CHECK YOUR LLP AGREEMENT

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Red – High Risk. Proceed with caution and it is strongly recommended to reconsider your position.

Yellow – Medium Risk. Careful consideration is recommended.

Green – Low Risk. Your agreement contains the common provisions required to deal with current legal risks and management issues.

Introduction

How often do you read your LLP Agreement? When was it last reviewed and updated? If it was more than two years ago or if your business, structure or partnership has undergone significant changes since the last review and update, this questionnaire can help you to check that your LLP Agreement:

Reflects changes in the LLP’s strategy, structure, governance and working practices
Enables the LLP to be competitive and attractive to current and incoming members by aligning with current market practice
Protects the LLP from legal and operational risks
Complies with changes in law and regulations

At the end of this questionnaire, you will be provided with a bespoke traffic light risk report, containing explanatory high-level commentary about potential risks, considerations and options that may be available to you, in relation to your LLP Agreement.

The traffic light system is categorised as follows:

Red – High Risk. Proceed with caution and it is strongly recommended to reconsider your position.

Yellow – Medium Risk. Careful consideration is recommended.

Green – Low Risk. Your agreement contains the common provisions required to deal with current legal risks and management issues.

If you would like our partnership law experts to carry out a full review of your LLP Agreement or if you would like to discuss the options for your LLP Agreement in detail, please contact us here.

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DISCLAIMER
Please note that partnership and LLP law is a complex and often fact-specific area of law. Whilst every care has been taken to ensure the accuracy of the information contained in this tool, the information is intended as guidance only, and it is not intended to apply to specific circumstances. The content does not, therefore, constitute legal advice and should not be relied upon as such. Further, we cannot guarantee that the law has not changed since the time of publication and the user is cautioned accordingly.

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Your Partnership/LLP Agreement appears to address some of the points and issues we highlight in this tool, however, there are certain areas where your Partnership/LLP agreement would benefit from specialist review and advice tailored to your specific business and partnership. If you would like to discuss any issues related to your Partnership/LLP Agreement, or any other questions arising from this tool, we would be happy to help. Please contact one of our experts using the form below, so that specific legal advice tailored to your specific circumstances can be provided. Alternatively, please email us on info@cm-murray.com.

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1. GOVERNANCE AND DECISION-MAKING

Does your LLP Agreement contain the following provisions in relation to the governance and decision-making within the LLP? Styling edits saved to this module won’t be used in the sections; it is stored under Theme Options.

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RESULT
THANK YOU FOR USING OUR 'CHECK YOUR LLP AGREEMENT TOOL'

It appears that your LLP Agreement contains most of the common provisions required to deal with current legal risks and management issues. However, the effectiveness and enforceability of all terms in your LLP Agreement is highly dependent on the precise wording used and how these terms are followed in practice. If you have any concerns regarding the enforceability of any terms in your LLP Agreement, please contact our expert partnership law advisers using the form below. Alternatively, please email us on info@cm-murray.com.
RESULT
THANK YOU FOR USING OUR 'CHECK YOUR LLP AGREEMENT TOOL'

Your LLP Agreement appears to address some of the points and issues we highlight in this tool, however, there are certain areas where your LLP agreement would benefit from specialist review and advice tailored to your specific business and partnership. If you would like to discuss any issues related to your LLP Agreement, or any other questions arising from this tool, we would be happy to help. Please contact one of our experts using the form below, so that specific legal advice tailored to your specific circumstances can be provided. Alternatively, please email us on info@cm-murray.com.
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Please tell us more...
1. GOVERNANCE AND DECISION-MAKING
Does your LLP Agreement contain the following provisions in relation to the governance and decision-making within the LLP?
1(a) Delegated authority for a sub-group of members/committee or nominated individuals to make routine management decisions on behalf of the LLP?
- Yes
- No
Delegated authority for a sub-group of members/committee or nominated individuals to make routine management decisions on behalf of the LLP?
The LLP Agreement should specify how decisions are to be made by the LLP.

The ultimate decision-making authority in respect of an LLP resides with its members, who (depending on the provisions of the LLP Agreement) usually make decisions by a member vote. However, this may not be appropriate for all day-to-day decisions relating to the LLP and can be logistically challenging where the LLP has many members who may be spread across different geographic locations and offices.

To facilitate agile decision-making, you should consider identifying the management decisions which can be more efficiently and appropriately determined by a small number of nominated individuals (such as a management board, the managing partner and/or a remuneration committee) without the need to coordinate, consult with and obtain consent from the entire partnership.

In addition to day-to-day management decisions, other matters that are commonly delegated to nominated individuals include granting members authorisation for having an outside business interest, approving the terms of a new members admission, agreeing to exit terms with an Outgoing Member Outgoing Member Outgoing Member means a member who has given or been given notice to retire and has not yet ceased to be a member. and agreeing the timing of profit distributions (amongst other things). Decisions regarding discretionary profit shares and promotions may be reserved for determination by a group of members (or other senior individuals) who form the remuneration committee.

