Q&As

If a limited liability partnership goes into administration, can a partner set-off a capital account (in credit) against amounts outstanding on an overdrawn current account?

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Published on LexisPSL on 31/10/2018

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • If a limited liability partnership goes into administration, can a partner set-off a capital account (in credit) against amounts outstanding on an overdrawn current account?
  • Do the normal set-off rules apply to an LLP in administration?
  • What debts does set-off apply to, ie can it cover amounts owed to a partner in a capital account and amounts in an overdrawn current account?

If a limited liability partnership goes into administration, can a partner set-off a capital account (in credit) against amounts outstanding on an overdrawn current account?

Do the normal set-off rules apply to an LLP in administration?

The Limited Liability Partnerships Act 2000 (LLPA 2000) introduced limited liability partnerships (LLPs) and must be read in conjunction with the Limited Liability Partnership Regulations 2001 (LLPR 2001), SI 2001/1090. The Limited Liability Partnership Regulations apply the Insolvency Act 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024 to LLPs.

As with companies, there are three routes into administration for LLPs:

  1. an application to court for an administration order (see: Administration—overview)

  2. an out of court appointment by the LLP

  3. an out of court appointment by the holder of a qualifying floating charge (QFC) (see: Appointment of an administrator using the out-of-court procedure by a qualifying floating charge holder (QFCH)—checklist and timeline)

The powers of the administrator are more or less the same as those of an administrator of a company. This is because IA 1986, Sch 1 and B1 apply to LLPs.

For further guidance, see Practice Note: Administration of a Limited Liability Partnership.

Insolvency set-off is a right of set-off that arises as a result of the insolvency legislation. The rules relating to liquidation set-off and administration set-off are contained in IR 2016, SI 2016/1024. It applies

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