Limited Liability Partnership - Members and Designated Members

The Limited Liability Partnership Act 2000 generally allows two or more persons associated for carrying on a lawful business with a view to profit to form a limited liability partnership by subscribing to its incorporation document - Form LLP 2. However, limited liability partnerships are not available for all activities such as non profit making activities.

Every limited liability partnership must have at least two, formally appointed, designated members at all times. If there are fewer than two designated members then every member is deemed to be a designated member.

With the agreement of the other members, a member may become a designated member at any time. Designated members have the same rights and duties towards the limited liability partnership as any other member. These mutual rights and duties are governed by the limited liability partnership agreement and the general law. However, the law also places extra responsibilities on designated members. In particular, designated members are responsible for:

  • appointing an auditor (if one is needed)
  • signing the accounts on behalf of the members
  • delivering the accounts to the Registrar
  • notifying the Registrar of any membership changes or change to the registered office address or name of the limited liability partnership
  • preparing, signing and delivering to the registrar an annual return (Form LLP363); and acting on behalf of the limited liability partnership if it is wound up and dissolved.

Designated members are also accountable in law for failing to carry out these legal responsibilities.

Members and Designated Members

There are no shareholders in an LLP. Instead there are members and they are identified in the initial incorporation document with subsequent changes to the membership being notified within 14 days of the event occurring.

Any person meaning any natural or legal person, may be a member of an LLP and the registrar of companies is not concerned with whether an individual member is acting in a personal or representative capacity (although the LLP agreement, discussed below, may address such issues). For entities other than individuals, the key issue is whether they have legal personality. If they have, they may be a member of an LLP, so any body corporate, such as a company registered under the Companies Act 1985, whether limited by shares or limited by guarantee, and whether acting on its own behalf or as a trustee, may be a member.

The legislation also requires that two or more of the members be identified as the designated members. The designated members have statutory responsibility for certain tasks and are subject personally to sanctions (typically a fine) in the event of default. The designated members are not the management team of the LLP (management is discussed below) but are responsible for these defined statutory tasks which include:

  • signing the accounts
  • delivering the accounts to the registrar of companies
  • appointment and removal of the auditors (if required)
  • notification of membership changes (and changes to the registered office) to the registrar of companies
  • preparing, signing and delivering the annual return
  • applying for the LLP to be struck off the register

In default of notification to the registrar of companies of the designated members, all members are designated members. Given this default position and the tasks imposed on designated members, anyone who is a member of an LLP should check that there are designated members.

Members' Obligations

All members, not just the designated members, are agents of the LLP, and as such owe the duties of an agent to the LLP. The typical obligations of agents include obligations to act in the interests of the principal (i.e. the LLP), to avoid conflicts of interests and a prohibition on the making of secret profits, and some elements of these requirements are reflected in the default provisions.

While members are the agents of the LLP, they are not agents of one another and the legislation does not regulate the relationship between the members. The reason for the omission was the potential for conflict between the duty which the members owe to the LLP (as agents) and any duty which they owe one another. The solution adopted was to impose the former duty as a matter of statutory obligation and to leave it to the members to address their internal relationship in a separate LLP agreement.