Significant and strategic decisions such as the amendment of the LLP Agreement or the approval of a sale or merger of the LLP are often reserved as matters for members to vote on.

This provision is particularly beneficial where there are a large number of members and can help to free up some of the members time and attention to focus on income-generating work.

This division of responsibilities is also popular amongst LLPs that wish to adopt a corporate style of governance and accountability.
1(b) Option for members’ meetings be held on short notice?
- Yes
- No
Option for members’ meetings be held on short notice?
The LLP Agreement should specify how members’ meetings are to be called, including the requisite notice period.

You should consider allowing meetings to be held on short notice. The LLP Agreement could specify a minimum notice period with an option for a shorter period of notice if all or a specified majority of the members at the meeting have given their consent and/or the managing partner/management board reasonably determines that the urgency of the matter(s) be considered at the meeting justifies a shorter notice.

This can help to speed up the decision-making process, which ensures that opportunities are not lost and that urgent issues (such as the immediate expulsion Expulsion Expulsion means a forced retirement of a member from the LLP (usually without or with very little notice) based on specified grounds such as a serious breach of the LLP Agreement or being convicted of a criminal offence. of a member) can be dealt with swiftly.
1(c) Options for members’ resolutions be approved by a written resolution?
- Yes
- No
Options for members’ resolutions be approved by a written resolution Written Resolution A written resolution is a decision which is recorded in writing and is usually passed by the signature of the requisite number of members who would be entitled to pass the resolution had it been proposed at a members’ meeting. ?
The LLP Agreement should specify how members’ resolutions are to be made.

To facilitate agile decision-making, you should consider allowing members’ resolutions to be made by a written resolution instead of at a members’ meeting.

A written resolution sets out the decisions to be considered and voted on by the members. The members usually signify their agreement by signing a document containing the resolution(s) or even by using electronic means (e.g., voting buttons in response to an email containing the resolution(s)).

This provision is particularly useful for LLPs with a large number of members based in different geographic locations or offices or in circumstances where it may be difficult for the members to convene a meeting (as the Covid pandemic has shown!)
1(d) Option for members’ meetings to be held remotely (for example, by telephone or video conference)?
- Yes
- No
Option for members’ meetings to be held remotely (for example, by telephone or video conference)?
The LLP Agreement should specify how members’ meetings are to be held and conducted.

To facilitate agile decision-making, you should consider allowing members’ meetings to be held remotely and the LLP Agreement should make it clear that members are to be counted in the quorum even though they are not physically present.

This provision is particularly useful in LLPs with members who are working remotely or generally based in different geographic locations or offices. It also assists in ensuring members' meetings are quorate.
1(e) Option for members to appoint a proxy to attend member meetings?
- Yes
- No
Option for members to appoint a proxy Proxy A proxy may be another member who is authorised by the absent member to attend the meeting and vote on the absent member’s behalf (usually in addition to the proxy’s own vote). to attend member meetings?
The LLP Agreement should specify how members’ meetings are conducted and how members can attend and vote at meetings.

Allowing the appointment of proxies can be especially helpful in LLPs with a small number of members to prevent inquorate meetings due to the absence of one or more members.

A proxy is usually another member who the absent member appoints to attend and vote at a meeting on their behalf (in addition to the proxy’s own voting and participation rights).

A right to appoint a proxy may be used in addition to or as an alternative to remote meetings and/or decision-making by a written resolution Written Resolution A written resolution is a decision which is recorded in writing and is usually passed by the signature of the requisite number of members who would be entitled to pass the resolution had it been proposed at a members’ meeting. .
1(f) Power to exclude members from participating in decision-making?
- Yes
- No
Power to exclude members from participating in decision-making?
Unless there is an agreement to the contrary in the LLP Agreement or otherwise, every member has the right to participate in the management of the LLP.

To prevent the risk of decisions being blocked or influenced by a member in circumstances where there is a risk of damage to the LLP, you should consider whether to include a provision that excludes certain members from attending a meeting, receiving notice of the meeting and voting on any resolutions of the members.

Common circumstances for the exclusion may include a member who is the subject of a proposed expulsion Expulsion Expulsion means a forced retirement of a member from the LLP (usually without or with very little notice) based on specified grounds such as a serious breach of the LLP Agreement or being convicted of a criminal offence. or compulsory retirement Compulsory Retirement Compulsory retirement means a compulsory retirement of a member from the LLP initiated by the LLP usually by notice to the member. , a member who has given or been given notice to retire, members who are suspected of colluding in a proposed team move and members who are suspended or on garden leave Garden Leave Garden leave means a specified period during which an Outgoing Member is subject to specific duties and restrictions designed to protect the LLP from any potentially damaging conduct by the Outgoing Member (for example, not to attend the office or have any contact with the LLP’s clients, members or employees). .

