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Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009

Volume 711: debated on Wednesday 17 June 2009

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009.

Relevant document: 16th Report from the Joint Committee on Statutory Instruments.

We are debating today the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009. Limited liability partnerships were introduced by the Limited Liability Partnerships Act 2000. The main early users of the limited liability partnership form were major accountancy and law firms, and now all sizes and types of businesses are using it.

The LLP Act is a relatively short Act that sets out the basic structure of the LLP and provides a power to fill it out as appropriate by applying to LLPs selected provisions of company law. The LLP Regulations 2001 applied major parts of the Companies Act 1985, with appropriate modifications, to LLPs along with bits of financial services and insolvency law.

As the Companies Act 1985 has been comprehensively replaced by the Companies Act 2006, we need to update the regulations that apply company law provisions to LLPs. Last year, your Lordships debated the Limited Liability Partnerships (Accounts and Audit) Regulations, which applied to LLPs rules on accounts and audit corresponding to those under the Companies Act 2006. These take effect for financial years beginning on or after 1 October 2008. The current regulations complete that work by applying to LLPs the other relevant provisions of the Companies Act 2006, with modifications as necessary. They apply to the whole of the United Kingdom.

If any noble Lord is familiar with the 2001 LLP regulations, he or she will have noticed that the current regulations are much longer. This is because the earlier regulations simply listed the section numbers of provisions in the Companies Acts that were to be applied with a list of textual modifications. The current regulations take the approach of writing out the provisions so that the regulations can be read as a stand-alone document without looking at the Companies Act. This approach received strong support when we consulted, particularly from practitioners in the field.

Much of the update has simply meant applying to LLPs the provisions of the Companies Act 2006 that correspond to the provisions of the 1985 Act that were applied to LLPs. As set out in the Explanatory Memorandum, some of the new provisions of the 2006 Act are applied to LLPs, but others are not. Broadly, these decisions maintain the approach of applying to LLPs the rules that regulate a company's dealings with third parties and, in particular, the filing and transparency requirements, but not rules on the internal workings of companies.

There is also a small number of changes that are not directly related to the Companies Act 2006. They include providing a new right for a member of an LLP, if he is the sole remaining member, to apply to have the LLP dissolved. In summary, these regulations will keep the law on LLPs up to date and consistent with current company law. I beg to move.

I am grateful to the Minister. The Explanatory Memorandum says that this instrument and the application of the accounts and audit provisions of the 2006 Act to LLPs will be,

“reviewed, from 2011, as part of the Companies Act 2006 evaluation”.

I notice that the other Explanatory Memorandums for the orders that we are discussing today all say something similar. What does “from 2011” mean? It sounds like, “not before 2011”, which is rather worrying. Does it mean, on the other hand, “in 2011”? If not, when will we know the outcome of the review?

Other noble Lords may have received a communication regarding these regulations from the Institute of Chartered Accountants in England and Wales, an institute of which, I should disclose, I am a member. While most of its concerns with earlier drafts appear to have been allayed, it raised the following points. Perhaps the Minister could address them.

The first concerns Regulation 18, which would apply Sections 162 to 165 of the 2006 Act, which concern the registry of directors’ names to LLPs with modifications. That will require an LLP to keep available for inspection a register of members containing certain particulars, including a service address for each individual member and whether a member is a designated member. In practice, the institute notes that most LLPs currently maintain a list of all members at their principal place of business and do not object to the requirement being imposed. However, particularly given that failure to comply will be an offence, it feels—and I can see the point—that it is important that the Minister’s department provides LLPs with adequate information about that new requirement to ensure compliance as from 1 October.

The institute also notes that the department has postponed the decision on whether to apply the overseas company disclosure regime to LLPs. It understands that it would be undesirable to hold up the application of the remainder of the Act to LLPs while the difficult question of overseas LLPs is considered, but it would like to know when the issue will be tackled, as there is now a discrepancy between the treatment of overseas companies, as against overseas LLPs.

Lastly, as a drafting point, the institute draws attention to the fact that in Regulation 51 applying Section 1007(1) and 1007(5)(a), reference is made to an application being made by an LLP. It says that that should refer to an application being made on behalf of an LLP. I should be interested to hear whether the Minister can respond to those points.

I make one point in support of the regulations, which is to congratulate whoever in the Government or the department was responsible for producing them in this format. Before the Minister’s time, when we ground our way through the Companies Bill in the august Chamber, we argued from these Benches that it was important that the Company Law Reform Bill became a consolidating Act, for the reasons that the Minister gave—that it was important that people could read legislation in a digestible form, rather than having to leap from one section and one Act to the other, the only benefit of which being to increase the profits of Butterworths. I welcome this approach and hope that the Government will continue to follow it when we have further legislation in this area.

I thank the noble Lord, Lord Razzall, for that comment. The Acts have been implemented in stages, which will need to be reflected in our evaluation. We will begin to evaluate some provisions commenced in 2007 next year, but we will wait until 2011 to evaluate most provisions commenced in October 2009.

The regulations for LLPs come into effect on 1 October 2009, in line with the implementation date for the remaining provisions of the Companies Act 2006 for companies. We will take steps to ensure that LLPs know about these changes, particularly the new register of members, given the importance of the situation in which they find themselves. Companies House will send a mailshot to all LLPs telling them about the changes. It will highlight the new requirement to keep a register of members available for inspection, and it will mention that a failure to do so will be an offence. Guidance and specimen forms will be available on the Companies House website from 1 July. We will look at the drafting point raised by the ICAEW to see whether it needs amendment. No consensus has emerged about how or whether to change the way in which we regulate overseas LLPs. The regulations before us therefore continue the approach in the existing regulations.

I believe that I have dealt with all the questions. I am grateful to noble Lords for their contributions to this debate. The regulations represent the last step towards the application of the Companies Act 2006 to limited liability partnerships. They ensure that the regulations under which LLPs form and operate are in step with modern company law. In summary, by applying the remaining provisions of the Companies Act 2006 to LLPs, as set out in the regulations, where necessary and appropriate, we make essential changes to align the requirements for LLPs with those for companies. This will ensure that LLPs enjoy some of the same benefits and savings as companies, and remain an attractive and distinctive corporate vehicle for business, with different characteristics from companies and other types of partnerships. I commend these regulations to the Committee.

Motion agreed.