Limited Liability Partnerships (Amendment) Regulations 2007

rose to move, That the Grand Committee do report to the House that it has considered the Limited Liability Partnerships (Amendment) Regulations 2007. The noble Lord said: The regulations we are debating today will strengthen the investigation regime operated by Companies Investigation Branch in respect of limited liability partnerships. My colleague the Minister of State for Industry and the Regions consulted earlier this year on a proposal to give Companies Investigation Branch increased powers to investigate limited liability partnerships, in line with those they have for companies. All those who commented on the proposal supported it, including the Law Society, the Institute of Chartered Accountants in England and Wales and the Association of Partnership Practitioners. A limited liability partnership is a relatively new corporate vehicle introduced by this Government through the Limited Liability Partnerships Act 2000 and the Limited Liability Partnerships Regulations 2001. An LLP gives the benefits of limited liability as for a company, but allows its members the flexibility of organising their internal structure as a traditional partnership. Since its creation about six years ago, the LLP structure has appealed to businesses of all sizes across a number of sectors. There are about 22,000 LLPs on the register at Companies House. Some aspects of the legal framework for LLPs were designed specially for the new vehicle, and they are contained largely in the LLP Act itself. But in other respects, where it is sensible to do so, an LLP is treated much like a company. That has been achieved in the 2001 regulations by applying sections of the Companies Act 1985 and other relevant legislation, such as the Insolvency Act 1986, to LLPs, either as they stand or with appropriate modifications to tailor the provisions for LLPs. One of the areas where the requirements for LLPs and companies are substantially the same is the investigation regime. When the LLP was introduced, the bulk of Part 14 of the 1985 Act on the investigation of companies was applied to LLPs by the 2001 regulations, leaving aside those provisions concerned with share dealings. Those are not relevant for LLPs, as they do not have shares. Part 14 gives the Secretary of State powers to appoint inspectors or investigators to investigate companies and requisition documents where, for example, there are grounds for suspicion of misconduct. It is our policy with regard to Part 14 of the 1985 Act to ensure consistency in the treatment of LLPs and companies. Since the 2001 regulations were made, the Companies (Audit, Investigations and Community Enterprise) Act 2004 was passed to ensure confidence in the UK corporate framework following Enron and other corporate scandals in the US. As part of that package, the 2004 Act strengthened the investigations regime by amending the investigation provisions set out in Part 14 of the Companies Act 1985 to give more extensive powers to investigators of companies. For example, it gave investigators the power to remain on premises if this would assist their investigation, and introduced more effective sanctions where people fail to comply. It did not change the basis for inspections or substantively change the grounds for an investigation. Where amendments in the 2004 Act affect provisions of the 1985 Act that are already applied to LLPs by the 2001 regulations, the 2004 Act amendments automatically apply to LLPs. They apply by virtue of Section 20(2) of the Interpretation Act 1978, as those 1985 Act provisions are referred to in the 2001 regulations. However, where new provisions were inserted into the 1985 Act by the 2004 Act, it is necessary expressly to apply those provisions to LLPs by amending the 2001 regulations to refer to the provisions inserted by the 2004 Act. Unfortunately, the new investigation provisions introduced by the 2004 Act were not applied to LLPs at the time. That oversight came to light during the process of considering how the new Companies Act 2006 should be applied to LLPs. It is the purpose of the Limited Liability Partnerships (Amendment) Regulations 2007 to apply the new investigation provisions to LLPs. As it turned out, Companies Investigation Branch has had no need to use the new powers against LLPs. Indeed, investigations of LLPs are rare. However, should investigators need to investigate an LLP, the full powers that they have to investigate companies will be available to them. That is the sole purpose of these regulations. I beg to move. Moved, That the Grand Committee do report to the House that it has considered the Limited Liability Partnerships (Amendment) Regulations 2007. 19th Report from the Statutory Instruments Committee.—(Lord Evans of Temple Guiting.)