You should also consider whether members should be automatically excluded from participating in decision-making where they have an actual or potential conflict of interest in a proposed contract, transaction or arrangement with the LLP or whether the conflicted member should be eligible to participate in decision-making until and unless determined otherwise by the management board or the resolution of the members.
2. PROFITS AND LOSSES
Does your LLP Agreement contain the following provisions in relation to the allocation of profits and losses of the LLP between the members?
2(a) A power to reduce a member’s fixed share of profits or drawings on account of profits?
- Yes
- No
A power to reduce a member’s fixed share of profits or drawings on account of profits?
Unless agreed in the LLP Agreement or otherwise, it may not be possible to reduce a member’s fixed share or drawings on account of profits without their consent.

A member’s entitlement to a fixed share and/or drawings on account of profits is usually specified in the LLP Agreement or in a separate agreement between the LLP and the member. Many LLP Agreements will state that a member’s fixed share and/or drawings on account of profits will be reviewed annually, for example, by the remuneration committee, however, the LLP may not be able to reduce a member’s fixed share and/or drawings unless it has the power to do so under the relevant agreement or with the member’s consent.

You should consider an express power for the management board, managing partner or a remuneration committee to reduce a member’s fixed share and/or drawings in specific circumstances (such as changes in the LLP’s cash flow and capital requirements, to reflect a member’s demotion, reduced interest in the LLP or part-time status).

It is also possible to include a power to reduce an incapacitated member’s Incapacitated Member Incapacitated Member typically means a member who is absent from the LLP or unable to perform the duties of a member due to sickness or some other mental or physical reason. fixed share and/or drawings after a reasonable period of absence due to sick leave. However, expert legal advice is recommended before including or exercising powers in the LLP Agreement against incapacitated member’s Incapacitated Member Incapacitated Member typically means a member who is absent from the LLP or unable to perform the duties of a member due to sickness or some other mental or physical reason. in order to avoid the risk of a disability discrimination claim against the LLP.
2(b) Provisions regarding how capital profits are to be shared between the members?
- Yes
- No
Provisions regarding how capital profits are to be shared between the members?
Unless agreed in the LLP Agreement or otherwise, any capital profits generated by the LLP may need to be shared amongst the members in the same way as revenue profits are shared. This may be unfair or inappropriate in some circumstances (especially where the LLP allocates revenue profits using a mixture of fixed profit shares, discretionary profit shares and/or equity profit shares).

Capital profits are often the proceeds from a sale of the members’ interests in the LLP, the LLP’s business and/or assets (including a subsidiary or a capital asset).

You should consider incorporating in your LLP Agreement provisions on how capital profits are to be shared between the members and what receipts are to be treated as capital profits.

You may also wish to exclude a class of members (for example, fixed share members and Outgoing Members Outgoing Member Outgoing Member means a member who has given or been given notice to retire and has not yet ceased to be a member. ) from having an entitlement to share in the capital profits.

You should consider whether the managing partner or a management board should have the power to determine whether profits are to be designated as capital profits and whether there should be a minimum financial threshold for triggering the entitlement to capital profits.
2(c) Power to demote a member?
- Yes
- No
Power to demote a member?
Unless agreed in the LLP Agreement or otherwise, a member’s rights and status cannot be unilaterally changed by the LLP.

When a member is under-performing or is found guilty of wrongdoing, you may wish to apply sanctions against that member which fall short of expulsion Expulsion Expulsion means a forced retirement of a member from the LLP (usually without or with very little notice) based on specified grounds such as a serious breach of the LLP Agreement or being convicted of a criminal offence. or compulsory retirement Compulsory Retirement Compulsory retirement means a compulsory retirement of a member from the LLP initiated by the LLP usually by notice to the member. ). In such circumstances, you may find it helpful to have the power to demote or de-equitise the member to a fixed share or more junior member tier or position on the lockstep. This may result in a reduction to their interest in the LLP (including a reduction in their profit share entitlement), a diminution of their voting rights and/or removal of the member from officeholder or other leadership roles.
3. CAPITAL
(3) Does your LLP Agreement contain a power to require members to contribute additional capital to the LLP?
- Yes
- No
Does your LLP Agreement contain a power to require members to contribute additional capital to the LLP?
Unless agreed in the LLP Agreement or otherwise, members are not required to contribute capital to the LLP.

