A partnership dispute in Kenya often begins with an informal arrangement that worked while trust remained: one person supplied capital, another managed operations, and profits were withdrawn without complete accounts. When the relationship fails, the parties may disagree about whether a partnership existed, their shares, authority, property ownership and responsibility for debts. The legal analysis must begin with the parties’ actual agreement and conduct, not with the label used in a business name or bank account.

Determine whether a partnership existed

Collect the partnership deed, business registration, tax records, licences, bank mandates, capital records and communications describing the venture. Sections 11 and 14 to 22 of the Partnerships Act address formation and legal relations relevant to identifying a partnership. Profit sharing is important evidence but should be considered with control, contribution, representation to third parties and the complete arrangement.

Distinguish a partnership from employment, agency, co-ownership, lending, a joint project or a company. A person who receives a percentage of revenue may be an employee or contractor rather than a partner. Co-owners of land do not automatically operate a partnership. State the business carried on, when the relationship began, who participated and what each party agreed to contribute.

Reconstruct capital, drawings and profit

Create a partner-by-partner ledger showing cash, assets, loans, expenses paid personally, drawings, salary-like payments and profit distributions. Trace entries to bank statements, receipts, mobile-money data and accounting records. Do not treat every deposit as capital or every withdrawal as theft. Record the stated purpose and how it was entered in the books at the time.

If accounts are incomplete, obtain third-party records from banks, customers, suppliers, tax systems and landlords through lawful means. Reconcile sales and purchases with inventory and cash. An accountant can reconstruct figures, but counsel should first define the disputed period and questions: undisclosed revenue, personal expenses, stock removal, partner loans or allocation of profit and loss.

Identify partnership property

List premises, equipment, vehicles, inventory, receivables, intellectual property, licences and digital accounts used by the business. Record whose name appears on each title or contract, how it was acquired and the source of funds. Personal registration does not necessarily end the inquiry, but business use alone does not automatically transfer ownership to the partnership.

Preserve high-value or perishable assets without self-help. Photograph stock, export accounting data and agree a neutral inventory if possible. Do not remove equipment, redirect customer payments or change access merely because a party believes they contributed more. If an asset is at immediate risk, seek a narrowly framed preservation arrangement or court order.

Authority and liability to outsiders

Obtain major customer, supplier, lease, loan and guarantee agreements. Identify who signed and what authority was represented. Partnership law may make the firm or partners responsible for acts within authority, while personal guarantees and acts outside the business require separate analysis. A private restriction between partners may not answer what an innocent third party was entitled to believe.

Notify banks and counterparties accurately if authority changes, but avoid false statements that the other partner has been removed where no lawful decision occurred. Continue essential obligations where possible and record disputed payments. Separating internal allocation from external liability helps prevent a partnership disagreement from creating defaults to employees, landlords and lenders.

Test the alleged breach of duty

Sections 26 to 44 of the Partnerships Act address rights, duties, changes and dissolution matters. Identify the precise conduct: undisclosed profit, competing business, exclusion from management, misuse of property, refusal to account, unauthorised borrowing or failure to contribute. Link each allegation to dates, transactions and records. General claims of betrayal are not a substitute for proof.

Include the opposing explanation. A withdrawal may have been agreed drawings; a payment to a related business may represent genuine supply; exclusion may have followed a documented safety or authority concern. Sections 107 to 109 of the Evidence Act place the burden on the person asserting facts, while section 112 may be relevant to matters especially within a party’s knowledge. The request for accounts should identify the records and period rather than assume missing records prove every allegation.

Keep the business operating—or decide to stop

Assess cash, employees, stock, customer commitments, licences and liabilities. If continuation preserves value, agree temporary controls: dual approval above a threshold, no related-party payments, weekly cash reporting and preserved access to records. Define who manages ordinary operations. An interim agreement should not decide disputed ownership but should prevent avoidable losses.

If continuation is unrealistic, plan an orderly cessation. Stop accepting work the firm cannot complete, preserve customer deposits and inventory, notify employees and counterparties through an agreed channel, and secure records. Do not dissolve or abandon the business merely to defeat an account or creditor.

Retirement, expulsion and dissolution

Read the deed for notice, retirement, expulsion, valuation, buyout and dissolution clauses. Do not assume a majority may expel a partner; identify the contractual and statutory authority and follow notice and decision procedures. Record the effective date because it affects management, profit allocation and obligations to third parties.

