Company law I 2008 2009 semester one lecture outline I an overview of our company Law Course


(iii) Limited Liability Partnerships: a hybrid partnership/company form (from Texas!) Available since April 2001



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(iii) Limited Liability Partnerships: a hybrid partnership/company form (from Texas!) Available since April 2001
Limited Liability Partnerships Act 2000. See also Limited Liability Partnerships Regulations 2001 SI 2001/1090 especially regulation 8 which contains default provisions on voting etc. These regulations apply an adapted version of Companies Act 1985, Insolvency Act 1986 and Company directors’ Disqualification Act 1986 to LLP’s.


  • Origins:

  • DTI, Limited Liability Partnerships: A New Form of Business Association for Professions (URN 97/597). DTI, Limited Liability Partnerships. Draft Bill (URN 98/874)




  • Articles:

  • Freedman and Finch, “Limited Liability Partnerships: have the accountants sewn up the deep pockets debate?” (1997) Journal of Business Law 387

  • J. Payne “A new legal entity poised to enter onto the commercial stage (2000) 21 Company Lawyer 133 - 134

  • J Henning, “Limited Liability Partnerships, limited partnerships and limited liability limited partnerships” (2000) 21 Company Lawyer pp165 & 196




  • Main Features:




  • Body corporate with legal personality formed by registration with Registrar of Companies under Act - sections 1(2), 2 & 3. & Sched 1.




  • Unlimited Capacity - section 1(3)




  • Limited liability - section 1(4). There is unlimited liability for the member actually negligent under Tort Law while the liability of the “innocent” members exists if the tortfeasor acted in the course of the business but is limited to their stake in the firm as agreed on establishing the LLP (section 6(4) and in SI 2001/1090– reg 5 and Schedule 3 substituting new section 74 in Insolvency Act 1986).




  • Partnership Law applies only when this Act applies it - section 1(5) but regulation 7 of SI 2001/1090 does apply many of the same default provisions on right to participate in management, share of profits and duties of partners to each other.




  • Members are those listed on incorporation or joining later with agreement of existing members and leave by agreement, death, dissolution or reasonable notice - section 4(1) - (3) - NOT limited to professionals - any two or more persons carrying on a lawful business - section 2(1) (a)




  • Rights and Duties to each other as agreed or failing that as regulations state - section 5. The courts will build fiduciary duties of members to the partnership and each other on this basis – see regulation 7.




  • Duties may be imposed on LLP by agreement between members before incorporation - - section 5(2) NOT true of companies




  • Section 6 agency of each partner for all unless no authority in fact and other person knew none or did not know/believe s/he was a partner - section 6(1) & (2) - as with other partnerships.




  • Taxed as a partnership - sections 10 to 13. - The main reason that businesses will want to use this new structure rather than a company structure.




  • Dissolution/Insolvency - section 14. Regulations fill in the detail by adapting the Insolvency Act 1986 (applicable to companies) to apply to the LLP. This deals with the limited liability of the partners by limiting their obligation to contribute on insolvency to the amount they agreed to contribute – LLP Regs 2001/1090 Schedule 3 new section 74 of Insolvency Act 1986. Section 6(4) of the LLP Act 2000 keeps individual Tort liability of the tortfeasor partner and also imposes it on the LLP but with limited liability for the other partners under the substituted section 74 of Insolvency Act 1986.



English and Scottish Law Commissions, Partnership Law: A Joint Consultation paper Consultation Paper No 159 Discussion Paper No 111 September 2000 and see The Reform of Partnership Law: A Consultation Document April 2004 http://www.dti.gov.uk/cld/reformofartnershiplaw.pdf


Raises possible reform proposals to deal with these main issues:


  • Introduction of Separate Legal Personality for English partnerships (Scots ones already have it) - directly on all without registration (Scots model) or only if register (the Company Law “deal”) with disclosure as the price for the privilege? Legal personality would allow them to hold property, and to sue and be sued as an entity.




  • No dissolution of partnership every time somebody leaves and joins. Most partnership agreements achieve this but the Partnership Act 1890 provides for dissolution in this event if there is no agreement to the contrary between the partners. Should the “fall back” rule allow withdrawal without dissolution? Right to withdraw would replace right to dissolve partnership.




  • Solvent dissolution in broadly the same way as companies with a liquidator to handle this - now complex and problematic if partners can’t agree to co-operate as no official with power to do all that is necessary.

In July 2006 the Government announced that it does not propose to take these reforms to general partnership law forward “at this time” but that it will use secondary legislation to bring forward reforms to the Limited Partnerships Act 1907





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