Limited Liability Partnership Agreement
Limited Liability Partnership February 8th, 2008
LLP has to be registered with Companies House.
Companies House at incorporation of Limited Liability Partnership (LLP) does not require Limited Liability Partnership Agreement. You can confirm your compliance with Limited Liability Partnership Act by signing the Form LLP2 and it will be enough to start your business. At the same time, Companies House recommends that every LLP should be subject to a Limited Liability Partnership Agreement. General law does not cover all the mutual rights and duties of the partners but only places extra responsibilities on the designated members. The Limited Liability Partnership, unlike the limited companies, does not have a memorandum or articles of association, you will need a Limited Liability Partnership Agreement to justify:
- Definitions and interpretation
- Incorporation
- Commencement and duration
- Name and registered office
- Property and place of business
- Accounts
- Banking arrangements
- Members’ shares and contributions
- Profits and losses
- Drawings
- Members’ obligations and duties
- Holiday leave
- Maternity leave
- Parental and family leave
- Management
- Limitations on members’ powers as agents
- Indemnity and expenses
- [Cars]
- Insurance
- Retirement
- Expulsion
- Provisions relating to death retirement or expulsion
- Payments following death retirement or expulsion
- Other provisions following death retirement or expulsion
- Winding up
- Guarantees and Indemnities
- Notices
- Arbitration
ANALYSIS OF PRINCIPAL SITUATIONS WHERE MEMBERS OF LIMITED LIABILITY PARTNERSHIPS CAN BE PERSONALLY LIABLE
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Relative tables |
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| No | Situation | Which regulation | In traditional partnership | In LTD for directors |
| 1. | Upon insolvency any money invested by members will be lost. | Creditors have priority over capital return | Yes | Yes, capital unvested to the share capital will be lost |
| 2. | Liability of member if act as agent which took personal responsibility.Properly contract documentation required to reduce this risk. Remember to avoid Unfair Contract Terms Act. | Williams -v- Natural Life Health Foods Ltd | Yes but if affect all partners | Yes |
| 3. | Contractual - if members signed personal guarantee or other personal; undertaking. | Contract Law | Yes | Yes |
| 4. | If a member breached his duty upon which authority was given. | Common Law | Yes | Yes |
| 5. | If a member commits a breach of trust. | Common Law | Yes | Yes |
| 6. | If LLP trades less than 6 months and it is a single member LLP. | Companies Act 1985, S.24 | N/A | Yes, for private LTD |
| 7. | Name of LLP not correctly shown. | Companies Act 1985, S.349(2) | N/A | Yes |
| 8. | Dishonesty. | Insolvency Act 1986, Ss.206 - 211 | Yes but if affect all partners | Yes |
| 9. | Misapplication. | Insolvency Act 1986, S.212 | ||
| 10. | Wrongful retention of funds. | Insolvency Act 1986, S.212 | ||
| 11. | Wrongful retention of LLP’property. | Insolvency Act 1986, S.212 | ||
| 12. | Fraudulent trading. | Insolvency Act 1986, S.213 | ||
| 13. | Wrongful trading. | Insolvency Act 1986, S.214 | ||
| 14. | Prior 2 years to commencement or winding up member personally liable to repay any money withdrawn by him from LLP. | Insolvency Act 1986, S.214A | Yes but if affect all partners | No |
| 15. | Use of prohibited name. | Insolvency Act 1986, S.216 - 217 | N/A | Yes |
Summary
LLP which provide accurate financial information and has Limited Liability Partnership Agreement lodged at Companies House members should not find themselves personally liable on insolvency (excluding for personal guarantees). The exceptions are:
- Appointment holders who may be unable to avoid personal liability for their professional activities.
- The risks of this liability are restricted to unusual situations, but can be reduced (not excluded) by contract documentation.
Once you have decided to order your custom-made Limited Liability Partnership Agreement, please Contact Us.
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