Benchers will consider rules for limited liability partnerships

The Partnership Amendment Act, 2004 (Bill 35) - which introduces limited liability partnerships in BC - passed Third Reading in the Legislature on May 4 and is expected to be proclaimed in effect late this fall.

Consequential amendments to the Legal Profession Act will permit the Benchers to pass rules to authorize lawyers and law corporations to practise law through limited liability partnerships (LLPs) and to set the conditions and requirements for doing so: see sections 30, 83.1 and 84 of the Legal Profession Act in the enclosed Member's Manual amendment package. The Benchers are expected to consider rules in the coming months to regulate the use of LLPs by lawyers - please watch the Law Society website and the Benchers' Bulletin for updates.

A limited liability partnership structure shields an individual partner from personal liability for the debts of the partnership or for negligence and wrongdoing of other partners, except to the extent of the partner's share in the partnership's assets. Individual partners continue to incur personal liability for their own negligence or wrongful acts and for failing to take action when they know of another's negligence or wrongful act.

On proclamation of Bill 35, section 104 of the Partnership Act will provide:

Limited liability for partners

104 (1) Except as provided in this Part, in another Act or in a partnership agreement, a partner in a limited liability partnership

(a) is not personally liable for a partnership obligation merely because that person is a partner,

(b) is not personally liable for an obligation under an agreement between the partnership and another person, and

(c) is not personally liable to the partnership or another partner for an obligation to which paragraph (a) or (b) applies.

(2) Subsection (1) does not relieve a partner in a limited liability partnership from personal liability

(a) for the partner's own negligent or wrongful act or omission, or

(b) for the negligent or wrongful act or omission of another partner or an employee of the partnership if the partner seeking relief

(i) knew of the act or omission, and

(ii) did not take the actions that a reasonable person would take to prevent it.

(3) Subsection (1) does not protect a partner's interest in the partnership property from claims against the partnership respecting a partnership obligation.

To obtain and maintain LLP status, every limited liability partnership in BC will need to register at the Corporate Registry, notify clients of its change in status, include the letters "LLP" in its business name and make an up-to- date list of partners available to the public at all times. A limited liability partnership from another province that intends to practise in BC must register extraprovincially.

In the case of the professions, including the legal profession, section 97 of the Partnership Act further provides:

97 If a partnership that wishes to register as a limited liability partnership is a professional partnership, that partnership must not register as a limited liability partnership unless

(a) members of that profession are expressly authorized by or under the Act by which that profession is governed to carry on the practice of the profession through a limited liability partnership, and

(b) any prerequisites to that authorization that have been established under that Act have been met by the partnership.

The Law Society's Limited Liability Partnership Task Force, chaired by Bencher David Zacks, QC, with members Bruce LeRose and Jocelyn Kelley of Blake Cassels, is expected to bring forward rule recommendations to the Benchers this summer on the requirements for lawyers to participate in limited liability partnerships in the practice of law.