Members are usually required to contribute capital upon joining the LLP. However, the ability to call for members to contribute additional capital is particularly important in two key circumstances:
- (i) firstly, where the LLP requires additional capital for investment and/or cash flow reason
- (ii) secondly, where the members (or class of members such as fixed share members) rely on “failing” “condition C” of the salaried member rules (i.e., their capital contribution to the LLP is less than 25% of their disguised salary/fixed share) in order to be treated as self-employed for tax purposes, such members may need to contribute additional capital to ensure they continue to “fail” condition C. Failure to ensure such members are treated as self-employed for tax purposes may result in the LLP being liable to pay employer’s national insurance on their earnings.
The power to require members to contribute additional capital may be drafted so that it is only exercisable in specific circumstances or by a relevant majority.
4. MEMBERS’ DUTIES, OBLIGATIONS AND RESTRICTIONS
Does your LLP Agreement contain the following provisions in relation to the duties, obligations and restrictions on members?
4(a) Do members owe a full range of contractual duties to the LLP, including the duty of good faith and other fiduciary type duties?
- Yes
- No
Do members owe a full range of contractual duties to the LLP, including the duty of good faith and other fiduciary type duties?
A member in an LLP does not owe general fiduciary duties to the LLP, however they may owe various implied duties to the LLP in the context of the specific roles and responsibilities the member has adopted in respect of the LLP. Therefore, the scope of such duties may be limited. Many LLP Agreements contain an express duty of good faith on the members towards the LLP as well as other ‘fiduciary’ type duties (such as a duty to declare any conflicts of interest, disclose information to the LLP (including in relation to their own wrongdoing or the wrong doing of other members/employees) etc. In some cases, the contractual duty of good faith extends to fellow members (effectively replicating the automatic duty of good faith between partners in a general partnership established under the Partnership Act 1890).

An express duty of good faith owed by the members to the LLP in the LLP Agreement can help to provide a course of action against a member who acts wrongfully (for example, by diverting the LLP’s clients to a competing business) and also serve as a deterrent for any bad behaviour. However, if there is an express duty of good faith between members, this may be used by a disgruntled member against a decision to challenge a decision or action taken by (for example) the members who are members of the management board (for example, a decision to expel the member).

Other express duties we would suggest incorporating into your LLP Agreement include:
- A duty to declare any actual or potential conflicts of interest in relation to a decision to be decided by the members
- A duty to disclose information to the LLP, including in relation to a member’s own wrongdoing or wrongdoing by other members/employees
- A duty to comply with all applicable laws and regulations (including professional regulations)
- A duty not to act in discriminatory, harassing or bullying manner
- A duty to comply with all policies and procedures of the LLP in place from time to time
4(b) Does your LLP Agreement require members to comply with a code of conduct, policy or statement of behavioural expectations?
- Yes
- No
Does your LLP Agreement require members to comply with a code of conduct, policy or statement of behavioural expectations?
It is important to define and set the expectations of members in relation to their conduct and performance. Failure to meet the expectations may be used as justification for demotion, expulsion Expulsion Expulsion means a forced retirement of a member from the LLP (usually without or with very little notice) based on specified grounds such as a serious breach of the LLP Agreement or being convicted of a criminal offence. or compulsory retirement Compulsory Retirement Compulsory retirement means a compulsory retirement of a member from the LLP initiated by the LLP usually by notice to the member. . The expectations may cover financial and management performance and prohibit behaviour that amounts to bullying, harassment and discrimination.
4(c) Does your LLP Agreement impose restrictions on the authority of members?
- Yes
- No
Does your LLP Agreement impose restrictions on the authority of members?
Unless the LLP Agreement imposes clear restrictions on members’ authority to do certain things, members (who are agents of and have ostensible authority to act on behalf of the LLP) may be able to bind the LLP into certain contacts or arrangements or transfer their interests in the LLP. You may wish to restrict members from doing the following without consent from the management board or managing partner:
- seek to transfer or assign their interests in the LLP;
- enter into contracts or obligations on behalf of the LLP unless it is in the ordinary conduct of business;
- make an offer of employment or terminate the employment of an employee;
- give any guarantee, surety or undertaking on behalf of the LLP; and
- pledge any loan or credit on behalf of the LLP.
5. MEMBER BENEFITS
Does your LLP Agreement contain or incorporate family friendly policies and benefits (including maternity, paternity and adoption leave, baby loss and menopause)?
- Yes
- No
Does your LLP Agreement contain or incorporate family friendly policies and benefits (including maternity, paternity and adoption leave, baby loss and menopause)?
Unlike employees, members do not have any statutory right to family friendly leave and pay. However, many LLPs do provide equivalent or similar rights to members to those that are enjoyed by employees (e.g., a specified period of paid/unpaid parental leave). If the LLP chooses to provide such rights, we recommend setting out these policies in a separate document to the LLP Agreement (for example, a members’ handbook) so that these policies can be easily updated as and when required to meet changes in the law, the needs of the LLP and market practice.

Family friendly policies can sometimes differ between men and women and sometimes ignore same sex relationships. We recommend seeking expert legal advice on the terms of family friendly policies and benefits to ensure that they do not fall foul of any discrimination legislation.
5(b) Does your LLP Agreement contain or incorporate a policy for sickness absence and benefits during the absence?
- Yes
- No
Does your LLP Agreement contain or incorporate a policy for sickness absence and benefits during the absence?
Unlike employees, members do not have any legal right to sickness leave and pay. However, most LLPs do provide equivalent or similar rights to those that employees are entitled to.

