DESIGNATED MEMBERS

  1.  Regulation 3.9 provides that a member of an LLP can become a designated member on incorporation of the LLP or on registration as such with the registrar of companies. The role of a designated member under the regulations is unclear, although under the modifications to the insolvency act he takes on some of the duties of a director. We believe that an LLP should have at least one designated member whose role and responsibilities should be equated to those of an officer of a company.

ACCOUNTS APPROVAL

  2.  It appears to be contemplated that all members of the LLP should approve the accounts. In a large partnership this is likely to be impracticable. We think it would be preferable to require the accounts to be approved by the designated member or members, in a similar way to approval of company accounts by the board of directors and then be circulated to members.

AUDITORS' REPORT

  3.  The auditors' report (section 235 CA 1985) is modified to require the auditors to report to the LLP. It would be better to mirror the Companies Act requirement to report to shareholders and to require the auditors to report to the members of the LLP rather than to the LLP itself.

DEBTORS

  4.  Note (5) of the notes to the balance sheet format concerning the disclosure of debtors requires amounts owed to members to be shown separately for each item of debtors. We do not understand the reasoning behind this separate disclosure and would also expect any disclosure to relate to amounts owed by members.

CONSOLIDATED ACCOUNTS

  5.  We note that the relief from publishing consolidated accounts for an LLP that is controlled by another EU entity is not to be available. Whilst noting that the number of LLPs which will be controlled by another EU entity is unlikely to be high, as a matter of principle we do not see why clients and creditors of the LLP should be in any different position from those of a company which takes advantage of section 228 of Companies Act 1985.

OVERSEAS FIRMS

  6.  The enabling powers within the draft Bill would allow for regulatory provisions for GB LLPs to be extended in whole or in part to overseas LLPs at the Secretary of State's discretion in the public interest. These provisions are not matched by any similar regulations for corporations or partnerships and we do not, therefore, understand why such powers are required for LLPs.

SMALL AND MEDIUM SIZED COMPANIES EXEMPTION

  7.  We are not convinced that the characteristics of an LLP are so special as to deny small and medium-sized LLPs the exemptions available to their counterparts as companies.

MERGER ACCOUNTING

  8.  We see no reason why merger accounting should not be used if the conditions are appropriate and would therefore encourage the re-instatement of paragraphs 10 and 11 of Schedule 4A.

STAMP DUTY

  9.  We believe that consideration should be given to a specific exemption from stamp duty when a partnership is incorporated into an LLP.

November 1998