. 28 of 1970. For a related detailed discussion of conflict and interplay between Federal and State legislation, see Afolabi Elebiju and Ayo Fadeyi, 'Tussles: A Review of Attorney General of Lagos State v. Eko Hotels & Anor (2018) 36 TLRN 1', LeLaw Thought Leadership Insights, May 2019, pp. 3-5: (accessed 20.01.2022).

9. According to a commentator, "The choice of federalism as the preferred system of government for Nigeria was not accidental. The eventual transformation of Nigeria into a federal state started in 1954 as a result of the 1953 Lyttleton constitution conference." See Aderonke Majekodunmi, 'Federalism in Nigeria: The Past, Current Peril and Future Hopes', Journal of Policy and Development Studies Vol. 9, No. 2 (February 2015), pp. 107 -120 at 110: Cf. with another view that: "To appraise the development of federalism in Nigeria, one may have to start with Arthur Richard's constitutional arrangement of 1947, which even though did not declare the country a federal state, it nevertheless provided greater interaction between Nigerian peoples." See Nwachukwu J. Obiakor, 'The Evolution and Growth of Federalism in Nigeria', Pen2Print Services: (both accessed 28. 02.2023). In A-G Abia State v. A-G Federation [2022] 16 NWLR (Pt. 1856), 205 at 414-415G-A, the SC espoused on the meaning and concept of federalism. See also detailed consideration by learned authors: Nwabueze, 'Federalism in Nigeria Under the Presidential Constitution', (2003, LASMOJ), esp. Chapters 1, 3 and 4; and 'Akande: Introduction to the Constitution of the Federal Republic of Nigeria 1999', MIJ (Lagos, 2000).

10. According to Muhammad, JSC in A-G Abia State v. A-G Federation [2022] 16 NWLR (Pt. 1856), 205 at 425F-H: "...certainly this country is still a Federation and the 1999 Constitution it operates a Federal one. The Constitution provides a clear division of powers between the Federal Government and the States Governments. The category of powers and roles either of the two enjoys is circumscribed. Neither of the two is at liberty to overstep the limits to overstep the Constitution prescribes for the other. If that occurs this Court would remain in place to declare the act unconstitutional and void same. The plaintiffs, by their second issue for the determination of their claim, urge us to view the Executive Order No. 10 of 2020 issued by President Muhammadu Buhari unconstitutional because in its issuance the President has overstepped the limits the Constitution sets for him. And the country is run on the basis of the rule of law rather than the personal dictates of the President. I entirely agree with them. For all reasons so far adumbrated, I find the Order so, declare it void, and nullify same." Emphasis supplied.

11. CAMA's long title states that it is: "An Act to repeal the Companies and Allied Matters Act, Cap.C20, Laws of the Federation of Nigeria, 2004 and enact the Companies and Allied Matters Act, 2020 to provide for the incorporation of companies, limited liability partnerships, limited partnerships, registration of business names together with incorporation of trustees of certain communities, bodies, associations; and for related matters". Emphasis supplied.

12. For purposes of this article, PLLS' LP provisions also includes LP provisions - to the extent they are still applicable - in States in the former Western and mid-Western Regions (Lagos, Ogun, Ondo, Oyo, Ekiti, Osun Edo and Delta States) vide the Partnership Law 1959. According to a commentator: "The English Limited Partnership Act 1907 does not apply in Nigeria since it was enacted after 1st January, 1900. The Western and Mid-Western (now Bendel) States in 1959 however did enact a Limited Partnership Law. Thus limited partnership can only be applicable in Bendel State, Lagos State and the Western States for there exists no similar laws in other States of Nigeria." See Nkem Amadike, 'The Introduction of Limited Liability Partnership Law in Lagos State of Nigeria as an Alternative to the Existing Forms of Business Organization: Echoes of A New Dawn?' Global Journal of Politics and Law Research, Vol. 8, No.1, January 2020, pp.68-89, at p. 77: _11.pdf. According to another corroborative commentary, "In 1959, the Governor of the Western Region enacted a law which limited the reception of the common law. The statutes of general application were re-enacted as local legislation, and so some unfavourable statutes were left out and some statutes after 1900 were re-enacted. The Western Region enacted a partnership law which allowed partners to limit liabilities. As the law was enacted in England in 1907, other Regions for a long time had laws which prevented partners from limiting their liabilities since it is so in the Partnership Act of 1890." Emphasis supplied. (both accessed 22.01.2023).

13. I.T. Muhammad, JSC in his concurring judgment in A-G Federation v. A-G Lagos State [2013] 16 NWLR (Pt. 1380) 249 at 329E-F held: " 'Inconsistency', in law, to me can be taken to be a situation where two or more laws, enactments and or rules, are mutually repugnant or contradictory, contrary, the one to the other so that both cannot stand and the acceptance or establishment of the one implies the abrogation or abandonment of the other. It is thus, a situation where the two or more enactments cannot function together simultaneously. The Constitution does not tolerate that. In Inshola v. Ajiboye (1994)7-8 SCNJ (Pt.1)1, (1994) 6 NWLR (Pt. 352) 506 this Court held that the Constitution is not only supreme when another law is inconsistent with it, but also when another law seeks to compete with it in an area already covered by the Constitution."

Originally published April 10, 2023

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