We recommend setting out these policies in a separate document to the LLP Agreement (for example, a members’ handbook) so that these policies can be easily updated as and when required to meet changes in the law, the needs of the LLP and market practice.

We recommend seeking expert legal advice on the terms of any sickness policy to ensure that they do not fall foul of any disability discrimination legislation.
6. MEMBER EXIT
Does your LLP Agreement contain the following provisions in relation to how a member retires from the LLP (and becomes an Outgoing Member Outgoing Member Outgoing Member means a member who has given or been given notice to retire and has not yet ceased to be a member. ) and the financial entitlements of Outgoing Members? Outgoing Member Outgoing Member means a member who has given or been given notice to retire and has not yet ceased to be a member.
6(a) Power to reduce the notice period for resignation and/or make payment in lieu of notice?
- Yes
- No
Power to reduce the notice period for resignation and/or make payment in lieu of notice?
The notice period for resignation is typically between 3 and 12 months for members of an LLP. A lengthier notice period of up to 24 months is also possible in some LLPs.

Provisions governing resignations should include flexibility for the LLP to reduce the notice period. The reduced notice period may be combined with a payment in lieu of notice so that the member is paid the profit share that would have accrued had the member served the full notice period. The ability to reduce the notice period is also helpful to immediately remove an Outgoing Member Outgoing Member Outgoing Member means a member who has given or been given notice to retire and has not yet ceased to be a member. who may cause damage to the LLP.
6(b) Restrictions to prevent a team move or mass exodus of members from the LLP?
- Yes
- No
Restrictions to prevent a team move or mass exodus of members from the LLP?
LLPs that are likely to suffer significant damage and instability from the simultaneous loss of a number of members and employees within the same team or office should consider provisions to deter and prevent team moves. Anti-team move restrictions may include restrictions on the number of members who may exit at or around the same time or a non-compete or non-poaching clause could be inserted in the LLP Agreement.

The enforceability of anti-team move restrictions have not yet been tested in UK courts but carefully worded provisions are expected to be enforceable.
6(c) Power to put an Outgoing Member on garden leave?
- Yes
- No
Power to put an Outgoing Member Outgoing Member Outgoing Member means a member who has given or been given notice to retire and has not yet ceased to be a member. on garden leave? Garden Leave Garden leave means a specified period during which an Outgoing Member is subject to specific duties and restrictions designed to protect the LLP from any potentially damaging conduct by the Outgoing Member (for example, not to attend the office or have any contact with the LLP’s clients, members or employees).
Modern LLP Agreements should include an express power to put an Outgoing Member Outgoing Member Outgoing Member means a member who has given or been given notice to retire and has not yet ceased to be a member. on garden leave Garden Leave Garden leave means a specified period during which an Outgoing Member is subject to specific duties and restrictions designed to protect the LLP from any potentially damaging conduct by the Outgoing Member (for example, not to attend the office or have any contact with the LLP’s clients, members or employees). .

Garden leave Garden Leave Garden leave means a specified period during which an Outgoing Member is subject to specific duties and restrictions designed to protect the LLP from any potentially damaging conduct by the Outgoing Member (for example, not to attend the office or have any contact with the LLP’s clients, members or employees). is usually a discretionary power to keep an Outgoing Member Outgoing Member Outgoing Member means a member who has given or been given notice to retire and has not yet ceased to be a member. away from the LLP and its clients and employees during the member’s notice period and can be effective in thwarting any attempts by the Outgoing Member Outgoing Member Outgoing Member means a member who has given or been given notice to retire and has not yet ceased to be a member. to take confidential information, solicit clients, or poach employees.

