Committee for Enterprise,
Trade and Investment
Wednesday 3 July 2002
MINUTES OF EVIDENCE
Limited Liability Partnerships Bill:
Committee Stage
(NIA 9/01)
Members present:
Mr Neeson (Deputy Chairperson)
Mr Armstrong
Mrs Courtney
Dr McDonnell
Ms Morrice
Mr McMenamin
Dr O’Hagan
Witnesses:
Mr M Bohill )
Mr J Johnston ) Department of Enterprise,
Ms A Aiken ) Trade and Investment
Ms C McGivern ) Assembly Legal Services
The Deputy Chairperson: Welcome Mr Bohill, Mr Johnston and Ms Aiken from the Department of Enterprise, Trade and Investment, and Ms McGivern who will give the Committee legal advice. We are pressed for time because of the Assembly plenary today. If you are happy, let us proceed with the formal consideration of the Bill.
Mr Bohill: I am content with that.
The Deputy Chairperson: Members will have the opportunity to raise any concerns or suggest any amendments. Members should read the relevant clauses in the Bill along with the related commentary in the explanatory and financial memorandum.
The Bill contains 16 clauses and one schedule. Each clause and related subsections will be considered in turn. The Committee can either agree that it is content with the clause as drafted or recommend to the Assembly that the clause be amended.
The purpose of the Bill is to enable all businesses of two or more members to incorporate with limited liability while organising themselves as partnerships, not as companies. The legislation will extend the range of legal organisations available to such businesses in Northern Ireland beyond the limited company, and the traditional form of partnership. That will provide Northern Ireland business with potential benefits from the limited liability partnerships (LLP) vehicle currently available in GB, and in similar form in other jurisdictions such as the USA, Canada and Australia. It is also intended to reduce the risk of Northern Ireland firms deciding to register in other jurisdictions in order to become limited liability partnerships.
Long title agreed to.
Clause 1 (Limited liability partnerships)
The Deputy Chairperson: Subsections (1) to (3) provide for a new form of legal identity to be known as a limited liability partnership (LLP). It will be a body corporate, formed on incorporation via clause 3. It will have unlimited capacity and will therefore be able to undertake the full range of business activities which a partnership can undertake.
Subsection (4) specifies that, although in law an LLP will be separate from its members, they may be liable to contribute to its assets if it is wound up. The extent of that potential liability is set out in the Regulations. Subsection (5) states that, except where otherwise provided, the law relating to partnerships will not apply to limited liability partnerships. Subsection (6) gives effect to the schedule, which deals with names and registered offices.
Question, That the Committee is content with the clause, put and agreed to.
Clause 2 (Incorporation document etc.)
The Deputy Chairperson: Subsection (1) details some of the requirements necessary to set up a limited liability partnership. For example, it specifies that to form such a partnership there must at the outset be at least two people who are associated for the carrying on of a lawful business with a view to profit and who subscribe their names to an incorporation document. The incorporation document must be delivered to the registrar.
Subsection (2) stipulates that the incorporation document must contain various items of information: the name of the limited liability partnership; the address of the registered office; the names and addresses of persons who are to be members on incorporation; and whether all or some of the members are to be designated members. Subsections (3) and (4) stipulate that it is an offence to make false statements or statements believed not to be true when forming the limited liability partnership and lay down what the penalties for the guilty party may be.
Question, That the Committee is content with the clause, put and agreed to.
Clause 3 (Incorporation by registration)
The Deputy Chairperson: Ms McGivern, I believe that you have a query on clause 3.
Ms McGivern: The third line in clause 3(1), referring to the registrar, states that
"unless the requirement imposed by paragraph (a) of that subsection has not been complied with, he shall".
However, clause 2(1)(c) provides an exception whereby the registrar may accept the statement. I felt that the provision in clause 3(1):
"unless the requirement imposed by paragraph (a) of that subsection has not been complied with";
should be redrafted so that it is clear that it is subject to clause 3(2). The Department agreed to examine my concern.
Mr Bohill: With the Committee’s agreement we shall consult the legislative draftsman to see whether the clause could be made clearer. If that is so, we shall introduce a suitable amendment.
The Deputy Chairperson: Will you provide the Committee with a copy of the amendment as early as possible?
Mr Bohill: Yes.
The Deputy Chairperson: Subsections (1) to (4) provide for the registration of limited liability partnerships by the registrar of companies and the issuing of a certificate.
Question, That the Committee is content with the clause subject to amendment by the Minister, put and agreed to.
Clause 4 (Members)
The Deputy Chairperson: Subsections (1) to (3) deal with the membership of a limited liability partnership, including the first members, new members and how members may leave the partnership. Subsection (4) explains the position of members in relation to their status as employees of the company.
Question, That the Committee is content with the clause, put and agreed to.
Clause 5 (Relationship of members etc.)
The Deputy Chairperson: Subsection (1) deals with the relationship between members. The intention is that a limited liability partnership should have the internal flexibility of a partnership, if members are able to enter into agreements about their mutual rights and duties. The rights and duties of the members of an LLP to one another and to the partnership are governed by the provisions of any agreement between the members. Subsection (2) provides that when a limited liability partnership comes into being it will be bound by the terms of any agreement that is entered into by the subscribers to the incorporation document.
