Limited Liability Partnerships Bill [H.L.] - continued        House of Lords
Membership - continued

back to previous text
 
Members as agents.     6. - (1) Every member of a limited liability partnership is the agent of the limited liability partnership.
 
      (2) But a limited liability partnership is not bound by anything done by a member in dealing with a person if-
 
 
    (a) the member in fact has no authority to act for the limited liability partnership by doing that thing, and
 
    (b) the person knows that he has no authority or does not know or believe him to be a member of the limited liability partnership.
      (3) Where a person has ceased to be a member of a limited liability partnership, the former member is to be regarded (in relation to any person dealing with the limited liability partnership) as still being a member of the limited liability partnership unless-
 
 
    (a) the person has notice that the former member has ceased to be a member of the limited liability partnership, or
 
    (b) notice that the former member has ceased to be a member of the limited liability partnership has been delivered to the registrar.
      (4) Where a member of a limited liability partnership is liable to any person (other than another member of the limited liability partnership) as a result of a wrongful act or omission of his in the course of the business of the limited liability partnership or with its authority, the limited liability partnership is liable to the same extent as the member.
 
Ex-members.     7. - (1) This section applies where a member of a limited liability partnership has either ceased to be a member or-
 
 
    (a) has died,
 
    (b) has become bankrupt or had his estate sequestrated or has been wound up,
 
    (c) has granted a trust deed for the benefit of his creditors, or
 
    (d) has assigned the whole or any part of his share in the limited liability partnership (absolutely or by way of charge or security).
      (2) In such an event the former member or-
 
 
    (a) his personal representative,
 
    (b) his trustee in bankruptcy or permanent or interim trustee (within the meaning of the Bankruptcy (Scotland) Act 1985) or liquidator,
 
    (c) his trustee under the trust deed for the benefit of his creditors, or
 
    (d) his assignee,
  may not interfere in the management or administration of any business or affairs of the limited liability partnership but may receive from the limited liability partnership any amount to which the former member, or member, would have been entitled but for that event.
 
Designated members.     8. - (1) If the incorporation document specifies who are to be designated members-
 
 
    (a) they are designated members on incorporation, and
 
    (b) any member may become a designated member by and in accordance with an agreement with the other members,
  and a member may cease to be a designated member in accordance with an agreement with the other members.
 
      (2) But if there would otherwise be no designated members, or only one, every member is a designated member.
 
      (3) If the incorporation document states that every person who from time to time is a member of the limited liability partnership is a designated member, every member is a designated member.
 
      (4) A limited liability partnership may at any time deliver to the registrar-
 
 
    (a) notice that specified members are to be designated members, or
 
    (b) notice that every person who from time to time is a member of the limited liability partnership is a designated member,
  and, once it is delivered, subsection (1) (apart from paragraph (a)) and subsection (2), or subsection (3), shall have effect as if that were stated in the incorporation document.
 
      (5) A notice delivered under subsection (4)-
 
 
    (a) shall be in a form approved by the registrar, and
 
    (b) shall be signed by a designated member of the limited liability partnership or authenticated in a manner approved by the registrar.
      (6) A person ceases to be a designated member if he ceases to be a member.
 
Registration of membership changes.     9. - (1) A limited liability partnership must ensure that-
 
 
    (a) where a person becomes or ceases to be a member or designated member, notice is delivered to the registrar within fourteen days, and
 
    (b) where there is any change in the name or address of a member, notice is delivered to the registrar within 28 days.
      (2) Where all the members from time to time of a limited liability partnership are designated members, subsection (1)(a) does not require notice that a person has become or ceased to be a designated member as well as a member.
 
      (3) A notice delivered under subsection (1)-
 
 
    (a) shall be in a form approved by the registrar, and
 
    (b) shall be signed by a designated member of the limited liability partnership or authenticated in a manner approved by the registrar,
  and, if it relates to a person becoming a member or designated member, shall contain a statement that he consents to becoming a member or designated member signed by him or authenticated in a manner approved by the registrar.
 
      (4) If a limited liability partnership fails to comply with subsection (1), the partnership and every designated member commits an offence.
 
      (5) But it is a defence for a designated member charged with an offence under subsection (4) to prove that he took all reasonable steps for securing that subsection (1) was complied with.
 
      (6) A person guilty of an offence under subsection (4) is liable on summary conviction to a fine not exceeding level 5 on the standard scale.
 
 
Taxation
Income tax and chargeable gains.     10. - (1) In the Income and Corporation Taxes Act 1988, after section 118 insert-
 
 

"Limited liability partnerships
Treatment of limited liability partnerships.     118ZA. For the purposes of the Tax Acts, a trade, profession or business carried on by a limited liability partnership with a view to profit shall be treated as carried on in partnership by its members (and not by the limited liability partnership as such); and, accordingly, the property of the limited liability partnership shall be treated for those purposes as partnership property.
 
Restriction on relief.     118ZB. Sections 117 and 118 have effect in relation to a member of a limited liability partnership as in relation to a limited partner, but subject to sections 118ZC and 118ZD.
 
Member's contribution to trade.     118ZC. - (1) Subsection (3) of section 117 does not have effect in relation to a member of a limited liability partnership.
 