Where dissolution occurs, prepare closing accounts that identify assets, liabilities, partner loans, capital and distribution. Preserve funds for creditors before distributing a surplus. Deal expressly with leases, guarantees, licences, employees, tax, customer work and records. A change in business registration does not by itself complete the winding-up of legal and financial obligations.

Valuing a partner’s exit

Agree the valuation date and what is being valued: capital account, share of net assets, going-concern interest or contractual formula. Provide complete accounts, bank statements, inventory, receivables, debts and material contracts. Address work in progress, doubtful debts and contingent liabilities. Goodwill should be supported by maintainable earnings or another explained method, not a figure selected to reward or punish a departing partner.

Set off disputed withdrawals only where the legal and accounting basis is established. If payment is instalment-based, include interest if agreed, security, information rights and default consequences. Obtain releases of guarantees and update mandates; a former partner should not remain unknowingly exposed to future borrowing.

Evidence and first-response checklist

• partnership deed and every amendment or retirement notice;
• registration, tax, licence and bank-mandate records;
• capital and loan accounts, drawings and profit distributions;
• bank, mobile-money, sales, purchase and inventory records;
• titles and contracts for business assets and premises;
• customer, supplier, loan and guarantee agreements;
• native communications concerning authority, money and proposed exit;
• a chronology of contributions, management changes and disputed transactions.

Preserve the accounting system and backups before access changes. Do not alter historic entries; post corrections through an auditable process. Witnesses should describe transactions they handled rather than repeat one partner’s conclusions.

Court relief and settlement

Depending on the facts, relief may include accounts, declarations about rights or property, injunctions, recovery of money, dissolution and orders supporting winding up. The claimant should specify the accounting period, property and decision requiring relief. Join persons whose legal interests will be altered and avoid seeking control over assets owned by an uninvolved company or third party.

A settlement should address authority during transition, accounts, asset and liability allocation, partner loans, valuation, payment, guarantees, employees, customer work, records, intellectual property, tax, business name and public communications. Verify transfers and releases before final withdrawal of proceedings. The commercial-debt guide may assist with a distinct receivable; the business-sale guide applies if the agreed exit involves selling the enterprise.

Limitations and protective dates

Identify when each obligation to account, repay, transfer or dissolve arose. Different claims may have different limitation analysis, and a continuing business relationship does not necessarily postpone every cause of action. Record notices, acknowledgments, part payments and the date access to records was refused. Negotiation should not be assumed to stop time.

Urgent action may be needed where assets are being removed, customer receipts redirected or records destroyed. Describe the specific act and propose a workable preservation order. A blanket freeze that prevents payroll or delivery may reduce the value available to both partners and creditors.

Tax and employee consequences of separation

Closing or reorganising the business may trigger final returns, payroll obligations, licence cancellation and tax treatment of asset transfers. Obtain accounting advice based on the agreed legal structure; do not describe a distribution as repayment or salary merely to achieve a preferred entry. Keep funds for known liabilities before partners divide cash or stock.

Employees should receive accurate information about the employer, continuity and any proposed termination or transfer. Partner disagreement does not suspend wage and statutory obligations. Record accrued pay, leave and benefits, and avoid using employees as messengers in the ownership dispute. A settlement should assign responsibility for every outstanding employment and tax item.

Official Kenyan provisions checked

• Partnerships Act, 2012: sections 11 and 14–22 on formation and relations involving the partnership.
• Partnerships Act, 2012: sections 26–44 on partner relations, duties, changes and dissolution-related matters.
• Evidence Act (Cap. 80): sections 107–109 and 112 on burdens of proof and facts especially within a party’s knowledge.

Need advice about a Kenyan partnership dispute? Request review by an independent Kenyan advocate. This page provides general information, not legal advice; the agreement, accounts and current law must be reviewed for the particular partnership.

Frequently asked questions

Can a partner bind the firm without the others signing?

A partner may have statutory or actual authority in the firm’s business, but the transaction, any restriction and the third party’s knowledge must be examined. Authority cannot be decided from job title alone.

How are drawings and disputed profits checked?

Reconstruct capital contributions, sales, expenses, drawings, loans, stock and receivables from source records and bank data. The partnership agreement and statutory duties determine how the resulting account is treated.

What happens when a partner leaves but liabilities remain?

Exit does not automatically erase accrued obligations or third-party exposure. Review notices, releases, continuing guarantees, the former partner provisions and the terms for valuation and payment of the outgoing interest.