Q&As

What is the status of a member's capital in an LLP? Is it akin to share capital or does it constitute a debt? Can a member of an LLP prove for his capital as a debt in its liquidation?

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Published on LexisPSL on 11/11/2014

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

  • What is the status of a member's capital in an LLP? Is it akin to share capital or does it constitute a debt? Can a member of an LLP prove for his capital as a debt in its liquidation?
  • The nature of capital contributions
  • Can a member of an LLP prove for his capital as a debt in its liquidation?

What is the status of a member's capital in an LLP? Is it akin to share capital or does it constitute a debt? Can a member of an LLP prove for his capital as a debt in its liquidation?

The nature of capital contributions

Like shareholders in a company, the members of a limited liability partnership (LLP) enjoy limited liability up to the amount of their contributions to the LLP, if any (see section 74 of the Insolvency Act 1986 (IA 1986), read in light of the Limited Liability Partnerships Regulations 2001, SI 2001/1090 (LLPR 2001) made under the Limited Liability Partnerships Act 2000 (LLPA 2000). There is no legal requirement for a member of an LLP to make a capital contribution.

The internal affairs of an LLP will usually be dealt with in an agreement between the members of the partnership (an LLP agreement). In the absence of an LLP agreement, the default provisions set out in the LLPR 2001 will apply. As the default provisions do not deal with capital contributions to the LLP, the requirement to make capital contributions must be specifically dealt with in any LLP agreement.

The LLP agreement will usually include a statement of the members’ initial capital contributions, if any. There may also be provisions stating the circumstances in which members may be required to provide additional capital and

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