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"id": 54337,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/54337/?format=api",
"text_counter": 224,
"type": "speech",
"speaker_name": "Mr. Githae",
"speaker_title": "The Minister for Nairobi Metropolitan Development",
"speaker": {
"id": 159,
"legal_name": "Robinson Njeru Githae",
"slug": "robinson-githae"
},
"content": "Madam Temporary Deputy Speaker, this Bill has very specific provisions. First of all, it constitutes the Office of the Registrar of Limited Liability Partnerships. The Bill proposes that the Registrar of Companies be also the Registrar of Limited Liability Partnerships. This will mean that it is possible to implement the Act of Parliament, once it is passed by this House immediately because the Registrar of Limited Liability Partnership will be the same as the Registrar of Companies. Therefore, he or she will use the officers and facilities that are currently at the Companies Registry. The procedure for establishing limited liability partnership is still being simplified. All you will be required to do is to present a set of documents with the Registrar of Limited Liability Partnership. Once the Registrar is satisfied that you have submitted all the relevant documents, your limited liability partnership will then be registered. Madam Temporary Deputy Speaker, one of the provisions I really like about this Bill is the fact that it will be possible, for the first time, to register a limited liability partnership electronically. That has been the main problem with our Companies Registry. You have to physically present documents to the Registrar of Companies. In countries like Mauritius and Oman, you can actually present your registration documents from wherever you are on the globe. That has been a major failure, but I am glad that this Bill has settled that problem. Once a limited liability partnership is registered, it becomes a body corporate with a legal personality, which is separate from that of the partners. This has been a major defect in our existing partnerships. It is not clear at any given time whether the partner is acting in furtherance of the partnership business or in furtherance of his own personal interests. That is basically what has caused âdeathsâ to a lot of partnerships. One of the partners may claim that what the other partner did was not in furtherance of the partnership business and, therefore, claiming that he is not liable or responsible for the debts and other liabilities of the partnership. Madam Temporary Deputy Speaker, under this Bill, once a limited liability partnership business is registered, the partners are not personally liable under contracts and other matters relating to the business of the partnership. The quantity of damages by a limited liability partnership will be met out of the property of the partnership. Again, this has been the main problem with existing partnerships. Where a partnership business fails, the partners are sued and the debts are recovered, not from the assets of the partnership but from the assets of the partners themselves. This has been a major drawback in our current partnerships. This Bill provides that when a partner acts within the authority of a limited liability partnership, the actions of that partner shall guide the partnership. This applies equally in cases where a person ceases to be a partner but that fact is not notified to the Registrar, or publicised, for general information. What this means is that if you were a partner of a limited liability partnership and you cease to be a partner, if you do not file the necessary papers with the Registrar, or publicise the fact that you have ceased to be a partner of that limited liability partnership, you will continue to be held responsible for the debts and liabilities of the partnership. That is the way it should be because once you establish yourself as a partner, people will treat you as a partner. Therefore, if you cease to be a partner, you must inform the general public and the Registrar of Limited Liability Partnerships. Madam Temporary Deputy Speaker, this Bill also provides for the formulation of partnership agreements to govern the limited liability partnership and define relationships between partners and their mutual rights and duties. If partners do not draw up articles of partnerships, this Bill provides for the automatic incorporation of the rules and articles of partnerships as provided for therein. This provision pleases me because, again, lack of such a provision has been a major defect in our current partnership laws. This provision has been borrowed from the Companies Act, where it says that if the Articles of Association are not stated specifically, the Companies Act presupposes that the Articles that are in the Companies Act are the ones to be deemed to apply. So, again, it shows that this defect has been cured. Madam Temporary Deputy Speaker, Clause 14 of the Bill provides for restitution to be imposed on a partner who becomes bankrupt. I am happy about this provision because, again, this has been a major drawback in the current partnerships. It is not possible to assign your rights in a partnership if you become bankrupt. What this would have meant is that people owed money would then have been able to satisfy their debts, not from the partnershipâs assets but from the assets of the partners, meaning that the partnership could actually draw upon your other assets, which you acquired not from the partnership but from your other personal sources. So, this Bill seeks to cure a lot of defects which are currently in partnership businesses. Madam Temporary Deputy Speaker, Part IV of the Bill contains a requirement for registration of a limited liability partnership. This comprises of lodging of statements indicating, among other things, the particulars of the partners, the nature of the business of the partnership and the registered office. We have had a major problem where partnerships have no registered offices. Under this Bill, they must have registered offices. We have had cases where the particulars of partners are not given. Most of the partnerships in this country are briefcase partnerships. They are partnerships in name only. They have neither registered offices nor managers. This Bill is trying to cure all those omissions by requiring that the particulars of partners, nature of the business, registered offices and managers are stated. The Bill goes further to say that there must be a manager who is resident in Kenya, even if the partners are foreigners. Again, this cures that major defect. One of the provisions of this Bill is that