Mergers involving one or more limited liability partnership are becoming increasingly common, particularly in the legal and professional services sectors where LLPs are a favoured business structure.
The combined entity resulting from a merger of LLPs can often enjoy additional security and cash flow, having effectively increased in size very quickly. Joining forces also opens up new markets, and is popular with big businesses looking to target a new locality without needing to set up a new office. Furthermore, new skills and ideas can be brought into the business, expanding your knowledge base and the improving the services you can offer to clients.
How LLP mergers work
An LLP is regarded as a body corporate and can therefore be merged or restructured much like a company. Two or more LLPs can therefore merge into one combined LLP, with members often retaining their positions.
However, all of the members of an LLP will need to agree to any changes, and Companies House must be notified of membership changes. Furthermore your limited liability partnership agreement should be checked for any provisions or restrictions in this area.
Considerations to protect your LLP
- A new LLP agreement should be drawn up for the newly merged LLP, protecting the best interests of its members and making provisions for disputes, expulsions, deaths and retirements. Of course, some compromises may be required now that management power has been further divided.
- In the case of any merger or acquisition, the Transfer of Undertaking (Protection of Employment) Regulations may apply. These regulations are intended to protect employees; for example, employment terms and conditions must be matched, while dismissals risk being unfair unless there is an economic, technical or organisational reason.
- If the name of an LLP changes, Companies House will need to be notified. However, choosing a name for a merged LLP can be difficult, as you risk alienating the clients of either original LLP, or ending up with a business name that is far too long.
- Remember, an LLP merger may not be the best option or indeed a viable option in every situation. A joint venture is sometimes more suitable, and can still be protected by an agreement.
If you are considering entering an LLP merger it is vital you obtain professional advice on whether it is the right decision, and in drafting an agreement that will protect you. Contact Ralli on 0161 832 6131 for assistance.