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Public Bill Committee Debates

Draft Limited Liability Partnerships (Amendment) Regulations 2007

The Committee consisted of the following Members:

Chairman: Mr. Mike Weir
Blunt, Mr. Crispin (Reigate) (Con)
Borrow, Mr. David S. (South Ribble) (Lab)
Burt, Lorely (Solihull) (LD)
Chapman, Ben (Wirral, South) (Lab)
Crabb, Mr. Stephen (Preseli Pembrokeshire) (Con)
Djanogly, Mr. Jonathan (Huntingdon) (Con)
Dorrell, Mr. Stephen (Charnwood) (Con)
Duddridge, James (Rochford and Southend, East) (Con)
Hoey, Kate (Vauxhall) (Lab)
McKechin, Ann (Glasgow, North) (Lab)
Milburn, Mr. Alan (Darlington) (Lab)
Öpik, Lembit (Montgomeryshire) (LD)
Pound, Stephen (Ealing, North) (Lab)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Timms, Mr. Stephen (Minister for Competitiveness)
Todd, Mr. Mark (South Derbyshire) (Lab)
Williams, Mrs. Betty (Conwy) (Lab)
Susan Griffiths, Committee Clerk
† attended the Committee

Seventh Delegated Legislation Committee

Wednesday 11 July 2007

[Mr. Mike Weir in the Chair]

Draft Limited Liability Partnerships (Amendment) Regulations 2007

2.30 pm
The Minister for Competitiveness (Mr. Stephen Timms): I beg to move,
That the Committee has considered the draft Limited Liability Partnerships (Amendment) Regulations 2007.
I begin by bidding you a warm welcome, Mr. Weir. The regulations are designed to strengthen the investigation regime operated by the companies investigation branch at the Department for Business, Enterprise and Regulatory Reform in respect of limited liability partnerships. A limited liability partnership is a relatively new corporate vehicle introduced through the Limited Liability Partnerships Act 2000 and the subsequent regulations in 2001. It gives the same benefits of limited liability as for a company, but allows its members the flexibility of organising their internal structure as a traditional partnership.
The LLP structure has appealed to businesses of all sizes throughout a range of sectors and about 22,000 of them are on the register at Companies House. Some aspects of the legal framework were designed especially for the new vehicle and they are contained mainly in the Limited Liability Partnerships Act itself. In other respects, however, when it is sensible to do so, an LLP is treated like a company. That has been achieved by applying to limited liability partnerships under the 2001 regulations sections of the Companies Act 1985 and other legislation, such as the Insolvency Act 1986, either as they stand or with appropriate modifications.
One of the areas where the requirements for limited liability partnerships and companies are much the same is the investigation regime. When the limited liability partnership was introduced, the bulk of part XIV of the 1985 Act on the investigation of companies was applied to limited liability partnerships by the 2001 regulations, leaving aside those provisions concerned with share dealing, which are not relevant because they do not have shares.
Part XIV of the 1985 Act gives the Secretary of State powers to appoint inspectors or investigators to investigate companies and requisition documents when, for example, there are grounds for suspicion of misconduct. We want consistency in that area between the treatment of LLPs and companies. Since the 2001 regulations were made, we have introduced the Companies (Audit, Investigations and Community Enterprise) Act 2004 to ensure confidence in the United Kingdom corporate framework following the corporate scandals in the United States. That strengthened the investigation regime by amending part XIV of the 1985 Act to give more powers to investigators of companies. For example, it gave investigators the power to remain on premises if that would assist their investigation, and introduced more effective sanctions when people failed to comply. It did not change the basis for inspections or substantively change the grounds for an investigation.
Where amendments in the 2004 Act affect provisions under the 1985 Act that are already applied to limited liability partnerships by the 2001 regulations, the 2004 Act amendments apply automatically to limited liability partnerships. Where, however, new provisions were inserted into the 1985 Act by the 2004 Act, it is necessary to apply them expressly to limited liability partnerships by amending the 2001 regulations to refer to the provisions inserted by the 2004 Act. Unfortunately, the new investigation provisions introduced by the 2004 Act were not applied to limited liability partnerships at the time that that legislation was passed. That oversight came to light when considering how the new Companies Act 2006 should be applied to limited liability partnerships. The aim of the regulations that we are discussing is to apply the new investigation provisions to such partnerships.
My right hon. Friend the Member for Barking (Margaret Hodge), my predecessor, consulted earlier this year on a proposal to apply the investigation provisions to LLPs. Fifteen respondents commented and all supported the change—a view that I have no doubt will be held widely in Committee today.
As it has turned out, the companies investigation branch has not yet had to use the new powers. Indeed, there have not been many investigations of limited liability partnerships. However, should investigators need to investigate an LLP, the regulations will give them the full powers that they already have to investigate companies. I commend the regulations to the Committee.
2.35 pm
Mr. Jonathan Djanogly (Huntingdon) (Con): I welcome the Minister to his new appointment. This is a nice, gentle statutory instrument to kick off the many measures coming in the next few months, not least those arising from the Companies Act 2006. We support the Government’s position and note that there has been full consultation, the response to which has been positive. We agree that as far as possible the regime for investigations should be the same for companies as for limited liability partnerships, for the sake of consistency and other obvious reasons. To that extent, we are happy with the statutory instrument.
2.36 pm
Lorely Burt (Solihull) (LD): I shall be equally short and sweet. I thank the Minister for his explanation, which lost me at times, but I am sure that the matter has been gone into thoroughly by his officials. The oversight was unfortunate, but we support the principle that the investigation provisions should apply equally to LLPs. That is all that I have to say; the Liberal Democrats support the provisions.
Question put and agreed to.
That the Committee has considered the draft Limited Liability Partnerships (Amendment) Regulations 2007.
Committee rose at twenty-four minutes to Three o’clock.

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