Corporate Blawg loves listening to cassettes, CDs, MP3's, and his iPod banging out a million beats on the walk to work. Having missed the whole LP thang (except for being the proud owner of an 1971 LP of John Lennon's "Imagine", in a picture frame), Corporate Blawg is very excited about this relatively new hybrid in the corporate world, the LLP.
The sweet music of the LLP is still reverberating in the ears of professional firms around the country,and is now unravelled in one short soundbite of a post
:
Limited liability partnerships emerged from the U.S. in the early 1990s. In the U.K. LLPs are governed by the Limited Liability Partnership Act 2000 and Regulations 2001. LLPs have the flexibility of a partnership and are taxed as a partnership, but in all other respects are like a company (and can be wound up in the same way as a company, In the Matter of Magi Capital Partners LLP [2003] EWHC 2790 Ch D). Most importantly this means that LLP's reduce the personal responsibility of the partners for the business debts.
In addition, an LLP is taxed as a partnership, which means that the members provide working capital and share in the profits. Members will be liable to pay Class 2 and Class 4 National Insurance contributions. Apparently this is good, but Corporate Blawg is not a tax lawyer.
What is less good is that, under certain circumstances, claims for economic loss could be made against individual members who have been negligent, and any such claim of negligence would be a civil action against the LLP itself. This is because the contract would be outside the individual's contract and the LLP would be a party.
The LLP's business is controlled by the members and more importantly by the 'designated members'. The designated member has greater responsibility (like a designated individual in the Human Tissue Act 2004, although somewhat less gory). In an LLP the designated member is analagous to a director of a limited Company.
LLPs clearly work... since their inception in the UK, Corporate Blawg can only find one significant case concerning Limited Liability Partnerships. This case was BFI Optilas Ltd v Blyth [2002] All ER 287. The case referred to section 6(1) of the 2000 Act restating that:
Every member of a limited liability partnership is the agent of the limited liability partnership.
And in section 6(4):
Where a member of a limited liability partnership is liable to any person [...] as a result of a wrongful act or omission of his, [...] the limited liability partnership is liable to the same extent as the member.
Yet the judge in this case found that although the relevant section provides for vicarious liability in the event of a wrongful act or omission of a member of the partnership, potential liability cannot form the basis for a restrictive convenant on a member being binding on the limited liability partnership itself, unless the limited liability partnership was responsible for the breach of that covenant. Well, tell us something we don't know...
For the eager beaver, Feetum v Levy [2005] EWCA Civ 1601 also caused a minor flurry of excitement, but is not worth mentioning because the appeal was dismissed.
Inspired by the hybrid vigour of limited liability partnerships, Corporate Blawg has dug up a few other acronyms for LLP, some more appropriate than others. Can you decide which is your firm?
- Lead Logistics Provider
- Lifelong Learning Plan
- Lightweight Laser Printer
- Limited Licensed Psychologist
- Live Long and Prosper
Corporate blawg's personal favourite is "Clifford Chance Lightweight Laser Printer".
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