New German law to enable UK companies to avoid compulsory partnership status post-Brexit

There is an interesting article on Lexology by CMS Germany ‘Law passed to prepare UK limited companies in Germany for possible Hard Brexit’.  It refers to the possibility of UK limited companies being treated as partnerships in Germany (and members therefore being at risk of personal liability) in the event of a no-deal or ‘hard’ Brexit – because in that event they would cease to have the freedom of establishment in other EU Member States under EU law. In response, a new German law has been passed to make it easier for UK companies to become German legal entities and thus to continue to trade in Germany with limited liability for members.

The article is at https://www.lexology.com/library/detail.aspx?g=4414b9ad-a0db-4720-8c14-0afe1534f8dd&utm_source=lexology+daily+newsfeed&utm_medium=html+email+-+body+-+general+section&utm_campaign=lexology+subscriber+daily+feed&utm_content=lexology+daily+newsfeed+2019-01-14&utm_term

(if you need to subscribe to Lexology to access it, it is free do do so - see further https://www.lexology.com/account/rss)

Legal developments in Jersey - new LLC law (not yet in force) and revised LLP law

Limited Liability Companies (Jersey) Law 2018

Jersey has introduced a new LLC form which, like a Jersey LLP, has separate legal personality but no corporate personality. LLCs are common in the US and the new vehicle is apparently intended to attract US business, investors and fund managers to a familiar vehicle. The Limited Liability Companies (Jersey) Law 2018 - which is not yet in force but is expected to come into force during 2019 - is available at: https://www.jerseylaw.je/laws/enacted/Pages/L-32-2018.aspx

Limited Liability Partnerships (Jersey) Law 2017

Jersey has also revised its LLP legislation (previously the Limited Liability Partnerships (Jersey) Law 1997 (https://www.jerseylaw.je/laws/revised/Pages/13.475.aspx#_Toc466280384), which provided impetus for the UK itself to introduce LLPs in 2000). All existing Jersey LLPs are now governed by the Limited Liability Partnerships (Jersey) Law 2017 (which came into force in August 2018). The revisions include:

  • removing the requirement that members must contribute skill and effort to the business (so it is clear that an LLP can be used as an investment vehicle) and replacing it with a requirement that members must contribute either skill and effort or capital;
  • allowing assignment of a member's interest (if permitted by the LLP agreement);
  • replacing the requirement to have at least two designated members who have additional responsibilities in relation to statutory filing requirements with a requirement to have an LLP secretary.  

The Limited Liability Partnerships (Jersey) Law 2017 is available at: https://www.jerseylaw.je/laws/enacted/Pages/L-02-2017.aspx

There are also new LLP Regulations concerning dissolution and insolvency at: https://www.jerseylaw.je/laws/enacted/Pages/RO-076-2018.aspx

UK business statistics

As I have previously discussed with colleagues, it can be difficult to find information on numbers of partnerships and other UK businesses.  The main source is the Business Population Estimates, which is published annually  - latest edition at https://www.gov.uk/government/statistics/business-population-estimates-2018 - and information on methodology at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/746602/OFFICIAL_SENSITIVE_-_BPE_2018_-_methodology_note_FINAL_FINAL.pdf

The House of Commons Library has now published a useful statistical analysis at: http://researchbriefings.files.parliament.uk/documents/SN06152/SN06152.pdf

Consultation on the reform of UK limited partnerships: government response published

The UK government's response to the consultation on the Reform of Limited Partnerships has been published at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/762849/government-response-limited-partnerships.pdf

The consultation resulted from concerns that limited partnerships in the UK and in particular in Scotland (where partnerships have legal personality, which they do not in England and Wales or Northern Ireland) were being used to facilitate international money laundering and other illegal activities.

The government now proposes the following:

* applicants to register LPs must demonstrate that they are registered with an anti-money laundering (AML) supervisory body, and applications from overseas will be subject to equivalent standards - although the government is still considering how this might be achieved.

