New Regulations applying the terms of the Companies Act 2006 to LLPs will come into effect on 1 October 2009. The existing law governing LLPs is set out in the Limited Liability Partnerships Act 2000 which is based on the old Companies Act 1985. The new legislation modifies the law relating to LLPs to reflect the new provisions contained in the 2006 Act as the government wants to ensure LLPs have the more modern and simplified regulatory structure now available for limited companies. The top ten changes are as follows:-
1. Members'
Details
From 1 October, every LLP will be
required to keep a register of members containing a service address
for each individual member. The LLP must tell Companies House where
the register is available for inspection unless it is held at the
registered office. The register requires to be open for inspection
by members free of change and for any other person on payment of a
fee.
Separately the LLP must also keep a
register of members' residential addresses. It must not
disclose that information to third parties unless the member
consents, Companies House requires it or pursuant to a Court
Order.
If there is any change in a
member's details, notice must be given to the Registrar within
14 days. LLPs should be notifying their members of this requirement
and obtaining any necessary changes to details.
2. Membership
LLPs will still require to have 2 or
more members and if they carry on business without this minimum
membership, for a 6 month period a member will be jointly and
severally liable with the LLP for debts incurred after expiry of
the 6 month period.
If an LLP has less than 2 members it
is currently possible to lodge an application for it to be wound up
or the Registrar of Companies can consider whether or not it should
be struck off if it is no longer in operation. The new legislation
will allow The Secretary of State to enforce the minimum membership
requirements and any direction from him must specify what action is
required to be taken to comply and the period during which it
should be completed. This will allow the Registrar of Companies to
keep track of which LLPs are "live".
3. Names
Current legislation is inconsistent
in that it allows LLPs to take the same name as an existing company
and vice versa. The new legislation marries up the provisions
applying to companies and LLPs. LLPs will therefore be subject to
the same restrictions relating to the sensitive words and
expressions in their names as companies and will have a duty to
obtain consent in certain cases. In addition they will not be
allowed names too similar to existing names and names can be no
longer than 160 characters. New regulations relating to
adjudication of name disputes will apply also to LLPs allowing any
person to object if the name of an LLP is a name associated with
the person making the objection in which he has goodwill or which
is likely to be misleading to the public.
4. Publication of
Details
The new trading disclosures regime
which applies to companies will apply equally to LLPs from 1
October. This will require LLPs to display their name and
registered office at their registered office and any other business
location, the name is not required to be placed on the outside of a
building but must be in a place clearly visible to any visitor. The
LLPs name, number and details must also be included on
correspondence including emails and on any website.
5. Accounts
The same penalties which apply to
companies for late filing of accounts will apply to LLPs for
financial years beginning on or after 1 October 2008. These have
increased and now start at £350 and Companies House has
little leeway for waiving fines so LLPs should ensure they get
their accounts filed at least a week prior to expiry of the time
limit – "its in the post" will not be
sufficient to avoid a fine.
6. Auditors
Audit reports for LLPs will require
to be signed by the senior statutory auditor who is a named
individual and a new offence has been created relating to causing
accounts to include misleading, false or deceptive matters. These
provisions apply for years commencing after 1 October 2008.
7. Communicating with
Members
How an LLP decides to communicate
with its members can still be dealt with by agreement between them.
The aspects of company law regulating how companies communicate
with members do not apply to LLPs however LLPs are at liberty to
decide to follow the Companies Act provisions should they choose to
do so.
8. Service of
Documents
The new rules for companies contained
in Sections 1139 to 1142 of the 2006 Act will apply to LLPs. These
clarify what addresses are valid for the purposes of service of
documents and define "service".
9. Execution of
Documents
In England and Wales and Northern
Ireland a document is to be executed by an LLP by applying its
common seal, by signature of two members or by signature of a
member of the LLP in the presence of a witness. An LLP may by a
document executed a deed empower a person as its attorney to
execute deeds or other documents on its behalf and a deed or
document so executed in the UK or elsewhere will have effect if
executed by the LLP. Execution formalities in Scotland remain
unchanged.
10. Key Areas Which Do Not
Apply
The new regime relating to
Directors' duties contained in Part 10 of the 2006 Act does not
apply to LLPs given that they do not have any Directors and the
derivative claims regime allowing shareholders to make claims
against the Directors equally does not apply.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.