| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
On Question, amendments agreed to.
Clause 1, as amended, agreed to.
Clause 2 [Incorporation document etc.]:
Lord McIntosh of Haringey moved Amendment No. 5:
The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 6, 8, 9, 10, 11, 48, 50 and 51. These amendments follow on the consultation document which was published originally in 1997 and which said that to secure incorporation as a limited liability partnership, founding members would have to submit to the registrar a document which included a statement in prescribed form that the business was being formed with a view to profit. That follows the scheme of partnerships. Again, as I said a few moments ago, we do not intend to alter that scheme.
The wording did not appear in the intervening draft since 1997, but we believe that it is necessary to restore those words. We do so for two reasons. First, we want to make it clear that, in our view, limited liability partnerships are unsuitable for charitable organisations. In view of the expertise of the noble Lord, Lord Phillips, in that area, I have written to him on that subject. I hope that he will agree that that is the right course to take. Again, it does not extend the
There was no intention in the genesis and evolution of limited liability partnerships to provide for their use by organisations which were not operating with a view to profit and we do not see the entity as appropriate for that purpose. No interest has been expressed in limited liability partnerships by such entities in any of the consultations.
As a result of requiring the founding members to associate for the carrying on of a lawful business with a view to profit, it will be necessary on registration for them to present a statement that they have complied with the requirements for incorporation. There will be a penalty for making a false statement, and the registrar may accept the statement as sufficient evidence of their compliance. That follows the treatment of companies.
I could say more about charities and not-for-profit organisations. Indeed, if any Member of the Committee has any questions about that, I shall be happy to respond. But on the basis of what I have said, I hope that it will be recognised that those amendments do go back to the original intention of the exercise which was first consulted on in 1997. They make it explicit, as perhaps it will be said it always should have been, and I hope that the amendments will find favour with the Committee. I beg to move.
Lord Phillips of Sudbury: I thank the noble Lord, Lord McIntosh, for the remarks that he has made vis-a-vis the amendment to exclude charities from the purview of the Bill. Perhaps I may say that his thinking is impeccable. Although charitable status in this country does not attach to a particular format, which sets us apart entirely from the Napoleonic code countries, I believe that it is absolutely right to exclude charities from the provisions of this Bill.
I should like to raise a rather boring point on Amendment No. 6. Perhaps the Minister will consider whether the wording in the proposed paragraph (c) does not give a slightly wrong idea of what is intended. At present the amendment refers to,
Lord McIntosh of Haringey: There are two possible answers to that. The first is that the wording comes
However, that does not absolve me from giving my second answer, which is that I shall look at it again to see whether anything further needs to be done. I commend Amendment No. 5 to the Committee.
On Question, amendment agreed to.
Lord McIntosh of Haringey moved Amendment No. 6:
On Question, amendment agreed to.
Lord Phillips of Sudbury moved Amendment No. 7:
The noble Lord said: In moving this amendment, I shall speak also to Amendment No. 31. I do not wish to inflict on the Committee a repetition of what I said on Second Reading, although it is quite true, as the Minister said a few moments ago, that apparently I am the only Member of this House who finds the whole of this measure superfluous and, indeed, contrary to the public interest.
It is interesting that only last week I was sitting round a board table of one of the very large firms of chartered accountants which are, of course, the main progenitors of this matter. At that meeting, the directors were required to sign to a limitation of their liability in respect of any claim arising out of their services. Indeed, that is what they do--and what they could and should continue to do. I shall not burden the House with the background to the matter. It would be improper to do so. These two amendments are small, but disproportionately effective if, like me, the House seeks to discourage anyone from abusing the limited liability privilege that the Bill will bestow upon partners. The same point is raised in Amendment No. 31 to Clause 9.
As a long-practising solicitor who has been engaged in commercial and partnership work all his practising life, I know that there is a peculiar sensitivity about declaring home addresses on the part of those who sign up as partners. I believe it is because people want to retain a separation between their business lives and the rest of their lives.
The simple requirement that any partner under a limited liability partnership should have on record his or her business address and his or her home address would be desirable and proper and would act as a minor but significant incentive to the partners concerned to run the partnerships properly. More importantly, I believe that it would give members of the public who had claims against any such person a better prospect of seeing such claims met.
