Partners in law firms will be required to disclose their earnings and provide personal financial guarantees to creditors, a powerful Commons committee is proposing.
The Trade and Industry Committee's report on the Limited Liability Partnership Bill recommends that measures to protect creditors of Limited Liability Partnerships (LLPs) should be stronger than those for a partnership or limited company.
LLPs protect partners' personal assets from legal actions against another partner and are already available in the offshore centre of Jersey.
The committee goes beyond the measures in the draft Bill by calling for partners to guarantee a sum of money that will be available to creditors should an LLP fail.
It also wants the publication of audited accounts and – more controversially – the disclosure, in bands, of partners' personal drawings on the LLP.
Ronnie Fox, senior partner at Fox Williams and chairman of the Association of Partnership Practitioners, says: “I thought the argument about requiring partners to give personal guarantees had been fought and won.”
“Having one's accounts published is bad enough, but forced disclosure of personal drawings of partners will be resented,” he adds.
Richard Thomas, Clifford Chances' director of public policy, says: “We see no good reason for that sort of disclosure, because it doesn't give the creditor any protection whatsoever… For the most part, we were content with the draft Bill produced by the DTI.”
Despite these misgivings, both men welcomed the committee's acknowledgement that LLPs should be introduced. Thomas says: “There is no good reason why the Government should not now introduce this Bill into the current session of Parliament.”
Fox says that the larger law firms are extremely interested in establishing themselves as LLPs. On whether Clifford Chance would adopt LLP status, Thomas says: “If we are to adopt a modern app-roach to partnership law, then that is very desirable. All law firms will keep all their options open.”