The garden leave Garden Leave Garden leave means a specified period during which an Outgoing Member is subject to specific duties and restrictions designed to protect the LLP from any potentially damaging conduct by the Outgoing Member (for example, not to attend the office or have any contact with the LLP’s clients, members or employees). provisions should state the duration of the garden leave Garden Leave Garden leave means a specified period during which an Outgoing Member is subject to specific duties and restrictions designed to protect the LLP from any potentially damaging conduct by the Outgoing Member (for example, not to attend the office or have any contact with the LLP’s clients, members or employees). , the circumstances in which a member may be placed on garden leave Garden Leave Garden leave means a specified period during which an Outgoing Member is subject to specific duties and restrictions designed to protect the LLP from any potentially damaging conduct by the Outgoing Member (for example, not to attend the office or have any contact with the LLP’s clients, members or employees). , whether the LLP has the power to extend the period of garden leave Garden Leave Garden leave means a specified period during which an Outgoing Member is subject to specific duties and restrictions designed to protect the LLP from any potentially damaging conduct by the Outgoing Member (for example, not to attend the office or have any contact with the LLP’s clients, members or employees). and members’ duties and entitlements during garden leave Garden Leave Garden leave means a specified period during which an Outgoing Member is subject to specific duties and restrictions designed to protect the LLP from any potentially damaging conduct by the Outgoing Member (for example, not to attend the office or have any contact with the LLP’s clients, members or employees). .
6(d) Power to require a member to compulsorily retire without cause?
- Yes
- No
Power to require a member to compulsorily retire without cause?
This is a provision to enable a member to be forced to exit the LLP (usually by written notice from the LLP). This power of compulsory retirement Compulsory Retirement Compulsory retirement means a compulsory retirement of a member from the LLP initiated by the LLP usually by notice to the member. is often deliberately drafted wide enough to be used in a range of circumstances that do not meet the grounds for expulsion Expulsion Expulsion means a forced retirement of a member from the LLP (usually without or with very little notice) based on specified grounds such as a serious breach of the LLP Agreement or being convicted of a criminal offence. . The power is often used in respect of underperforming members and members who are not the right fit for the LLP. We recommend seeking expert legal advice before exercising this power as the law governing the exercise of such power is currently evolving.
6(e) Power to expel a member for cause without any notice?
- Yes
- No
Power to expel a member for cause without any notice?
A member may only be expelled if the members have been granted the power of expulsion Expulsion Expulsion means a forced retirement of a member from the LLP (usually without or with very little notice) based on specified grounds such as a serious breach of the LLP Agreement or being convicted of a criminal offence. by an express agreement.

A power of expulsion Expulsion Expulsion means a forced retirement of a member from the LLP (usually without or with very little notice) based on specified grounds such as a serious breach of the LLP Agreement or being convicted of a criminal offence. is usually drafted in an LLP Agreement with specified grounds for exercising the power (such as the member becoming bankrupt, ceasing to hold a licence or regulatory authorisation to carry on the business, being guilty of serious misconduct or committing a material, serious or persistent breach of the LLP Agreement). In some LLPs, it may be appropriate to include additional grounds (such as refusing or wilfully neglecting to perform the duties of a member or deliberately damaging the reputation of the LLP).

The exercise of any power of expulsion should always be carefully considered and expert partnership law advice is highly recommended before taking such action.
6(f) Compulsory retirement upon reaching a specified retirement age?
- Yes
- No
compulsory retirement Compulsory Retirement Compulsory retirement means a compulsory retirement of a member from the LLP initiated by the LLP usually by notice to the member. upon reaching a specified retirement age?
A clause requiring a member to retire based on the member’s age amounts to unlawful age discrimination unless it is objectively justified as a proportionate means of achieving a legitimate aim. A legitimate aim may include staff recruitment and retention and workforce planning (i.e., the need to encourage promotion of the next generation of members) and to protect the dignity of older members (by enabling them to retire without expulsion Expulsion Expulsion means a forced retirement of a member from the LLP (usually without or with very little notice) based on specified grounds such as a serious breach of the LLP Agreement or being convicted of a criminal offence. based on performance).

