LLPs may be new to Ireland, but they have existed elsewhere in different formats since the 1990s.
Authorisation of a partnership of solicitors to operate with limited liability under the act does not create a new business entity. Instead, it authorises existing partnerships of solicitors to limit their personal liability.
The effect of authorisation means that each partner in an LLP will not be personally liable for the debts, obligations or liabilities of the LLP, of himself or herself in their capacity as a partner in the LLP, or of another partner in the LLP, or any employee, agent or representative of the LLP.
The act allows a ‘relevant business’ to apply to the LSRA for authorisation to operate with limited liability. A relevant business is defined as a partnership of solicitors or a legal partnership.
The framework to allow for the formation of legal partnerships will be introduced later this year, so currently only existing solicitor partnerships can apply to become LLPs.
Single solicitor practices cannot seek limited liability status – only firms with two or more partners can be authorised.
The LSRA issued the Legal Services Regulation Act 2015 (Limited Liability Partnerships) (Section 130) Regulations 2019, in October 2019. The regulations prescribe the form to be used in the application process, and the application fee of €175.
Under the act, once authorised, the LLP has a number of obligations, including providing information to its clients and creditors, and carrying on business using a name that ends with either ‘limited liability partnership’ or LLP.
As of 3 March 2020, a total of 230 partnerships of solicitors have requested, and been provided with, an application form from the LSRA. A total of 133 firms have submitted a valid form with the prescribed fee, and 112 firms have been authorised to operate as an LLP.
The LSRA maintains and regularly updates the Register of Limited Liability Partnerships, which can be found on the LSRA website at www.lsra.ie.
Since the introduction of the application process in November 2019, the LSRA has received queries from partnerships of solicitors on a number of issues. Here are some of the most common questions that have arisen to date.
Are newly authorised LLPs required to register with the Companies Registration Office?
The authorisation of an existing solicitor partnership to operate with limited liability under the act does not create a new legal entity. Instead, it authorises an existing relevant business to operate with limited liability.
There is no obligation on a newly authorised LLP to register the LLP with the Companies Registration Office under the Limited Partnerships Act 1907.
The 1907 act facilitates the creation of a special type of limited partnership, which is a completely separate legal regime from the new form of LLPs introduced in the act. In effect, partnerships of solicitors are governed by the Partnership Act 1890 and, following LLP authorisation, the provisions of the 1890 act continue to apply, apart from a few minor modifications introduced by the act.
Do we have to send the notification to all our clients and creditors, as we have a large number who are not active clients?
Section 125(7) of the Legal Services Regulation Act 2015 sets out the requirement to notify clients and creditors of a new LLP status.
It reads: “A limited liability partnership shall, as soon as practicable after receipt of the authorisation under subsection (4), notify its clients and creditors of the fact that it is operating as a limited liability partnership and setting out the information prescribed in regulations made under section 130(2)(c).”
A few solicitors have stated that it is not clear from the legislation whether the obligation extends beyond existing clients – that is, whether there is a requirement to inform clients who they may have provided services to a number of years ago, but have not engaged the firm since.
The LSRA is of the view that it is up to individual firms to determine whether it is necessary or appropriate to notify a client who has not engaged their firm for legal services for a considerable period of time.
It should be noted that the 2019 regulations also set out the information required in this notification.
Does the LLP designation have to be included the firm’s logo and branding?
Section 125(8)(b) of the act sets out where the name under which the LLP has been authorised is to be used.
It states that the name is to be used on “all contracts, invoices, negotiable instruments, orders for goods and services, advertisements, invitations to treat, websites or any other publication published in any format by or on behalf of the limited liability partnership”.
The intention of this section is obviously to protect customers and make them aware of a partnership’s LLP status.
The LSRA has received a number of queries from partnerships of solicitors regarding whether they will need to update their logo and their signage.
One interpretation of section 125(8)(a) of the act could indicate that either the words ‘limited liability partnership’ or the ‘LLP’ abbreviation must be at end of every reference to a partnership’s name or logo.
The LSRA can see how this requirement may prove impractical for some firms, especially in the context of fixed outdoor signage, such as plaques or frontage.
The LSRA is of the view that such physical signage does not need to be updated, provided that the LLP abbreviation is routinely used at the end of a firm’s name in all other situations – for example, contracts, invoices, negotiable instruments, orders for goods and services, advertisements, invitations to treat, and other publications.
For example, all letterheads/stationery should refer to the fact that a firm is an LLP.
However, if a firm wishes to retain just its main logo at the top of its letterhead – provided that it specifies that it is an LLP prominently elsewhere on the letterhead (for example, beneath the logo or alongside the list of partners) – this will be sufficient to comply with the act.
The main aim of using the LLP abbreviation prominently in a partnership’s name and on its website is that all the partnership’s clients are informed of its change in status and that they are aware of what the consequences of this are, with the result that all the partnership’s clients and the wider public are fully informed and protected.
If an LLP can clearly show that its clients have been updated in this regard, the LLP will be in compliance with the act.
With this in mind, the LSRA suggests that, alongside the other requirements of the act, within a week of an LLP’s authorisation date, they include an update on their website informing their clients of the change of status to LLP and a short explanation of what this means, in accordance with regulation 5 of the 2019 regulations.
