S17.7 Limited Liability Partnerships

Limited Liability Partnerships Act 2000

1. Introduction

1.1 The Limited Liability Partnerships Act 2000 (hereinafter referred to as ‘the Act’) comes into force on 6 April 2001. It introduces a new type of legal entity known as the limited liability partnership (hereinafter referred to as ‘LLP’). The LLP is, as its name suggests, a combination of both a partnership and a company. Its main purpose is to ‘enable two or more persons associated for carrying on a lawful business with a view to profit’ to limit their liability whilst trading in partnership mode. This limited liability is possible because an LLP is a legal person separate from its members.

1.2 To achieve the status of LLP it is necessary to register with the Registrar of Companies. The Registrar of Companies will, in due course, issue a Certificate of Incorporation statinginter-alia the LLP’s trading name and the date of incorporation. In return for being allowed to trade with limited liability LLPs will have to disclose more information about themselves than is the case with traditional partnerships. They will do this by filing annual reports, accounts and details of their composition and constitution etc. with the Registrar of Companies.

2. Legal persona

2.1 Once incorporated the LLP becomes a body corporate possessing a legal personality separate from that of its members. In addition an LLP has unlimited legal capacity. This means that an LLP can do anything that a natural person can do. It has the ability to hold property in its own name and enter into contracts in its own name. Thus where the LLP is, for example, the disponee in a conveyance the deed will simply narrate the name of the LLP, i.e. ‘do hereby dispone to and in favour of Smith and Jones LLP’. Similarly the subsequent entry in the proprietorship section of the title sheet will simply read ‘Smith and Jones LLP’, followed by its address. This position differs markedly from that of the traditional partnership. Traditional partnerships cannot hold property in their own name, rather title is taken on their behalf by the partners as trustees thereof. It can be seen therefore that the LLP’s existence as a separate legal entity makes it more closely akin to a company than to a partnership. For the avoidance of doubt however, standard securities by LLPs do require to be registered in the Register of Charges. 

2.2 Part I of the Schedule to the Act provides that an LLP must end its name with the words "limited liability partnership" or the abbreviation "llp" or "LLP." (There is, in addition, a special provision for LLPs registered in Wales to use the Welsh equivalent of LLP viz., -"partneriaeth atebolrwydd cyfyngedig" or its abbreviation "pac" or "PAC").

3. Execution of deeds

The Limited Liability Partnerships (Scotland) Regulations 2001 amended the terms of the 1995 Act to set out that where the granter of a document is a limited liability partnership the document is validly subscribed if it is signed on behalf of the partnership by one of the members. To establish a self evidencing document, the Regulations provide that a document shall be presumed to have been subscribed by the limited liability partnership where:

• it bears to have been subscribed on behalf of the limited liability partnership by a member of the limited liability partnership;
• it has been signed by a person as a witness of that subscription and it states the name and address of the witness; and
• nothing in the document, or in the testing clause or its equivalent, indicates:

1. that it was not subscribed on behalf of the limited liability partnership as it bears to have been so subscribed; or

2. that it was not validly witnessed for any of the following reasons:

(a) a signature bearing to be the signature of the witness is not such a signature, whether by reason of forgery or otherwise;
(b) a witness happens to be a granter;
(c) the witness did not know the granter, or was under the age of 16 years, or was mentally incapable of acting as a witness;
(d) the witness did not witness the subscription;
(e) the witness did not sign after the granter's subscription, or the granter's acknowledgement of his subscription and the signature of the witness were not one continuous process. 

If the signature has not been witnessed, a document shall also be validly executed if it bears to have been subscribed by two members of the partnership. 

Sasine drafters should bear in mind that this paragraph relates only to documents which run in the name of the partnership itself. For deeds to which trustees of the firm are parties, signature by all the trustees in the presence of a witness (or by each of the trustees separately in the presence of their respective witnesses) is required.