The inclusion and retention of a mandatory retirement age in an LLP Agreement should be carefully considered and expert partnership law advice is highly recommended before enforcing or introducing such clauses as the law is evolving in this area.
7. FORMER MEMBERS
Does your LLP Agreement contain the following provisions in relation to the rights and obligations of Former Members Former Member Former Member means a member that has ceased to be a member of the LLP. ?
7(a) Enforceable non-compete restrictions to prevent the Former Member joining a competitor and supplying services to clients or customers of the LLP through the competitor?
- Yes
- No / Don't Know
Enforceable non-compete restrictions to prevent the Former Member Former Member Former Member means a member that has ceased to be a member of the LLP. joining a competitor and supplying services to clients or customers of the LLP through the competitor?
This provision is designed to protect the business of the LLP by preventing the Former Member Former Member Former Member means a member that has ceased to be a member of the LLP. from joining a competitor or setting up a business in competition with the LLP. The restriction must be reasonable and go no further than necessary to protect a legitimate interest of the LLP. This means that the restriction should be for a reasonable duration and be limited in its geographic reach (such as locations where the LLP/member actually operates). A non-compete restriction can be more difficult to enforce than a non-solicit or non-dealing restriction as it can effectively prevent an individual from earning a living. The inclusion or retention of a non-compete restriction in your LLP Agreement should be carefully considered and expert partnership law advice is highly recommended to ensure that such a restriction remains enforceable. If you do not have these restrictions or if you are unsure whether or not your provisions are enforceable, you should review the position in order to ensure your business is protected.
7(b) Enforceable non-poaching restrictions to prevent a Former Member encouraging an existing employee or member to leave the LLP?
- Yes
- No / Don't Know
Enforceable non-poaching restrictions to prevent a Former Member Former Member Former Member means a member that has ceased to be a member of the LLP. encouraging an existing employee or member to leave the LLP?
This provision is designed to prevent a Former Member Former Member Former Member means a member that has ceased to be a member of the LLP. from encouraging or enticing an existing employee and/or member from leaving the LLP. This can help to prevent team moves. The restriction must be reasonable and go no further than necessary to protect a legitimate interest of the LLP. This means that the restriction must be for a limited duration and should only capture employees that the Former Member Former Member Former Member means a member that has ceased to be a member of the LLP. has recently worked with and/or who are of a particular level of seniority. If you do not have these restrictions or if you are unsure whether or not your provisions are enforceable, you should review the position in order to ensure your business is protected.
7(c) Enforceable non-solicitation restrictions to prevent Former Members soliciting clients or prospective clients of the LLP?
- Yes
- No / Don't Know
Enforceable non-solicitation restrictions to prevent Former Members Former Member Former Member means a member that has ceased to be a member of the LLP. soliciting clients or prospective clients of the LLP?
This provision is designed to prevent a Former Member Former Member Former Member means a member that has ceased to be a member of the LLP. from soliciting or inducing the LLP’s clients or customers to move with the Former Member Former Member Former Member means a member that has ceased to be a member of the LLP. to another business. The restriction must be reasonable and go no further than necessary to protect a legitimate interest of the LLP. This usually means that the restriction must be for a limited duration and should only capture clients with whom the Former Member Former Member Former Member means a member that has ceased to be a member of the LLP. has had recent contact or dealings with. In some circumstances, the restriction may also apply to potential or former clients of the LLP and may be limited to clients in a particular geographic location. If you do not have these restrictions or if you are unsure whether or not your provisions are enforceable, you should review the position in order to ensure your business is protected.
7(d) Continuing confidentiality obligations on Former Members which prevents them from using and disclosing confidential information belonging to the LLP, its customers or clients and which include appropriate exclusions, such as to comply with law or make disclosures to enforcement agencies or medical professionals (both to ensure compliance with best practice and UK legal services regulator warning notices)?
- Yes
- No / Don't Know
Continuing confidentiality obligations on Former Members Former Member Former Member means a member that has ceased to be a member of the LLP. which prevents them from using and disclosing confidential information belonging to the LLP, its customers or clients and which include appropriate exclusions, such as to comply with law or make disclosures to enforcement agencies or medical professionals (both to ensure compliance with best practice and UK legal services regulator warning notices)?
Robust confidentiality provisions should be included in your LLP Agreement in order to protect the confidential information of the LLP and its clients and prevent a Former Member Former Member Former Member means a member that has ceased to be a member of the LLP. from disclosing such information or using it for their own purposes. If you do not have these provisions or if you are unsure if there are confidentiality obligations which continue to apply to Former Members, this should be reviewed. It is essential that these provisions include exclusions to allow disclosures in relevant circumstances (not least because the UK legal services regulator considers failure to include these as a serious regulatory issue).
7(e) Provisions governing the rights of Former Members who are classed as “Good Leavers” or “Bad Leavers?”
- Yes
- No
Provisions governing the rights of Former Members Former Member Former Member means a member that has ceased to be a member of the LLP. who are classed as “ Good Leavers Good Leaver A Good Leaver is typically a member who has retired in non-contentious circumstances such as a voluntary resignation or retirement upon reaching retirement age. ” or “ Bad Leavers? Bad Leaver A Bad Leaver is typically a member who has been expelled, compulsorily retired, resigned to join a competitor, or who has or is suspected to have breached restrictive covenants. ”
It is possible to specify different financial entitlements and obligations for Former Members Former Member Former Member means a member that has ceased to be a member of the LLP. depending on the circumstances of their exit.

Good Leavers Good Leaver A Good Leaver is typically a member who has retired in non-contentious circumstances such as a voluntary resignation or retirement upon reaching retirement age. are usually those who have exited in amicable circumstances.

Bad Leavers? Bad Leaver A Bad Leaver is typically a member who has been expelled, compulsorily retired, resigned to join a competitor, or who has or is suspected to have breached restrictive covenants. are usually members who have been compulsorily retired or expelled or members who have been found to have breached the LLP Agreement before or after leaving the LLP. Potential Bad Leavers? Bad Leaver A Bad Leaver is typically a member who has been expelled, compulsorily retired, resigned to join a competitor, or who has or is suspected to have breached restrictive covenants. can be deterred by less favourable exit terms than those being offered to Good Leavers Good Leaver A Good Leaver is typically a member who has retired in non-contentious circumstances such as a voluntary resignation or retirement upon reaching retirement age. . For example, the payment of LLP balances (including capital, tax reserves and undistributed profits) due to Bad Leavers? Bad Leaver A Bad Leaver is typically a member who has been expelled, compulsorily retired, resigned to join a competitor, or who has or is suspected to have breached restrictive covenants. can be deferred over a longer period than for Good Leavers Good Leaver A Good Leaver is typically a member who has retired in non-contentious circumstances such as a voluntary resignation or retirement upon reaching retirement age. .
8. DISPUTES
Does your LLP Agreement contain the following provisions in relation to an actual or potential dispute between a member and the LLP?
8(a) Can the members, management board or managing partner obtain legal advice in connection with an actual or potential dispute against a member and also keep the advice confidential from the member in question?
- Yes
- No
Can the members, management board or managing partner obtain legal advice in connection with an actual or potential dispute against a member and also keep the advice confidential from the member in question?
If the LLP obtains legal advice in respect of a potential legal claim by or against a member of the LLP, all members of the LLP (including the member to whom the legal claim relates) may be entitled to inspect a copy of the advice given to the LLP through their default right to access the books and records of the LLP.

