Members can be individuals, companies or other legal entities.
Unless the LLP agreement says otherwise, the admission of a new member requires the unanimous consent of the existing members. This may be too rigid a requirement, especially where the LLP has many members – admission with the approval of a majority of members may be more appropriate in these circumstances. It may also be the case that members investing significantly more capital may want a greater say in the appointment of new members.
An LLP is a separate legal entity and exists independently of its membership. As a result, the death or exit of a member does not result in dissolution of the LLP.
Ceasing to be a Member
A person may cease to be a member:
- On death (or dissolution if it is a corporate member);
- By agreement with the other members; or
- By giving reasonable notice to the other members.
This default position is often augmented by the LLP agreement, which typically contains additional grounds and procedures for cessation of membership.
A member can only be expelled from membership if the members have entered into an LLP agreement which expressly provides for expulsion.
Common reasons for expulsion include:
- Breaching the LLP agreement;
- Ceasing to hold a relevant qualification;
- Neglecting to perform duties; or
- Failing to pay monies owed to the LLP.
As one would expect, expulsion for discriminatory reasons such as sex, race or disability is not permitted.
Often an outgoing member is paid-off in instalments to ease the burden on the LLP.