Business - Limited Liability Partnerships (3) Flashcards
What are LLPs?
Limited Liability Partnership: LLPs are corporate bodies with a degree of overlap between companies and partnerships. Like partnerships, there is a default contract in absence of a bespoke agreement (LLP Act 2000).
(1) Default Contract: The default contract is provided in the LLP Regulations 2001.
(2) CA 2006: Certain provisions of the CA 2006 also apply to LLPs (LLP Regulations 2009).
What are the advantages of LLPs?
Advantages: LLPs have a number of advantages:
(1) Limited Liability: Members have limited liability for LLP debts (subject to wrongful trading claims).
(2) Separate Legal Personality: LLPs have separate legal personality.
(3) Charges: LLPs can grant both fixed and floating charges. These must be filed internally and at CH.
(4) Management Flexibility: LLPs have very flexible management structure options.
What are the disadvantages of LLPs?
Disadvantages: LLPs also have a number of disadvantages:
(1) Administration: Regular accounts must be filed at the Registrar of Companies, and information such as membership termination must be filed at CH. These documents are public.
(2) Clawback Provisions: LLPs are subject to certain clawback provisions on insolvency.
What are the administrative requirements for incorporation of a LLP?
Administrative Requirements: Incorporation involves the following:
(1) Form LL IN01: Form LL IN01 must be filed at CH with a fee, and the LLP will be issued a Certificate of Incorporation.
(2) LLP Agreement: Members may agree to an LLP Agreement, but it does not have to be filed at CH.
How many members do there need to be in an LLP?
Members: LLPs must have 2 members and 2 designated members on incorporation (they can be the same people).
(1) Designated Members: Responsible for filing documents at CH, and must be a member.
(2) Single Member: If LLP reduces to 1 member, they become personally liable for all debts of the LLP after 6 months of this date.
Do LLPs need to have a registered office?
Registered Office: LLPs must have a registered office for service of official documents.
What are the name requirements for an LLP?
Name: LLPs must end in ‘LLP’ or ‘Limited Liability Partnership’.
(1) Restricted Names: Restricted names are the same as for companies.
(2) Signposting: LLPs must place their name on their place of business and stationery. The latter must include the place of registration, registration number, and registered office address.
What duties and limitations do members of an LLP have?
Members: Members are agents of the LLP (s6 LLPA).
(1) Duties: Mutual rights and duties are governed by the LLP agreement. They also owe fiduciary duties to: a) act in good faith; b) account money received on behalf of the LLP; and c) render true accounts and full information.
(2) Limitations: Limitations may be placed on their authority by agreement, written or otherwise.
Who are designated members?
Designated Members: Similar powers to directors, and separate duties on top of membership duties.
(1) Duties: On top of existing duties, owe a duty of reasonable care and skill to the LLP.
(2) Functions: Responsible for:
* Signing and filing annual accounts with the Registrar of Companies;
* Appointment and removal of auditors;
* Filing annual confirmation statement;
* Sending notices to CH;
* Winding up.
How are members appointed and retired from an LLP?
Appointment and Retirement: The process for appointment and retirement derive from the LLP agreement.
(1) Filing: Registrar of Companies must be informed within 14 days of an appointment or retirement/removal.
(2) Appointment: Form LL AP01 (natural) or LL AP02 (corporate).
(3) Retirement: Form LL TM01 (natural) or LL TM02 (corporate).
(4) Details: The form must include: a) service address; b) residential address; c) full and former names; and d) DoB.
What is an LLP agreement?
LLP Agreement: LLPs are subject to default rules under the LLP Regulations 2001, but can contract on specific terms as well.
(1) Default Provisions: Mirrors the PA 1890 in regard to profit, decision-making, expulsion, and non-compete clauses.
What bespoke clauses should be considered in an LLP agreement?
Bespoke Clauses: As default agreements are incomprehensive, bespoke clauses are appropriate to alter:
(1) Capital and Profits: Shared equally by default.
(2) Losses: No default position, as LLP has limited liability.
(3) Management: All members take part in management by default. No equivalent of Model Articles.
(4) Remuneration: No default position.
(5) Decision-Making: Decisions by majority, barring unanimous for changing nature of business, appointments and changing LLP agreement.
(6) Resignations: Members can leave by reasonable notice by default, but cannot be expelled.
