Insolvency options for LLPs
The Limited Liability Partnership Act 2000, which came into force on the 6th April 2001, introduced a new business vehicle, which although it has the “Partnership” label, is in fact a body corporate, with many similarities to Limited Companies-LTD.
A Limited Liability Partnership (LLP) is a legal entity, a body corporate entirely separate to its members. (Partners) The LLP and not its members will be liable to third parties. LLPs can enter into CVA’s, Administrations, Administrative Receiverships and voluntary and compulsory Liquidations.
Despite their name of Limited Liability Partnerships, it is worth noting that partnership law does not apply to LLPs. In a partnership, each partner has an unlimited liability to third parties for the business debts, but in an LLP each member is liable only to contribute to the assets of the LLP, as specified in the LLP member’s agreement.
However, there are a few peculiarities with winding up LLPs that are not included in the rules for Ltd companies. Under section 214A of the Insolvency Act 1986, a liquidator can “claw back” withdrawals made by the LLP members(past and present)over the 2 years preceding the commencement of the winding up. The various provisions of the LLP members agreement can play an important role as to individual members liabilities under insolvency legislation.
Subject to a few, but important exceptions, the options available for Limited companies, generally apply to LLPs