upon issuance of certificate of registration by the Registrar, it should be conclusive proof that the applicants have complied with the prescribed requirements. So, you do not have to go behind the veil and try to find out whether the partners are duly registered or whether they are conducting lawful business. Once the Registrar of Limited Liabilities Partnerships has issued a certificate, that is conclusive evidence, and it can be tabled in a court of law. Madam Temporary Deputy Speaker, Part V of the Bill provides for conversion of ordinary partnerships or private companies into limited liability partnerships. Again, the most important thing is ordinary partnership. In other words, this Bill enables the current partnerships to be converted into limited liability partnerships. Even private companies can be converted into limited liability partnerships. However, you will notice very significantly that public companies cannot be converted into limited liability partnerships. After registration of a partnership of a private company, it is transformed into a limited liability partnership and it assumes the debts, interests, rights, liabilities and all the obligations previously attached to the partnership of the limited liability company. Madam Temporary Deputy Speaker, the Second Schedule of the Bill contains other transitional provisions necessitated by the conversion. The new registered partnership is required to ensure that after the expiry of 14 days of such registration and for 12 months thereafter, all documents sent out from its offices contain a statement of such conversion, giving the name and the registration number of the partnership from which it was converted. Again, this is important, so that you can be able to trace where this limited liability partnership came from. In other words, you can trace that it came from either a notre partnership which has been converted into limited liability partnership or from a private company. Part Six of the Bill has provisions relating to the management of limited liabilities. Clause 27, as I mentioned earlier, requires that there be a manager who must be of adult age and who must be resident in Kenya, so that at any given time, if you want information about this limited liability partnership, there is somebody who is legally obligated to furnish you with that information. Again, this is cure for the so-called brief case partnerships which exist today and tomorrow they do not exist. That is the defect that is being cured. It requires that the manager shall personally be responsible for ensuring that the partnership complies with the provisions relating to the lodgement of the annual declaration of solvency of the partnership, the form of documents issued by the partnership and the notification of changes to the Registrar. In other words, the resident manager is personally responsible and liable for this information. Again, this is to make sure that any time you want information, you get it and quickly. If the resident manager does not provide you with that information, then there are penal sanctions that can be imposed on him or her. The manager is personally responsible to comply with that requirement. Madam Temporary Deputy Speaker, under this Bill, partnerships must keep proper accounting records and not recording transactions on sheets of paper, exercise books and diaries. They must maintain proper records of accounting. These records must sufficiently explain the transactions and the financial position of the partnership. It must give a true and fair view of the state of affairs of the partnership. The defect that is being cured is again briefcase partnerships, which do not keep any records or you find partners, and this in the public domain, keep two or three sets of accounts. There is one set for the Income Tax which shows losses. Another set of accounts is for the other partner to show reduction in profits to reduce the dividends payable to the partnership. Then there is another set of documents for the partner which are the true accounts, so that the partner knows how much he has actually swindled from the partnership. Again, under this Bill, the partnership must maintain proper accounting records. In other words, it must have ledgers, those who are accountants, cash books and bank statements. All the other accounting records must be maintained by the partnership. Part VII of the Bill contains provisions on the winding up of a limited liability company. These are set out more detailed in the Fourth Schedule. Under this Schedule, the application for winding up may be made to the court by the partnership itself, a creditor, a partner, the official receiver or a trustee of the bankrupt partner or a liquidator. Again, you can see that almost anybody who may have a stake in the partnership is allowed to petition for the winding up. This could be, as I said, a creditor, a partner, the official receiver, a trustee of the bankrupt partner or even by a liquidator. Even the Minister responsible for partnerships has also been given, in certain circumstances, to petition for the winding up of partnerships. Hon. Members, will ask themselves: Under which circumstances can the Minister apply for the winding up? What comes in mind is, if, for example, the partnership engages in illegal business or activities, then the Minister has power to call for the winding up of the partnership. Madam Temporary Deputy Speaker, where a winding up order is made, the official liquidator shall be appointed for the partnership and the Schedule has detailed provisions on the powers and the activities of the liquidator. Again, you will find that we have a major problem with our Companies Act. The Companies Act provides for the appointment of a receiver and manager. Unfortunately, all the official receivers and managers do not manage the business. They are only concerned more in liquidating the business rather than nursing the business back to good health. In my view, if I can recollect, there has been only one successful receiver manager. This was the Uchumi, Mr. Zano. That is the only one who was able to manage Uchumi Supermarkets from its deathbed into good health. Under this provision, the receiver manager is mandated to, first, nurse the business back to good health before calling for a liquidator. Lastly, once this Bill is passed, then the limited liability partnership, which is Cap.30 of our Laws of Kenya, will stand repealed. Under the transitional clauses, it is provided that upon registration, the existing limited partnerships shall continue under this Bill when it is enacted. In addition, all rights and liabilities---"
}