* LPs will need to demonstrate an ongoing link with the UK in the form of a principal place of business in the UK, a legitimate business activity in the UK, or continuing engagement with a UK AML supervisory body.

* all UK LPs will have to file an annual confirmation statement (rather than, as at present, only certain Scottish partnerships). This will include additional information not currently required to be registered, such as the date of birth and nationality of all partners.

* the Registrar will be given power to strike off LPs which have dissolved or are not carrying on business.

It is not clear whether the government intends to apply to the requirement to register Persons with Significant Control (PSC) over the partnership to all LPs (rather than, as at present, only certain Scottish partnerships).

The government has rejected the possibility of all partnerships having to file accounts (rather than, as at present, only those whose general partners are all either limited companies or unlimited companies/Scottish partnerships whose members are all limited companies).

The response states that the government will legislate "when Parliamentary time allows" - but when that will be is anyone's guess, given the ongoing Brexit shenanigans

Book Review: Palmer’s Limited Liability Partnership Law,

(with apologies for the delay!)

Palmer’s Limited Liability Partnership Law, Geoffrey Morse, Paul Davies, Ian Fletcher, David Milman, Richard Morris, David Bennett and Peter Bailey (eds) (3rd edn, Sweet & Maxwell 2017), 1294pp., hardback, ISBN: 9780414056947.

The editorial team for this book reads as a ‘Who’s Who’ of the partnership and LLP law world, and provides a guarantee that the text will be both authoritative and comprehensive.

In 2011, when the previous edition of this book was published, LLPs had only been available in the UK for ten years, and there had been a relatively slow take-up of the entity during its earliest years.  However, by the time of this new edition, the entity had almost doubled in age and vastly increased in number, resulting in a considerable increase in the number of cases coming before the courts and consequent development of the law governing LLPs. The expanding nature of the subject is, unsurprisingly, mirrored in an increase in the size and coverage of this volume. It is not available as an e-book despite the availability in that format of its chief competitor, Whittaker and Machell’s The Law of Limited Liability Partnerships.

The basic structure of the book remains the same as in the previous edition. The first part, accounting for approximately one-third of the total book, consists of a detailed explanation of the law relating to all elements of an LLP’s life, from formation to winding up and insolvency, including chapters on the nature of the LLP, public disclosure, accounting and auditing requirements, the relationships between LLPs and their members and between LLPs and outsiders, minority protection of LLP members and exit procedures, borrowing and security, arrangements and reconstructions, and insolvency and disqualification. However, more of the subheadings within the chapters are now included in the Contents list, which is helpful when it comes to locating material, although the use of paragraph numbers rather than page numbers can slow down the process of locating material.

The second part of the book continues to include the key pieces of LLP legislation, now updated to include the various statutory instruments which have been adopted since the previous edition, including the Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016.

More notably, the third and fourth parts of the book set out versions of the key corporate statutes (including the Insolvency Act 1986) which have been amended by the editors to reflect the modifications to, and omissions from, those statutes made by the LLP legislation. These versions thus show how the corporate statutes apply to LLPs. As the editors rightly note, these resources ‘are of course a substitute for what a first world government ought to provide itself for its people’ – but given that the UK government has failed to provide them, their provision in this book is valuable, particularly given the difficulties encountered by anyone attempting to comprehend the law by cross referring between the corporate statutes and the modifications and omissions listed in the LLP legislation.

Other new material includes discussion of a number of significant judgments, including F & C Alternative Investments (Holdings) Ltd v Barthelemy [2011] EWHC 1731, in which the court held that LLP members did not, merely by virtue of that status, owe fiduciary duties to the LLP; Clyde & Co LLP and another v Bates van Winkelhof v [2014] UKSC 32, Tiffin v Lester Aldridge [2012] EWCA Civ 35 and Reinhard v Ondra LLP and others  [2015] EWHC 26 (Ch) in which the courts battled with the difficult question of whether an LLP member could also be a ‘worker’ for the purposes of employment protection legislation; and Flanagan v Liontrust Investment Partners LLP [2017] EWCA Civ 985 in which the court held that, just as the doctrine of repudiatory breach does not apply to a partnership agreement, it does not apply to an LLP agreement, so that a purported acceptance of such a breach is of no legal effect and does not terminate the LLP agreement.

