LLPs were established as a new form of legal entity under the LLPA 2000, with members as opposed to partners. Under section 1(5), the general position is that the law relating to partnerships does not apply to LLPs, with the result that the legal basis for LLPs is to be found in the LLPA 2000 and the regulations made pursuant to that legislation (which include the LLPR 2001).
As for the relationship between the members of an LLP, the relevant principles are located in section 5 of the LLPA 2000 and Regulations 7 and 8 of the LLPR 2001, and are as follows:
Section 5 (1) LLPA 2000
Except as far as otherwise provided by this Act or any other enactment, the mutual rights and duties of the members of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its members, shall be governed –
(a) by agreement between the members, or between the limited liability partnership and its members, or
(b) in the absence of agreement as to any matter, by any provision made in relation to that matter by regulations under section 15(c).
Regulations 7 and 8 LLPR 2001
Default provision for limited liability partnerships
7 The mutual rights and duties of the members and the mutual rights and duties of the limited liability partnerships and the members shall be determined, subject to the provisions of the general law and to the terms of any limited liability partnership agreement, by the following rules:
(1) All the members of a limited liability partnership are entitled to share equally in the capital and profits of the limited liability partnership.
8 No majority of the members can expel any member unless a power to do so has been conferred by express agreement between the members.
By section 994 of the Companies Act 2006 (as applied to LLPs), an LLP member may apply to court if his interests are being unfairly prejudiced by the LLP or the other members. While many LLP agreements exclude this right, that was not the case in Flanagan.