UK case on derivative actions in relation to LLPs

Homes for England v Nick Selman (Holdings) Limited and Bromham Road Development LLP [2020] EWHC 936 (Ch)

Homes for England, and Nick Selman (Holdings) Limited, were equal members in an LLP. Homes alleged that Holdings had breached the duties of honesty and good faith which it owed to Homes, by delaying in executing refinancing documentation in relation to a loan from a finance company to the LLP. The trial judge exercised his discretion to permit Homes to bring a derivative claim on behalf of the LLP, applying the criteria in s263 of the Companies Act 2006 (CA 2006) for the exercise of that discretion.

On appeal, the court held that s263 did not apply. Sections 260-264 CA 2006 on derivative actions had not been applied to LLPs by the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 which applied other provisions of CA 2006. Nor was s263 applied by the Civil Procedure Rules 1998 (CPR) Rule 19.9C. First, CPR 19.9C applied ss261, 262 and 264 but deliberately omitted s263, which was logical because the CPR dealt with procedure whereas s263 was substantive and s260, which was also substantive, had also been omitted. Furthermore, whereas the official form to be used for such proceedings in relation to a company stated that the court must take account of the s263 criteria, the form for an LLP did not. Second, the broad discretion given to the court by s261 did not enable the court to apply the s263 criteria, because s261 concerned the terms upon which a claim was to continue if it was given permission, and not the basis on which the court was to determine whether to give permission in the first place.

Since the statutory test for permission to bring a derivative claim did not apply, the court applied common law test. It held that it was not satisfied and therefore permission was not granted. In order to bring a derivative claim at common law, it was necessary to show that one of the four established exceptions to the rule in Foss v Harbottle (1843) 2 Hare 461 applied. Only the fourth exception was relevant here, and it required Holdings’ actions to have caused financial loss to the members, and that either fraud in the sense of deliberate and dishonest breach of duty had been pleaded or it was alleged that Holdings had acquired a personal benefit at the expense of the LLP. The court accepted that the increased amount payable on the refinanced loan was a loss to the LLP which would also be suffered reflectively by the members. However, there was no allegation of dishonest breach of duty, and the allegation that the delay had put Homes under pressure in relation to an ongoing negotiation regarding a dissolution of the LLP was fell short of the type of benefit required.

A short article on this case by Gregor Hogan of Serle Court is available at https://www.serlecourt.co.uk/images/uploads/news-and-events/LLP__Derivative_Actions.pdf.

Short summaries of partnership regulation in Brazil, Colombia, France, India, Mexico and Saudi Arabia

Lexology has published some updated summaries of partnership regulation in these countries written by law firms. If you are not already a subscriber to Lexology, you will need to register (free). See also earlier posts on this Forum website on partnership formation and/or structures in some of these countries. 

Brazil:

https://www.lexology.com/library/detail.aspx?g=a19f2895-b026-4e1b-9525-edc5a39f6fae&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-09-18&utm_term=

Colombia:

https://www.lexology.com/library/detail.aspx?g=ff998224-9e17-435e-9306-951b77c638b7&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-09-25&utm_term=

France:

https://www.lexology.com/library/detail.aspx?g=6dda93fe-f0e2-4fa2-83ae-04512cba3618&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-09-25&utm_term=

India:

https://www.lexology.com/library/detail.aspx?g=ecc34747-aa98-4ed8-aa49-bef5fa5988f5&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-09-25&utm_term=

Mexico:

https://www.lexology.com/library/detail.aspx?g=0e7328af-070c-4ade-ac75-ffd62ed0d1f6&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-09-25&utm_term=

Saudi Arabia:

https://www.lexology.com/library/detail.aspx?g=0c4d66b6-44db-499e-b373-565484bf76d0&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-09-25&utm_term=

Third Annual Conference 17 September 2020 - details and registration

Short summaries of partnership formation in France, India, Mexico, Saudi Arabia and Switzerland

Lexology has published some potentially useful summaries of partnership formation in these countries. If you are not already a subscriber to Lexology, you will need to register (free). See also earlier posts on this Forum website on partnership regulation and/or structures in these countries. 

The formation summaries are available as follows.