      (2) But, for the purposes of that section and section 118, such a member's contribution to a trade at any time ("the relevant time") is the greater of-
 
 
    (a) the amount subscribed by him, and
 
    (b) the amount of his liability on a winding up.
      (3) The amount subscribed by a member of a limited liability partnership is the amount which he has contributed to the limited liability partnership as capital, less so much of that amount (if any) as-
 
 
    (a) he has previously, directly or indirectly, drawn out or received back,
 
    (b) he so draws out or receives back during the period of five years beginning with the relevant time,
 
    (c) he is or may be entitled so to draw out or receive back at any time when he is a member of the limited liability partnership, or
 
    (d) he is or may be entitled to require another person to reimburse to him.
      (4) The amount of the liability of a member of a limited liability partnership on a winding up is the amount which-
 
 
    (a) he is liable to contribute to the assets of the limited liability partnership in the event of its being wound up, and
 
    (b) he remains liable so to contribute for the period of at least five years beginning with the relevant time (or until it is wound up, if that happens before the end of that period).
Carry forward of unrelieved losses.     118ZD. - (1) Where amounts relating to a trade carried on by a member of a limited liability partnership are, in any one or more chargeable periods, prevented from being given or allowed by section 117 or 118 as it applies otherwise than by virtue of this section (his "total unrelieved loss"), subsection (2) applies in each subsequent chargeable period in which-
 
 
    (a) he carries on the trade as a member of the limited liability partnership, and
 
    (b) any of his total unrelieved loss remains outstanding.
      (2) Sections 380, 381, 393A(1) and 403 (and sections 117 and 118 as they apply in relation to those sections) shall have effect in the subsequent chargeable period as if-
 
 
    (a) any loss sustained or incurred by the member in the trade in that chargeable period were increased by an amount equal to so much of his total unrelieved loss as remains outstanding in that period, or
 
    (b) (if no loss is so sustained or incurred) a loss of that amount were so sustained or incurred.
      (3) To ascertain whether any (and, if so, how much) of a member's total unrelieved loss remains outstanding in the subsequent chargeable period, deduct from the amount of his total unrelieved loss the aggregate of-
 
 
    (a) any relief given under any provision of the Tax Acts (otherwise than as a result of subsection (2)) in respect of his total unrelieved loss in that or any previous chargeable period, and
 
    (b) any amount given or allowed in respect of his total unrelieved loss as a result of subsection (2) in any previous chargeable period (or which would have been so given or allowed had a claim been made)."
      (2) In section 362(2)(a) of that Act (loan to buy into partnership), after "partner" insert "in a limited partnership registered under the Limited Partnerships Act 1907".
 
      (3) In the Taxation of Chargeable Gains Act 1992, after section 59 insert-
 
 
"Limited liability partnerships.     59A. - (1) Where a limited liability partnership carries on a trade or business with a view to profit-
 
    (a) assets held by the limited liability partnership shall be treated for the purposes of tax in respect of chargeable gains as held by its members as partners, and
 
    (b) any dealings by the limited liability partnership shall be treated for those purposes as dealings by its members in partnership (and not by the limited liability partnership as such),
  and tax in respect of chargeable gains accruing to the members of the limited liability partnership on the disposal of any of its assets shall be assessed and charged on them separately.
 
      (2) Where subsection (1) ceases to apply in relation to a limited liability partnership with the effect that tax is assessed and charged-
 
 
    (a) on the limited liability partnership (as a company) in respect of chargeable gains accruing on the disposal of any of its assets, and
 
    (b) on the members in respect of chargeable gains accruing on the disposal of any of their capital interests in the limited liability partnership,
  it shall be assessed and charged on the limited liability partnership as if subsection (1) had never applied in relation to it.
 
      (3) Neither the commencement of the application of subsection (1) nor the cessation of its application in relation to a limited liability partnership is to be taken as giving rise to the disposal of any assets by it or any of its members."
 
      (4) After section 156 of that Act insert-
 
 
"Cessation of trade by limited liability partnership.     156A. - (1) Where, immediately before the time of cessation of trade, a member of a limited liability partnership holds an asset, or an interest in an asset, acquired by him for a consideration treated as reduced under section 152 or 153, he shall be treated as if a chargeable gain equal to the amount of the reduction accrued to him immediately before that time.
 
    (2) Where, as a result of section 154(2), a chargeable gain on the disposal of an asset, or an interest in an asset, by a member of a limited liability partnership has not accrued before the time of cessation of trade, the member shall be treated as if the chargeable gain accrued immediately before that time.
 
      (3) In this section "the time of cessation of trade", in relation to a limited liability partnership, means the time when section 59A(1) ceases to apply in relation to the limited liability partnership."
 
Inheritance tax.     11. In the Inheritance Tax Act 1984, after section 267 insert-
 
 
"Limited liability partnerships.     267A. For the purposes of this Act and any other enactments relating to inheritance tax-
 
    (a) property to which a limited liability partnership is entitled, or which it occupies or uses, shall be treated as property to which its members are entitled, or which they occupy or use, as partners,
 
    (b) any business carried on by a limited liability partnership shall be treated as carried on in partnership by its members,
 
    (c) incorporation, change in membership or dissolution of a limited liability partnership shall be treated as formation, alteration or dissolution of a partnership, and
 
    (d) any transfer of value made by or to a limited liability partnership shall be treated as made by or to its members in partnership (and not by or to the limited liability partnership as such)."
 
previous section contents continue
 
House of Lords home page Houses of Parliament home page House of Commons home page search page enquiries

© Parliamentary copyright 2000
Prepared 7 March 2000