The book is clearly written – no mean feat given the extensive and somewhat indigestible statutory material underlying much of the subject. The footnotes are thorough, and include helpful cross references as well as extensive references to further sources of legal commentary, which will be of particular use to academics and postgraduate students.

In summary, this book continues to provide one of the few comprehensive sources of reference on LLP law. As noted above, this is a developing area of law, and one which will only become more important in the future, not only to LLPs members, their advisors, and commentators on this area of law, but also, given the interaction of LLP law with partnership and company law, to their partnership and company counterparts. It is thus recommended for all those advising on or studying any of these areas of law.

Updated Conference programme, abstracts and speaker biographies

The updated programme and some of the abstracts and speaker biographies are now available on the Forum website (under the 2019 Conference heading at the right-hand side of the page).  Remaining abstracts and biographies will be added as they are received, and any changes to the programme.

Attention all Forum members!

I'd also like to advertise publications by speakers and indeed other members of the Partnership, LLP and LLC Law Forum at our forthcoming conference on 10 January 2019 - I hope to have a table with copies of books and possibly journal articles and flyers for forthcoming books. Ditto information about forthcoming events and publications in related fields (eg company law, tax law, accountancy, business studies, economic theory etc) and in the UK or elsewhere.

If there is anything you would like to be made available on the day for members and other delegates to peruse, please let me know - including journal articles, which can often be poorly advertised or difficult to obtain. 

Many of you will already be familiar with each other's works - but we endeavour to make the Forum as inclusive as possible and so have members (and conference delegates) from a wide area of expertise, and I think it would be nice to showcase what Forum members do and help to exchange knowledge resources.

Please feel free to give me the appropriate journal citation/URL and I will print a copy off for the display table, or publication details and I will contact the publisher.

Thank you!

Conference Registration Now Open: The Regulation of Partnerships and Closely-Held Corporations

We invite you to register for the second annual conference of the Partnership, LLP and LLC Law Forum, which is being held jointly with Nottingham Law School’s Centre for Business and Insolvency Law.

Registration is now open, and we look forward to welcoming you to the Forum's second one day conference exploring developments and areas of debate in the law and practice relating to partnerships and closely-held corporations.

Date: 10 January 2019, 10am - 4.00pm (registration from 9.30am)

Venue: Newton Building, City Campus, Nottingham Trent University

Confirmed papers include:

Professor David Milman (University of Lancaster) - The Partnership Influence Upon Corporate Law
Gary Wilson (Nottingham Law School) - Bovill’s Act 1865: much ado about nothing?
Jeremy Callman (Ten Old Square, Lincoln’s Inn) – Issues that arise in partner/LLP member exits – a practitioner’s eye view
Stephen Chan (Harper Macleod LLP, Edinburgh, and author of A Practical Guide to Partnership Law in Scotland)) – Scottish partnerships and how they differ from English partnerships
Elspeth Berry and Professor Rebecca Parry (Nottingham Law School) – The Application of Corporate and Individual Insolvency Law to Partnerships and LLPs
Professor Rebecca Parry – The Shifting Balance of Power in UK Insolvencies
Richard Smith (freelance journalist) - Abuse of UK Limited Partnerships and the Outlook for Reform

Attending the Conference
•    All those interested in the issues are very welcome to attend the conference, including academics, practitioners and postgraduate students.
•    To register for the conference please visit our online store at https://www.ntu.ac.uk/about-us/events/events/2019/01/partnership,-llp-and-llc-law-forum-and-nottingham-law-school-centre-for-business-and-insolvency-law-joint-conference
•    There is a conference fee of £20 payable via the online store.
•    There will be lunch provided, as well as tea/coffee and refreshments at registration and during the morning and afternoon breaks. If you have any special dietary requirements please notify us.
•    If you have any special requirements to enable you to participate more comfortably, please let us know and we will do our very best to meet them.

