Limited liability partnerships 347Section 4(4) of the Limited Liability Partnership Act 2000 is similar to s. 10 of the
Partnership Act 1890 (see pp. 333 – 4). It makes an LLP liable for the torts of its members if
these were committed during the course of the business of the LLP or with the authority of
the LLP.
Members’ relationship with each other
The Limited Liability Partnerships Act 2000 has been expanded by the Limited Liability
Partnerships Regulations 2001. Regulation 7 sets out default provisions, which will govern
the members’ relationship with each other. The members can choose to make their own
provisions instead, but if they do not the default provisions will apply.
There are ten default provisions in Regulation 7. The first seven are virtually identical to
the first seven provisions made by s. 24 of the Partnership Act 1890. However, it should be
noted that the members of an LLP do not have to share in the losses of the LLP because the
LLP is a corporate body with a legal identity of its own. The final three default provisions
are very similar to ss. 28–30 of the Partnership Act 1890. (Sections 24, 28, 29 and 30 of the
Partnership Act 1890 were considered earlier in this chapter on pp. 339 and 343.)
Regulation 8 is virtually identical to s. 25 of the Partnership Act. It states that no majority
of members of an LLP can expel a member unless a power to do so has been conferred by
express agreement between the members.
Members of an LLP owe a fiduciary duty to the LLP.
Accounts and accounting records
The rules relating to accounts and accounting records are similar to those relating to limited
companies (see pp. 316 –17). The financial boundaries of being a small LLP or a medium-
sized one are the same as for small and medium-sized companies. The accounts of LLPs
have to be audited, unless the LLP is small enough to be exempt. The auditor is appointed
annually by the members of the LLP.
Minority protection
Any member of an LLP can petition the court to wind the LLP up under s. 122 of the
Insolvency Act 1986. Any member also has the right to petition the court claiming unfair
prejudice under s. 994 of the Companies Act 2006. Both of these provisions were considered
in the previous chapter in relation to limited companies (see pp. 333 – 4). There is no right to
bring a statutory derivative claim.
The Company Directors Disqualification Act 1986 (considered in the previous chapter at
p. 303) applies to both members and designated members.
Winding up of limited liability partnerships
LLPs are wound up in the same way as companies. They can issue charges over their prop-
erty which must be registered with Companies House. (Charges are explained in relation
to companies on pp. 311–13.) The assets of the LLP are applied in the same order as the assets
of a company would be. Members and designated members can be liable for wrongful or
fraudulent trading, both of which were considered in the previous chapter in relation to
limited companies. In addition, members of an LLP can agree with the other members or
with the LLP that they will be personally liable for the LLP’s debts up to a certain amount.
However, this rule, which is contained in s. 74 of the Insolvency Act 1986, applies only if a
member agrees to become liable to contribute in this way.