Question, That the Committee is content with the clause, put and agreed to.
Clause 6 (Members as agents)
The Deputy Chairperson: Subsection (1) provides that each member of a limited liability partnership will be an agent of that limited liability partnership. Therefore, they may represent and act on behalf of the limited liability partnership in all its business — subject to the provisions of subsection (2).
Subsection (2) stipulates that a limited liability partnership will not be bound by the actions of a member where that member has no authority to act for the limited liability partnership, and the person dealing with the member is aware of this or does not know or believe that the member was in fact a member of the limited liability partnership.
Subsection (3) states that transactions with a person who is no longer a member of a limited liability partnership will still be valid transactions with the limited liability partnership, unless the other party has been told that the person is no longer a member, or the registrar has received a notice to that effect.
Subsection (4) ensures that where a member of a limited liability partnership is liable to a person — other than another member of the limited liability partnership — for a wrongful act or omission in the course of business of the limited liability partnership or with its authority, the limited liability partnership will be liable to the same extent as the member.
Question, That the Committee is content with the clause, put and agreed to.
Clause 7 (Ex-members)
The Deputy Chairperson: Subsections (1) to (3) refer to the situation where a person ceases to be a member of a limited liability partnership, or his interest in the limited liability partnership is transferred to another person. A former member, the member’s personal representatives, the member’s trustee in bankruptcy or liquidator or the trustees under the trust deed for the benefit of his creditors or assignee may not interfere with the management or administration of the limited liability partnership, but may receive any amount from it to which they are entitled.
Question, That the Committee is content with the clause, put and agreed to.
Clause 8 (Designated members)
The Deputy Chairperson: Subsection (1) provides that members, subject to the agreement of the members, can be specified as designated members either on incorporation or at a later date and may be removed as a designated member. Subsection (2) requires there to be at least two designated members and provides for the occasion where there are less than two designated members.
Subsection (3) provides that if the incorporation document states that every person who is a member of the limited liability partnership is a designated member then all members who are members from time to time will be regarded as designated members. Subsections (4) and (5) deal with the registration of designated members with the registrar of companies. Subsection (6) provides that when a person ceases to become a member of the limited liability partnership he will also cease to be a designated member.
Question, That the Committee is content with the clause, put and agreed to.
Clause 9 (Registration of membership changes)
The Deputy Chairperson: Subsections (1) and (3) require a limited liability company to notify the registrar of companies about changes to its membership. Subsections (4) to (6) provide that, where subsection (1) is not complied with, the limited liability company and all designated members commit an offence, what defence is available and the punishment liable to guilty parties.
Question, That the Committee is content with the clause, put and agreed to.
Clause 10 (Insolvency and winding up)
The Deputy Chairperson: Subsections (1) to (3) require the Department to make Regulations regarding the insolvency and winding up of limited liability companies and overseas limited liability companies.
Question, That the Committee is content with the clause, put and agreed to.
Clause 11 (Application of company law etc.)
The Deputy Chairperson: This clause allows the Department to make Regulations applying or incorporating the law relating to corporations, companies and partnerships, with appropriate modifications, to limited liability partnerships.
Question, That the Committee is content with the clause, put and agreed to.
Clause 12 (Consequential amendments)
The Deputy Chairperson: Subsections (1) and (2) allow for statutory provisions, in particular those affecting companies, corporations or partnerships, to be amended in consequence of the provisions in the Bill or of any Regulations which may be made under it.
Question, That the Committee is content with the clause, put and agreed to.
Clause 13 (General)
The Deputy Chairperson: Subsections (1) to (6) make general provision about Regulations under the Bill, and in particular allow Regulations to provide that failure to comply with their requirements is a criminal offence. The clause provides that the Regulations require the negative resolution procedure.
Question, That the Committee is content with the clause, put and agreed to.
Clause 14 (Interpretation)
The Deputy Chairperson: The clause sets out the meaning of certain terms used in the Bill.
Question, That the Committee is content with the clause, put and agreed to.
Clause 15 (Commencement)
The Deputy Chairperson: Subsections (1) and (2) provide for the Department to make an order, or orders, bringing the Bill into operation.
Question, That the Committee is content with the clause, put and agreed to.
Clause 16 (Short title)
The Deputy Chairperson: This clause gives the short title of the Bill.
Question, That the Committee is content with the clause, put and agreed to.
Schedule
The Deputy Chairperson: Part I of the schedule deals with names. Paragraph 1 amends the Companies (Northern Ireland) Order 1986 to include limited liability partnerships as a legitimate type of business. Paragraphs 2 and 3 deal with the rules governing the name to be given to a limited liability partnership.
Paragraphs 4 to 6 cover changing the name of a limited liability partnership, notification of the name change and its effects. Paragraph 7 makes it an offence to use the term "limited liability partnership" improperly. Paragraph 8 gives guidance on determining whether a company’s name is the same as another for the purposes of Part I of the schedule.
Part II concerns registered offices. Paragraphs 9 and 10 deal with the need to register an office and how one should go about changing a registered office address.
Question, That the Committee is content with the schedule, put and agreed to.
26 June 2002 / Menu / 29 July 2002 (part i)