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Lord Phillips of Sudbury : Before the Minister sits down, can he give me a positive reason why it would not be a good idea to require the business address and the residential address? We are not talking about precisely the same animal as a limited liability company. This is an extension of state privilege to a class of business that hitherto has never been thought to be entitled to it--non-capitalist businesses.

Lord McIntosh of Haringey: This refers to the relationship with a body corporate which has not existed before. If the noble Lord relies on the analogy with partnerships, a person carrying out business with a partner in a partnership clearly carries out business directly with one person. It is common sense to seek a proper co-ordinate in order to track down that person if there is a problem. Here a body corporate is being created, which is exactly analogous to a limited company and it seems proper that we should mirror the requirements of company legislation.

The noble Lord asked for a positive reason. I suppose it is true to say that already there is a certain amount of work for the Registrar of Companies in recording changes of residential address. That work would increase substantially if he had to record changes of business address as well. Such changes cost money; they would cost the taxpayers money. However, I do not advance those arguments as overwhelming reasons.

Lord Phillips of Sudbury: I am not surprised by the Minister's reply, but I am disappointed. I believe that the Minister underestimates the degree of reckless incompetence and fraud at the bottom end of the business market behind limited liability. I do not accept his argument that too much expense would be involved. Too many people try to get away with secreting their business addresses as well as their residential addresses.

Lord McIntosh of Haringey: I do not want to prejudge what the noble Lord wants to do with his amendment, but is it not true that a lot of business addresses are concealed as box numbers? People can give a business address and they would still be covered legitimately by the amendment and it still would not do any good.

Lord Phillips of Sudbury: With respect, that is not the case. As a result of this amendment, they would

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have to give their real business address and not some fictitious business address. However, I withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 8:

    Page 2, line 15, at end insert--

("(3) If a person makes a false statement under subsection (1)(c) which he--
(a) knows to be false, or
(b) does not believe to be true,
he commits an offence.
(4) A person guilty of an offence under subsection (3) is liable--
(a) on summary conviction, to imprisonment for a period not exceeding six months or a fine not exceeding the statutory maximum, or to both, or
(b) on conviction on indictment, to imprisonment for a period not exceeding two years or a fine, or to both.").

On Question, amendment agreed to.

Clause 2, as amended, agreed to.

Clause 3 [Incorporation by registration]:

Lord McIntosh of Haringey moved Amendment No. 9:

    Page 2, line 16, leave out ("requirement imposed by paragraph (b) of subsection (1) of section 2 has") and insert ("requirements imposed by paragraphs (b) and (c) of subsection (1) of section 2 have").

The noble Lord said: Amendment No. 9 was spoken to with Amendment No. 5. I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendments Nos. 10 and 11:

    Page 2, line 18, leave out from ("unless") to end of line 19 and insert ("the requirement imposed by paragraph (a) of that subsection has not").

    Page 2, line 23, at end insert--

("( ) The registrar may accept the statement delivered under paragraph (c) of subsection (1) of section 2 as sufficient evidence that the requirement imposed by paragraph (a) of that subsection has been complied with.").

The noble Lord said: With the leave of the House, I shall move Amendments Nos. 10 and 11 en bloc. I beg to move.

On Question, amendments agreed to.

Clause 3, as amended, agreed to.

Clause 4 [Members]:

Lord McIntosh of Haringey moved Amendment No. 12:

    Page 2, line 38, at end insert--

("(4) A member of a limited liability partnership shall not be regarded for any purpose as employed by the limited liability partnership unless, if he and the other members were partners in a partnership (rather than members of a limited liability partnership), he would be regarded for that purpose as employed by the partnership.").

The noble Lord said: The noble Baroness, Lady Buscombe, raised at Second Reading the need to have an express clause in the Bill to ensure that members are

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not employees of the limited liability partnership; indeed, she was reflecting views expressed during the public consultation exercise that a member would be an employee and thus be entitled to protection under employment law. I am happy, therefore, to bring forward an amendment which makes it clear on the face of the Bill that a member is not an employee of the limited liability partnership. I beg to move.

Baroness Buscombe: I thank the Minister for that explanation and for bringing forward this amendment. However, notwithstanding that I am a lawyer, I find it difficult to understand this clause. I have read it more than half a dozen times and wonder whether we can improve on the wording, if I may be so blunt.

Is the clause saying that members can be employed so partners can be employed? What about designated members? I confess that I prefer--although I know the Minister will not warm to this--Amendment No. 17 wherein it becomes clear that the members are as partners and therefore subject to partnership law unless both the incorporation document makes it clear to the contrary together with the provisions of any agreement express or implied between the members of the LLP. As I have heard the Minister say in relation to Clause 1 that there is a move to exclude partnership law as far as possible in preference to company law, I therefore feel that I shall not get far with that amendment either.

However, I suggest that we look again at the wording, wherever possible, to simplify the legislation so that people in the community who want to take part in, and establish, a vehicle such as an LLP can understand with relative ease the parameters of a limited liability partnership and what it really stands for.

Lord Phillips of Sudbury: I identify myself with the remarks of the noble Baroness, Lady Buscombe. Amendment No. 12 is work for lawyers, however well intentioned.

Lord McIntosh of Haringey: Two issues arise here. The first is where the amendment should be placed in the Bill. The noble Baroness rightly identified our wish to have it placed here rather than where it can be seen as an amendment to partnership law more generally.

On the issue of the wording, I only wish it were possible to have a simple definition of an "employee". The noble Baroness did not have the misfortune of sitting through as much of the Employment Relations Bill last summer as I did. We spent many happy hours discussing the definition of "employee" and I fear that this is not the legislation to resolve those questions which could not be resolved at that time.

There is not a single test to determine whether or not a person is an employee. Many factors are taken into account. Sharing profits, for example, is prima facie evidence that a person is a partner. If the losses as well as the profits are shared, the presumption is even stronger. But when a person receives both a salary and

24 Jan 2000 : Column 1361

a share of the profits, there is strong evidence that he is an employee. That was an important consideration when we dealt with employment relations legislation.

There have been requests that any statutory provision should state that members are not employees unless there is an express agreement to the contrary. I believe that is what the noble Baroness is getting at in Amendment No. 17. We feel that that is going too far. If a person receives a salary, does not share profits and exhibits all the characteristics of an employee, it is inappropriate for the LLP to exclude the employee's rights in relation to that person. In addition, such an approach would be inconsistent with the employment law approach under which the description which the parties apply to the relationship--again coming back to Amendment No. 17--is not conclusive.

The noble Baroness referred to designated members. A designated member is a member and is therefore covered by the clause. The intention is not to put a member of an LLP in a different position from that of a partner in a partnership. I found the wording difficult and I promise to look at it again to see whether it can be made clearer. However, I insist on the thinking behind the amendment which is that much different from Amendment No. 17.

On Question, amendment agreed to.

5.15 p.m.

Lord Goodhart moved Amendment No. 13:

    Page 2, line 38, at end insert--

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