Limited Liability Partnership (LLP) in Hong Kong: A Legal Overview
Limited Liability Partnership (LLP) in Hong Kong is a specialised form of partnership introduced by the Legal Practitioners (Amendment) Ordinance 2012, catering specifically to solicitors’ firms and foreign law firms. Since its inception on March 1, 2016, LLPs offer a distinct structure that sets them apart from traditional general partnerships.
Key Differences with General Partnership
In contrast to general partnerships where each partner bears joint and several liability for all partnership debts, LLPs provide a shield for personal assets. Partners in an LLP are not personally liable for the firm’s liabilities arising from the provision of professional services, protecting them from defaults or misconduct by others within the firm.
Conditions and Protections
For LLPs to benefit from the Ordinance’s protection, certain conditions must be met. These include maintaining a top-up insurance policy of at least HK$10 million per claim, informing clients of the LLP status, and disclosing the identity of an overall supervisory partner. However, this protection is not absolute and is subject to limitations, such as partner knowledge of a default and protection not extending to a partner’s interests in partnership property.
Clawing Back Past Distributions and Obligations
LLPs face restrictions on distributing partnership property. If an LLP makes a distribution and subsequently cannot meet its obligations or its remaining property’s value is insufficient, the recipients may be liable to repay the distribution. Proceedings to enforce this liability must commence within two years of the distribution.
Compliance and Transparency
LLPs must comply with naming conventions, distinguishing themselves from non-LLP firms. Transparency requirements involve informing existing clients of the LLP status, providing lists of supervisory partners upon client request, and prominently displaying the LLP name in business operations.
Consumer Considerations
Consumers seeking legal services must be aware of the differences between general partnerships and LLPs. While a consumer of a general partnership can sue all partners, an LLP consumer can only sue partners directly involved in a default. The protection of innocent LLP partners is contingent on insurance coverage and compliance with conditions and limitations.
In the complex landscape of legal service providers, businesses and consumers alike must carefully weigh the advantages and limitations offered by LLPs, making informed decisions based on their specific needs and risk tolerance.
