15 September 2022
Nottingham Trent University, UK
The Partnership, LLP and LLC Law Forum is pleased to host its 5th Annual Conference in conjunction with the Centre for Business and Insolvency Law at Nottingham Law School. The Conference aims to bring together all those with an interest in partnerships, LLPs, LLCs and other alternative forms of business organisation in the UK and overseas.
The following speakers have provisionally confirmed:
• Corinne Staves (Maurice Turnor Garner) – partnership and LLP structures
• Caroline Field (Fox & Partners) - restrictive covenants in a partnership context, with a specific focus on developments in relation to LLPs
• Nic Clarke (HMRC) – partnership/LLP tax developments
• Victoria Griffiths (BEIS) - update on limited partnership and register reform proposal
• Professor Laura Macgregor and Jonathan Hardman (University of Edinburgh) - empirical reflections on LLPs and limited partnerships
• David Leask (investigative journalist) - developments in UK limited partnerships
• Stephen Chan (Harper Macleod) - why are Scottish limited partnerships used in a fund?
It is intended that the Conference will be an in-person event.
Registration will open shortly, and details provided on this website. In the meantime, please contact Elspeth Berry at elspeth.berry@ntu.ac.uk with any queries.
We look forward to meeting you at the Conference!
Butler to the World: How Britain became the servant of tycoons, tax dodgers, kleptocrats and criminals, Oliver Bullough (Profile Books 2022), 224pp., hardback, ISBN: 9781788165877. Also available as an e-book and an audiobook.
Forum members who attended the 2021 Conference will already know something of Oliver Bullough’s work; he is a journalist and author who specialises in writing about financial crime, and his previous book, Moneyland, was a Sunday Times bestseller.
In my opinion, ‘Butler to the World’ should be read by anyone with an interest in law, finance, regulation or democracy (which I’d like to think is everyone on this Forum!). It contains a highly readable account of the role of Britain (or at least of the British government and institutions) as an amoral enabler for kleptocrats, profiting from helping them launder not only their money but their reputation. It is a fascinating and eye-opening read, if somewhat depressing, for example his scathing comment that ‘[f]inancial skulduggery isn’t just something that happens in the UK; there has been a concerted and decades long effort to encourage it to do so’. His narrative clearly details the extent of the harms caused by this behaviour, both in the UK (including gambling addiction, loss of tax revenue, and improper levels of political influence) and overseas (in particular, economic deprivation of some of the poorest countries and most marginalised communities).
Bullough takes as his starting point the impact on Britain of the Suez crisis and the end of empire, and its search for a role in that new world. He examines the rise of the City of London and the potentially anti-democratic impact of deregulation and globalisation on the power of national governments. He also looks at Britain’s offshore territories and their role as tax havens and facilitators of opaque businesses and transactions. He carefully critiques the regulatory gaps and deficiencies, and the imbalance between the resources of regulators and prosecutors as compared with wealthy kleptocrats and their advisors, which results in an impression of effective regulatory activity while little of substance is actually done to combat money laundering and other harms. There is also an interesting chapter on private prosecutions, something which has painful resonance in the light of the Post Office’s use of this process to perpetrate miscarriages of justice on a significant number of its sub-post masters and sub-post mistresses. The book concludes with a summary of useful resources (including, should anyone wish to pursue a career as a Jeeves-style actual butler, details of how to embark on that career path!).
In Chapter 6, which is likely to be of particular relevance to Forum members, he examines the financial ‘laundromats’ operated in countries of the former USSR and facilitated by Scottish limited partnerships as well as limited partnerships operating elsewhere in the UK, and UK LLPs. His damning indictment is that ‘Butler Britain exists to help its clients. It has no interest in stopping them from misbehaving when there’s profit in it’. Despite the introduction of the legislation requiring disclosure of people with significant influence (PSCs) over a business (the substantial flaws in which have been pointed out by many commentators, including this reviewer (see ‘Partnership law: Used, Misused or Abused?’ (2021) 32(2) EBLR 208)), little has been done legislatively to remedy the problem. As Bullough pithily puts it, from the point of view of the British government, ‘limited partnerships were an obscure twig on an already pretty unfashionable branch of the law’. He also makes the point, citing Richard Smith (whom Forum members may recall from the 2019 Conference), that SLPs owned by anonymous offshore companies are not isolated examples but, at some points in time, the vast majority of SLPs being registered. And he concludes this chapter by sounding the alarm about the exploitation of the new PFLP vehicle (something on which this reviewer has also written (see ‘Limited partnership law and private equity: an instance of legislative capture?’ (2019) 19(1) JCLS 105).
Bullough does conclude with some limited optimism, making the point that the dislocations caused by Brexit and then Covid have led to Britain questioning its role in the world as it did after Suez and the dismantling of its empire, and that this provides an opportunity for Britain to make ‘a principled decision to take a course of action not because it [is] profitable but because [is] right’.
I’ll certainly raise my half-full glass to that.
Law firm Carey Olsen has published a brief article on forthcoming amendments to Jersey's limited partnership legislation. They include extensions to the 'safe harbour' list of activities in which a limited partner can participate. It is available at:
https://www.careyolsen.com/briefings/upgrades-jerseys-limited-partnership-law
Law firm Axis Chambers have published a short note on the LLP legislation enacted in Pakistan in 2017 and 2018l. It is available at:
https://axislaw.pk/news/62486221f33923001711ff1b
We have pencilled in Thursday 15th September 2022 for this year's Conference in Nottingham, but will confirm once speakers have confirmed. We are in the process of drawing up the programme, and a Call for Papers will be sent shortly (so please get your thinking caps on if you are interested in presenting!). As always, we welcome papers on all aspects of partnership/LLP law and practice, or other alternative business organisations, from academics, practitioners, journalists, policymakers and students (to name but a few).