Although it has been said that large solicitors' and accountancy partnerships are the main promoters of this Bill, when passed the Bill will apply to a vast number of small and very small businesses. My expectation is that accountants will advise small businesses--for example, small building businesses--to utilise the LLP precisely because, as the Explanatory Notes indicate,
We already have the slackest limited liability regime in the world. Only in this country can one walk into a law stationers and purchase a limited liability company "off-the-shelf", and undoubtedly, that will be the case with these LLPs. In Germany, it takes at least 13 weeks to get through the paperwork and quite a considerable effort is required to ensure that everything is done properly and with due solemnity.
I believe that those two requirements, and a couple of others to which I shall speak later, will act as minor but significant deterrents to those who inevitably will abuse the new limited liability arrangements. I beg to move.
Lord McIntosh of Haringey: I am interested in what the noble Lord says. The complaint that I heard about our provisions was that they were too draconian, rather than not draconian enough. There has always been a trickle, rather than a flood, of complaints by company directors that their security is put at risk by having to give their home addresses in legal documents. However, I do not hear that from the noble Lord, Lord Phillips.
This is a perfect example of what I said in relation to Amendment No. 1. We are making as few amendments to company legislation as possible, not least because the company law review, which started in 1998, is under way. We shall go out to full consultation within the next few months and we shall consider all these matters in great detail.
Here we have required that the incorporation document gives the names and addresses of all members of a limited liability company and that the registrar is notified of any changes in a member's address. That mirrors exactly the provisions of the Companies Act 1985, which in Section 289 requires directors to disclose their "usual residential address". That will be the case for members of a limited liability partnership because Clause 17 of the Bill says,
I know that the objections of the noble Lord, Lord Phillips, go further and that he describes our regime as the slackest limited company regime in the world. However, I am not tempted by his example of Germany where he said that it takes a minimum of 13 weeks to set up a limited company. That does not seem to me to be a desirable objective. If parts of our company legislation are slack and, therefore, damaging, and if there are problems about giving addresses, they can be dealt with in the company law review. In the mean time, it seems right for us to mirror company legislation in this Bill. I ask the noble Lord not to press his amendment.
( ) The members of a limited liability partnership have such liability").
Page 1, line 27, after ("persons") insert ("associated for carrying on a lawful business with a view to profit").
"carrying on a business in common with a view of profit".
Instead of "in common" we have used the word "associated" and instead of "a view of profit" we have used the phrase "with a view to profit". That is the change between 1890 and 2000. I do not believe that it has any other impact. I am always reminded of the sign which appears in some company offices which says, "This is a non-profit company. It wasn't intended that way but that's the way it's worked out". That is why we must use the words "with a view to profit" instead of "non-profit".
"either a solicitor engaged in the formation of the limited liability partnership or anyone named in the incorporation document as a person who is to be a member",
and then it goes on. That gives a futuristic intention or meaning which is not intended. What is intended is that,
"either a solicitor engaged in the formation of the limited liability partnership",
or anyone who subscribes to the incorporation document is capable of signing that statement. I draw that to the Minister's intention and hope that it will be dealt with in due course.
Page 2, line 3, at end insert (", and
(c) there must have been so delivered a statement in the form prescribed by regulations, made by either a solicitor engaged in the formation of the limited liability partnership or anyone named in the incorporation document as a person who is to be a member, that the requirement imposed by paragraph (a) has been complied with").
Page 2, line 11, after ("and") insert ("home address and business").
"The essential feature of an LLP is that it combines the organisational flexibility and tax status of a partnership with limited liability for its members".
That organisational flexibility will be of tremendous appeal to small businesses, some of which are recklessly and incompetently run, to take that part rather than the full limited liability part which is infinitely more onerous in its regulatory requirements.
5 p.m.
"'address', in relation to a member of a limited liability partnership, means ... his usual residential address".
We do not think that there is a case for members of a limited liability partnership to be treated any differently from a company director by requiring them to give both their home address and their business address.
Next Section
Back to Table of Contents
Lords Hansard Home Page