In order to ensure that the LLP has the ability to seek and pay for legal advice without the risk of such advice being disclosed to the member it relates to, you should include provisions in your LLP Agreement which enable the management board or managing partner to assume the conduct of any claims by or against the LLP and authorise them to obtain privileged legal advice on behalf of the LLP and exclude any right of access to such advice by the member(s) involved in the dispute.
8(b) Power to suspend a member?
- Yes
- No
Power to suspend a member?
This power is often used where allegations of wrongdoing have been raised against a member. To enable a fair investigation of the allegations, it is important for the LLP to be able to require the member in question to be suspended (including limiting access to clients or employees).
8(c) A confidential arbitration procedure?
- Yes
- No
A confidential arbitration procedure?
Most LLP Agreements require disputes to be determined by arbitration rather than through the courts. In some cases, the LLP Agreement will set out a dispute resolution process that begins with an informal discussion or mediation before resorting to arbitration.

Arbitration proceedings are conducted in private. This can help protect the LLP and the member's reputation and personal and confidential information.

Arbitration tends to involve a less formal procedure than the court system and usually involves less costs.
9. SALE
(9) Does your LLP Agreement contain provisions governing a proposed sale of the LLP or its business and/or a merger of the LLP?
- Yes
- No
Does your LLP Agreement contain provisions governing a proposed sale of the LLP or its business and/or a merger of the LLP?
Before commencing any sale or merger process, it is helpful to consider and review the process for approving a potential sale or merger in your LLP Agreement to help prevent issues which can hinder the sale or merger negotiations.

For example, an excessively high threshold for approving a sale or merger may be unachievable and can impede the LLP’s strategic ambitions.

Thought should also be given as to what should happen to a member that does not support a merger or sale that has been approved by the requisite majority. Often, the member may be compulsorily retired. This power can be useful to ensure that the member does not disrupt the merger or sale.
10. OTHER LEGAL MATTERS
Does your LLP Agreement contain the following general provisions?
(10)a A disapplication of Section 994 of the Companies Act 2006?
- Yes
- No
A disapplication of Section 994 Section 994 Section 994 allows a member to bring a claim in court that their interests are being unfairly prejudiced by the LLP or members. This right can only be excluded by agreement in writing by the members. of the Companies Act 2006?
Section 994 allows a member of an LLP to bring a claim in court on the basis that their interests are being or have been unfairly prejudiced by the LLP. This right can only be excluded by agreement in writing of the members of the LLP. If this right is not properly excluded, a disgruntled member may be able to bring a claim against the LLP (or threaten to do so) in respect of a decision or action taken by the LLP, which can disrupt the LLP’s business and involve significant costs and management time in defending the claim.
(10)b Exclusion of Regulation 7 of the Limited Liability Partnerships Regulations 2001/1090?
- Yes
- No
Exclusion of Regulation 7 Regulation 7 Regulation 7 sets out the rights and duties which will govern the LLP and its members in the absence of a written or oral agreement. of the Limited Liability Partnerships Regulations 2001/1090?
In the absence of a written or oral agreement relating to the LLP, the rules in Regulation 7 will govern the LLP. These default rules are often undesirable for most LLPs (such as equal sharing of profits and capital of the LLP, new members to be admitted by unanimous consent of the members and a right for every member to take part in the management of the LLP).

It is advisable for the LLP Agreement to expressly exclude Regulation 7 to ensure that none of the default provisions will apply and make clear that the terms of the LLP Agreement will govern the rights and obligations of the LLP and its members.
(10)c All new members must adhere to the LLP agreement in writing?
- Yes
- No
All new members must adhere to the LLP agreement in writing?
New members should adhere to the terms of the LLP agreement on or before they join the LLP. As well as ensuing that all members are playing by the same rules, this avoids scope for confusion and disputes, and also ensures that key protections for the LLP, such as the disapplication of Section 994, are effective.

CHECK YOUR LLP AGREEMENT

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1. GOVERNANCE AND DECISION-MAKING

Check Your LLP

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1. GOVERNANCE AND DECISION-MAKING

2. PROFITS AND LOSSES

3. CAPITAL

4. MEMBERS’ DUTIES, OBLIGATIONS AND RESTRICTIONS

5. MEMBER BENEFITS

6. MEMBER EXIT

7. FORMER MEMBERS

8. DISPUTES

9. SALE

10. OTHER LEGAL MATTERS