In the course of my work I have considered hundreds of partnership and LLP member agreements (also sometimes called LLP agreements or LLP members’ agreements). In my dispute resolution role, acting for individuals, I have found and exploited weaknesses and loopholes in many such agreements. Acting for firms and LLPs I have enforced provisions against partners and LLP members, sometimes in circumstances where the language was unclear and had to be interpreted by the court. When drafting or updating an agreement I can draw on this experience. I have a deep understanding, and long experience, of what can go wrong and what works well.
Partnership and LLP member agreements need, so far as reasonably practicable, to fulfil a number of functions:
- Cover every eventuality
- Clearly set out the rights and responsibilities of partners/members
- Achieve fairness between partners/members
- Preserve goodwill/client relationships
- Protect other assets of the business
- Preserve continuity of the business
- Avoid provisions that are discriminatory (and thus in most cases void)
The law relating to partnerships, LLPs and companies is constantly developing. New court judgments can have a significant impact on partnership and LLP member agreement drafting.
The consequences of not having an adequate partnership or LLP members’ agreement can be severe. Whether it is insufficient or unclear grounds for expulsion, loose drafting of restrictive covenants, or some other failing, inadequate agreements can translate into expensive and distracting disputes, compensation payments, or loss of key clients, partners and staff, and with them loss of turnover. If there is a loophole in your documentation it may well in due course be exploited.
If you do not have a partnership or LLP member agreement at all you are exposed to all manner of potential difficulties in the event of a falling out, or on the death of a partner or member.