Partnerships of solicitors interested in gaining authorisation to operate as an LLP should familiarise themselves with all requirements of the act and the regulations in advance of submitting an application, as well as their obligations once LLP status has been authorised.
Do we need to change our bank account as an LLP?
A recently authorised LLP solicitors’ partnership brought it to the LSRA’s attention that their bank considered that they may need to close their existing office and client accounts and open new ones.
The authorisation of an existing solicitor partnership to operate with limited liability under the act does not create a new legal entity, but instead authorises an existing relevant business to operate with limited liability.
On that basis, the LSRA does not see that there would be a requirement to close pre-existing accounts and open new accounts.
The LSRA is liaising with business banking departments in some of the main banks on this issue. Should any newly authorised LLPs have any issues of this nature, they are encouraged to bring it to the attention of the LSRA.
Are there any tax implications for new LLPs?
The authorisation of an existing partnership of solicitors to operate as an LLP has the effect of giving the partners in the firm a degree of limited liability. No increased tax obligations for LLPs are included in the act.
Under section 123(4) of the act, limited liability does not apply where the debt or obligation relates to any tax as defined in the Taxes Consolidation Act 1997. The LSRA has been engaging with the Revenue Commissioners to ensure that there is clarity as regards the impact of the commencement of the LLP provisions.
The introduction of any new legislation can result in questions and queries being raised that may not have been specifically addressed by the legislators.
While the LSRA cannot advise legal practitioners on whether or not to apply for authorisation as an LLP, we are happy to do what we can to assist in explaining the new LLP provisions and their impact.
Any partnership of solicitors seeking to apply for authorisation should contact the LSRA at email@example.com and request an application form.
The application form that is provided is given a unique reference number, which is used to track both the submitted form and the payment of the fee required under the act.
DOS AND DON’TS
By Padraig Langan
I run the team responsible for processing applications for LLP status and for establishing and maintaining the register of LLPs. In processing the applications for authorisation, the LSRA has encountered similar issues arising with many of the application forms. To ensure that all applications are processed without undue delay, here is a list of key ‘dos and don’ts’.
Do ensure that you apply using the correct name of your partnership, as registered with the Law Society.
The LSRA has received several application forms from firms using a name that does not match the partnership of solicitors name registered with the Law Society of Ireland.
If a partnership of solicitors wishes to change their name, they must apply to the Law Society for this change prior to applying for LLP status to the authority.
Do ensure that you are using the correct Law Society firm numbers and solicitor numbers.
The authorisation process requires the LSRA to confirm that the relevant business is a partnership of solicitors registered with the Law Society of Ireland and that the partners have valid practising certificates.
If the wrong data is supplied on the application form, the LSRA has to contact the Law Society to verify which numbers are correct. This can slow down the authorisation process.
Do make sure that the insurance information provided is complete and accurate.
The LLP application form requires firms to supply the name of their insurer. The Law Society has a list of participating insurers on its website.
Some LLP applications include an insurer’s name that is similar to, but not exactly the same as, those listed on the Law Society’s website, or include the name of the broker, but not the insurer. The insurer’s name on the form must match the participating insurer exactly.
Do make sure that the data held by the Law Society in relation to partners is up to date and accurate.
During the verification process for several firms, it was found that partners listed on the application form were registered at the Law Society with a different firm.
The applicant had to be contacted, asked to clarify the issue, and advised to update the partners’ details with the Law Society. The application could not proceed until the issue had been rectified.
Do make sure that the statutory declaration is fully and carefully completed.
The application process requires completion of a statutory declaration by the applicant, duly countersigned. On some forms processed by the LSRA, the countersigners had not added their name after ‘declared before me’, or had not indicated under what authority they were countersigning the form.
Where the LSRA has to contact applicants for clarifications or replacement forms, this unnecessarily slows down the application process.
Do familiarise yourself with your obligations as a newly authorised LLP under the act and the 2019 regulations, and give some thought as to when you want the authorisation to come into effect.
Prior to issuing an authorisation, the LSRA will engage with the applying partner and request a proposed date from which the authorisation will be deemed to be effective.
This is to ensure that a newly authorised LLP is ready to fulfil its obligations under the act, as regards using ‘LLP’ or ‘limited liability partnership’ in its name and on all contracts, invoices etc, and is also ready to inform its clients and creditors of its new limited liability status and its impact.
Applicant firms should familiarise themselves with the requirements under the act and the regulations in advance of their application, in particular, the requirements around the use of ‘LLP’ in the applicant firm’s name and the need to update stationery, logos and branding, etc. I
t is also important that you give some thought as to the resources required to ensure that you are in a position to comply with the act from the authorisation date.
Once you have been authorised, do check the Register of LLPs and ensure that the details are correct.
LLPs have an obligation under the act to inform the LSRA should their details change. So, for example, if a partner joins or leaves your LLP, you need to inform the LSRA that this has occurred. A form is available on the website for requests to alter details on the register.
Do let us know if there is any part of the process that is unclear.
While we can’t advise law firms as to whether to apply for authorisation to operate as an LLP, we’ll do our best to answer any questions about the act, or the process, that we can.
Don’t forget to sign all the relevant sections of the application form.
The LLP application form must be submitted in the name of only one partner. The applicant partner must sign all the relevant sections in the form. If this is not done, the LSRA will return the form for completion.