We are hoping to have a paper from representatives of HMRC so you if you have a particular interest in partnership/LLP tax and would like to suggest specific topics that you'd like to see covered, please contact Elspeth Berry at elspeth.berry@ntu.ac.uk.
Canadian law firm McMillan has published a short note on a recent Canadian case on fiduciary duties in LLPs. It is available at:
https://mcmillan.ca/insights/fiduciary-duties-in-corporate-transactions-expansion-of-directors-duties-to-limited-partnerships-liability-of-knowing-third-party-assistants/
The judgment itself is available at:
https://www.canlii.org/en/on/onca/doc/2021/2021onca853/2021onca853.pdf
Damien Crossley & Mark Baldwin have just published Taxation of Partnerships and LLPs (Sweet & Maxwell 2021), which provides a detailed and important discussion of the law in this area. Further details of the book, which is available in hardback or as an ebook, are available at: https://www.sweetandmaxwell.co.uk/Product/Partnerships/Taxation-of-Investment-and-Trading-Partnerships-and-LLPs/eBook-ProView/42960097
Forum members may recall that Mark presented a paper on partnership/LLP tax at the Annual Conference of the Partnership Forum in 2021.
Law firm CM Murrary has published a summary of three 2021 partnership cases:
- Dixon Coles and Gill v Baines (on partner liability for fraud of co-partner)
- Re Bell Pottinger, SSBEIS v Geoghegan (on the application of the directors disqualification regime to LLp members - see earlier post on this site)
- Tribe v Elborne Mitchell (on rationality of decisionmaking - see earlier post on this site)
It is available at:
https://www.cm-murray.com/knowledge/3-of-the-must-know-partnership-law-cases-of-2021/?utm_source=rss&utm_medium=rss&utm_campaign=3-of-the-must-know-partnership-law-cases-of-2021
Tribe v Elborne Mitchell LLP [2021] EWHC 1863 (Ch)
An LLP agreement made provision for each member to receive a fixed share of profits and, if there was a balance, distributions from a discretionary fund could be allocated by a decision of the members on a recommendation from the senior member. A former LLP member disputed the distributions in certain years.
The court noted first that where an agreement could give rise to rival interpretations, weight should be given to the interpretation which was more consistent with business common sense (Wood v Capita Insurance Services [2017] UKSC 24). Second, where the agreement gave one party a discretion in making an assessment or choosing from a range of options there was an implied term that the discretion would not be exercised in an arbitrary, capricious or irrational manner, and such a term was difficult, though not impossible, to exclude (Braganza v BP Shipping Limited [2015] UKSC 17, Mid Essex Hospital NHS Trust v Compass Group UK and Ireland Ltd [2013] EWCA Civ 200 and Charterhouse Capital Ltd [2015] EWCA Civ 536). The discretion was also fettered because in the context of an LLP a decision-making power must be exercised in good faith and in the best interests of the LLP. Thus the senior member making a recommendation, and the members collectively in making a decision, must exercise good faith and should not take into account irrelevant matters or ignore relevant ones, and the recommendation or decision should not be outside the range of reasonable proposals that might be made in the circumstances.
Applying these principles, the court held that the Agreement here did not require the members to adopt the senior member’s recommendations, or to adopt or reject them in their entirety. Even if this had been a possible interpretation, it would have been rejected because it made less commercial sense, since it would have removed the opportunity for members to bring their personal knowledge and opinions into a debate, and would have meant that the whole process might fail and have to start again because of the senior member’s failure to include a significant fact or matter. The recommendations did not need to be perfect or include all possible analyses, but needed to be full enough to allow a debate between partners. The court concluded that the recommendations had been reasonable exercises of the discretions to recommend and decide on distributions.
Herberstein v TDR Capital General Partner II LP and others [2021] CSOH 64
A limited partner in a limited partnership registered in Scotland brought an action of count, reckoning and payment against the partnership. This action is a two-part procedure in the Scottish courts whereby a person such as a partner can compel payment of sums due to them in circumstances where they are not aware of precisely what sums are due. The first stage is concerned with whether the defender is liable to account, and the second stage is to ascertain what sum is due. This judgment concerned the first stage.
The court noted that there were advantages in choosing a Scottish limited partnership because under Scots law, unlike English law, partnerships had separate legal personality, but those who sought these advantages must accept the consequence of this choice that Scots law applied. It was fundamental to Scottish law that partners must act with what was referred to traditionally as ‘exuberant trust’ and more recently as ‘utmost good faith’, and the Scottish action of count, reckoning and payment was available to determine the amount due to a partner. The purpose of that action was the payment of sums due, not the provision of documents, which was simply a procedural step. This meant that it was different to the purpose in Inversiones Frieira SL and another v Colyzeo II LP [2012] Bus LR 1136, which was to obtain access to documents so as to enable the limited partners to understand the business in which they had invested. Here the pursuer was not seeking to understand the business, but to be paid what was due to him.
The court declined to depart from the normal two stages of the procedure, since this was not a situation where the pursuer had already received accounts. At this first stage the only question was whether the defenders owed a duty to account to the pursuer, and it held that they did. Partners owed a common law duty to account to other partners, and a duty under s28 of the Partnership Act 1890 to render true accounts and full information to the other partners, and the partnership agreement here did not have the effect of contracting the partners out of that duty. Its provisions simply regulated the administrative accounting procedure on the preparation and form of accounts and did not displace the legal obligation to account. The court expressly left open the question of whether it was ever possible to contract out of the s28 or the common law obligation to account, since that issue did not arise on the wording of this particular partnership agreement. It concluded that the action should proceed to the second stage.