The foundation of the law of partnership is the duty of good faith between partners. Trust is a precious commodity and no partnership can prosper without trust between the partners. Unless partners trust one another with their livelihoods without questioning the integrity and honesty of others there will inevitably be conflict.
In practice the same is true for members of a limited liability partnership (LLP), introduced in April 2001 by the Limited Liability Partnerships Act 2000. An LLP is a hybrid form of business entity – it is neither a partnership nor a company. Like a company, an LLP is a body corporate and therefore a separate legal entity and an LLP member’s liability is limited. However, like a partnership the relationship between the LLP members is governed by private agreement and trust between members remains a key component for any successful LLP business.
In the context of the duties owed by partners of traditional partnerships and members of an LLP our specialist partnership lawyers regularly advise both individuals and firms on a wide range of issues including:
- fiduciary duties between partners (which include the obligation to act honestly and give full disclosure as between partners, the obligation to avoid conflicts and to account for unauthorised benefits and, in particular, not to compete with the firm)
- statutory rights and obligations of partners and members (contained in the Partnership Act 1890, the Limited Liability Partnerships Regulations 2001 (as amended), the Insolvency Act 1986 and the Companies Act 2006)
- contractual duties of partners and members both to one another and the firm, especially the obligation of members to contribute capital following the revised rules on the tax treatment of LLP members with effect from 6 April 2014
- common law/equitable duties of partners and members including confidentiality, good faith and the duty of care.
A full understanding of the legal duties that partners and members owe both to one another and to the firm is the foundation for a successful partnership or LLP.
Our recent experience includes:
- providing legal and strategic advice to a senior partner of one of the big 4 accounting firms on his contractual duties to the LLP, notably with regard to his duties to respect confidentiality and also in relation to his restrictive covenants
- advising the founder of a niche law firm on his prospective duties to creditors and eliminating his potential post-exit exposure to any liabilities as a former member of the LLP, particularly with regard to the possible ‘clawback’ of his drawings pursuant to the Insolvency Act 1986
- advising a partner of a well-known law firm on her fiduciary duties as a partner following receipt of a notice of retirement from the firm
How Fox & Partners can help…
- we are aware of the myriad of statutory, contractual and common law duties owed by partners of traditional partnerships and members of LLPs
- we aim to provide cogent advice to our clients in striking the right balance between knowing what their duties are and abiding with their obligations whilst at the same time trying to satisfy their personal career objectives.
Please call us on 020 7618 2400