Most Kenyan business partnerships start with excitement and goodwill. Two people share a vision, pool resources, and shake hands. Then the business starts making money — and so do the problems. Who decides how profits are split? Who has authority to sign cheques? What happens if one partner wants to leave?
Without a written partnership agreement, all of these questions are answered by the Partnership Act (Cap. 29, Laws of Kenya) — and you might not like its default answers. This guide explains what you must include to protect yourself.
What the Law Says About Partnerships in Kenya
Under the Partnership Act, a partnership is defined as the "relation which subsists between persons carrying on a business in common with a view to profit." You don't need a written contract to legally form a partnership — it can arise from conduct alone. Two people selling goods together can be a legal partnership even without a piece of paper.
Default rule you may not want: Under Section 24 of the Partnership Act, if there is no agreement to the contrary, partners share profits and losses equally — regardless of how much capital each partner contributed. A partner who put in KES 900,000 and one who put in KES 100,000 each get 50%.
A written partnership agreement overrides these defaults. Without one, you're bound by rules designed for a generic situation that may not match yours at all.
What a Kenya Partnership Agreement Must Cover
1. Capital Contributions and Ownership Shares
State exactly how much each partner is contributing — in cash, assets, or services — and what percentage of the business this represents. These percentages will govern profit sharing, voting rights, and the distribution of assets on dissolution.
2. Roles and Decision-Making Authority
Specify who handles which function of the business. More importantly, set a financial threshold above which both partners must agree. Typical arrangements require both signatures for any single transaction above KES 50,000. Without this, any partner can legally bind the entire partnership to any contract.
3. Profit Distribution
Define how profits are calculated (before or after drawings?), when they are distributed (monthly, quarterly, annually?), and what expenses are deducted first. This is the single biggest cause of partnership disputes in Kenya — get it in writing.
4. Banking and Financial Controls
Specify where the business banks, what the account name is, who the signatories are, and the maximum amount one signatory can authorise alone. Dual-signatory requirements above a set limit are standard practice and prevent one partner from emptying the business account.
5. What Happens When a Partner Leaves
This is the clause most people skip — and the one most likely to end up in court. Your agreement should cover: how a departing partner's share is valued, who has first right to buy that share, how long the outgoing partner is paid out, and what restrictions apply (non-compete clauses, for instance).
6. Dissolution
Set out what triggers dissolution (death, incapacity, mutual agreement), how liabilities are settled, and how remaining assets are distributed. Without this, dissolution is governed by the Partnership Act, which may require you to wind up the entire business rather than continuing it with the remaining partner.
Common mistake: Many Kenyan partnerships register a business name but never write a partnership agreement. The business name registration at the Registrar of Companies does not create a partnership agreement — it only registers the trading name. You still need a separate agreement.
Partnership vs Limited Company in Kenya
| Factor | Partnership | Private Limited Company |
|---|---|---|
| Personal liability | Unlimited — personal assets at risk | Limited to share capital |
| Registration cost | ~KES 1,000 business name | ~KES 10,000+ via eCitizen |
| Tax filing | Individual returns | Corporate returns |
| Governance formality | Low | High (AGMs, minutes, etc.) |
| Suitable for | Small, trust-based ventures | Higher-risk or investment-seeking businesses |
Dispute Resolution for Kenyan Partnerships
Partnership disputes in Kenya can be heard by the High Court (Commercial Division) or resolved through arbitration. Include a clause requiring mediation first — it's faster and cheaper, and the Business Laws (Amendment) Act 2020 actively promotes ADR for commercial disputes.
If there is no dispute resolution clause and the partnership breaks down, winding up a partnership through court can take 2–4 years and cost more than the business was worth.
Generate your Partnership Agreement in 2 minutes
Kenya-compliant · Professional PDF · KES 125 (50% OFF)
Get Your Partnership Agreement →