Book Review: Stephen Chan, A Practical Guide to Partnership Law in Scotland

A Practical Guide to Partnership Law in Scotland, Stephen Chan (W Green 2018), 250pp, hardback, ISBN: 9780414059771

This new text, authored by a senior Scottish solicitor with extensive experience in partnership law, is unique in providing a thorough explanation of the law relating to Scottish partnerships and LLPs in the 21st century.

Although the key governing statutes apply to both English and Scottish firms, the Partnership Act 1890 makes a number of distinctions between English and Scottish partnerships (in relation to legal personality (s4(2)), partner liability (s9), partnership property (s20(2) and (3)), partners’ separate judgment debts (s23(5)), notification of partner departures (s36(2), partners’ authority in winding up (s38) and partner bankruptcy (s47)). The Limited Liability Partnerships Act 2000 and the various LLP Regulations also draw some distinctions, albeit of a more minor and procedural nature. In addition, the fact that Scotland has its own legal system separate from that of England and Wales produces differences in a number of areas of law which impact on partnerships, including land law, criminal law and insolvency.

The thorough coverage of Scottish partnership and LLP law in this book is therefore important for not only to Scottish lawyers and academics, who have for some years lacked a text dedicated to Scottish law, but also to their English compatriots, since substantial parts of the law apply equally to English firms. The explanations in the book include discussion of a number of unreported Scottish cases which may be unfamiliar – and thus of particular interest – to English partnership lawyers, as well as to practitioners with a more general commercial practice. The differences between Scottish and English partnership law (and, to a lesser extent, LLP law) are clearly highlighted in the context of the relevant material, although a separate summary of the key differences would have been helpful to lawyers in both jurisdictions.

The book is particularly timely because partnership law developments in Scotland have been prominent in recent years, including legislative developments to address the problem of how to bring a criminal prosecution against a partnership which has dissolved, and that of identifying persons with significant influence over Scottish firms in order to combat money laundering, and the current government consultation on possible further regulation in relation to the misuse of Scottish limited partnerships in particular.

The structure of the book is that general partnerships are considered first, from formation (the requirement to register persons with significant influence), through partner liability and authority, decisionmaking, partner duties, separate legal personality (which Scottish partnerships, unlike English partnerships, possess), partnership property, changes in partners and partner disputes, to dissolution and winding up. The practitioner focus of the book is enhanced by the inclusion of chapters on loans and security, and on accounts. Limited partnerships are considered separately, with an emphasis on those areas where they differ from general partnerships, such as the registration requirements. There is also an interesting chapter on how limited partnerships are used in practice, and a further chapter is devoted to the private fund limited partnership (PFLP) variant on the limited partnership. The remainder of the book covers LLPs, with chapters on similar areas to those in the general partnership section, although there are also chapters on conversion to LLP status and on LLP agreements.

The book is fluently written, and the chapters are broken down into short and clearly labelled sections, with the result that it is easy to read and, together with a detailed index, easy to locate material within it. The law is fully referenced in footnotes, as are leading practitioner commentaries and, to a lesser extent, academic discourse.

In summary, this is an essential text for those advising on Scottish partnership or LLP law, but it also contains much of interest to English practitioners, and to academics and students in this area of law.

Proposals to reform NZ partnership law

The New Zealand government is proposing to reform New Zealand's law of general partnership law, which was originally based on the UK's Partnership Act 1890. In the government's own words "The Bill's purpose is to re-enact the Partnership Act 1908 to make it more accessible, readable, and easier to understand. It is not intended to make policy changes." 

Further details at http://www.pco.govt.nz/assets/Uploads/legislative-documents/plb/exposure-draft-Partnership-Law-Bill.html.

Resources

Biographies

Links

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

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