France:

https://www.lexology.com/library/detail.aspx?g=094d1ed3-fe59-4067-96d0-3576fa366695&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-08-28&utm_term=

India:

https://www.lexology.com/library/detail.aspx?g=2d40ed06-7060-49e3-8406-654d15da3fcb&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-08-28&utm_term=

Mexico:

https://www.lexology.com/library/detail.aspx?g=b2662bfd-0655-4df0-9783-ae08d72fbda8&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-08-28&utm_term=

Saudi Arabia:

https://www.lexology.com/library/detail.aspx?g=5d08847a-2309-48cb-ba77-0c8ba1cb1c9f&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-08-28&utm_term=

Switzerland:

https://www.lexology.com/library/detail.aspx?g=31ccc27d-71d1-4477-a427-c0a9fd0faaba&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-08-28&utm_term=

Recording of recent webinar on Expulsions and Forced Retirements in Partnerships/LLPs by Littleton Chambers

This webinar by Jonathan Cohen QC, James Bickford Smith and Sophie Berry is a currently available at 

https://littletonchambers.com/articles-webinars/expulsions-and-forced-retirements-in-partnerships-and-llps/

Short summaries of partnership formation in Brazil and Colombia

Lexology has published some potentially useful summaries of partnership formation in Brazil and Colombia.

Brazil:

https://www.lexology.com/library/detail.aspx?g=1071c588-ff5c-4ca4-8f68-310c6d40c61b&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-08-21&utm_term=

Colombia:

https://www.lexology.com/library/detail.aspx?g=bdc34b6c-28d2-4247-9983-922badae9f6d&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-08-21&utm_term=

If you are not already a subscriber to Lexology, you will need to register (free).

See also earlier posts on this Forum website on partnership regulation in Brazil and Colombia.

Short articles on on new regulations in Guernsey allowing overseas limited partnerships to continue as Jersey partnerships

International law firms Ogier and Carey Olsen have published short articles on new regulations in Guernsey which will allow certain overseas limited partnerships to be migrate to Guernsey and obtain a certificate of registration. The articles are available at:

Ogier:

https://www.internationallawoffice.com/Newsletters/Private-Client-Offshore-Services/Guernsey/Ogier/Migration-of-foreign-limited-partnerships-into-Guernsey-1

You may need to register (free) in order to access the article.

Carey Olsen: https://www.careyolsen.com/briefings/guernsey-introduces-statutory-migration-regime-limited-partnerships

See also the earlier post on this Forum website on similar regulations adopted by Jersey.

Short articles on recent US case on limited partners's rights to inspect partnership books

US law firm Sidley Austin, and Steve Quinlivan of US law firm Stinson Leonard Street, have both published short articles on the recent US case of Murfey v WHF Ventures on the rights of limited partners to inspect partnership books.

They are available at 

https://www.sidley.com/en/insights/newsupdates/2020/07/delaware-supreme-court-clarifies-contractual-inspection-rights-in-private-fund-documents

and

http://dodd-frank.com/2020/07/16/delaware-supreme-court-interprets-books-and-records-provision-of-limited-partnership-agreement/#page=1.

Short articles on new Hong Kong private equity limited partnership

Law firms Slaughter & May, Stephenson Harwood, Hogan Lovells, and Morrison & Foerster have all published short articles on Hong Kong's new Limited Partnership Fund Ordinance which came into force at the end of August 2020, and which provides a new limited partnership structure for private equity funds. 

The Slaughter & May article is available at:

https://my.slaughterandmay.com/insights/briefings/limited-partnership-fund-ordinance-a-new-fund-vehicle-for-private-equity-in-hong-kong

The Stephenson Harwood article is available at:

https://shlegal.com/docs/default-source/news-insights-documents/eng_hong-kong-new-limited-partnership-regime---goodbye-offshore-hello-ho.pdf?sfvrsn=4a87ec5b_0

The Hogan Lovells article is available at: 

https://www.lexology.com/library/detail.aspx?g=f7c7e3f2-c6f4-45b7-8901-e9db3f03b336&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-09-04&utm_term=

The Morrison & Foerster article is available at:

https://www.lexology.com/library/detail.aspx?g=eeb00eaa-ea65-4dd9-9e85-61f87311d47c&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2020-09-11&utm_term= 

Short article on compulsory retirement of partners

Tina Williams, consultant at partnership law firm Fox Williams, has published a short article on 'Compulsory retirement of partners' (2020) 117(26) LSG 27. It is available online at:

https://www.lawgazette.co.uk/practice-management/compulsory-retirement-of-partners/5105046.article

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Second Annual Conference of the Partnership, LLP and LLC Law Forum 10 January 2019

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