There have been a number of statutory instruments, issued under the Companies Act 2006, which have implemented changes to LLPs. The SIs include the Large and Medium-sized Limited Liability Partnerships (Accounts) Regulations 2008, the Small Limited Liability Partnerships (Accounts) Regulations 2008 and the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008.
The regulations come into effect for LLPs on 1st October 2008 for financial years beginning on or after that date. The existing regulations will continue to apply for financial years beginning before that date. There are further changes to be made in October 2009.
If you have an interest in a UK Limited Liability Partnership, read on.
How LLPs are defined:
LLPs are now categorised as small, medium or large
What is a small LLP?
With certain exceptions, a small LLP is an LLP which meets at least two of the following three criteria:
A workforce of no more than 50 employees;
An annual turnover of £6.5 million or less;
A balance sheet total of no more than £3.26 million.
What is a medium sized LLP?
With certain exceptions, a medium-sized LLP is an LLP which meets at least two of the following three criteria:
A workforce of no more than 250 employees;
An annual turnover of £25.9 million or less;
A balance sheet total of no more than £12.9 million.
Changes to the form and content of LLP accounts are as follows:
Large and medium-sized LLPs and LLP groups:
Medium-sized LLPs will no longer be exempt from disclosing turnover in abbreviated profit and loss accounts. The exemption from disclosing detailed particulars of turnover remains;
Technical amendments will apply to the preparation of consolidated accounts providing greater flexibility to address the potential for differences in the context of UK accounting standards being converged with International Financial Reporting Standards;
LLPs will have the option to include a wider range of financial instruments in the accounts at a fair value;
There is a new requirement for large (not medium) LLPs to make certain disclosures about transactions with related parties.
Small LLPs and LLP groups:
Small LLPs will have the option to include a wider range of financial instruments in the accounts at a fair value;
Technical amendments will apply to the preparation of consolidated accounts providing greater flexibility to address the potential for differences in the context of UK accounting standards being converged with International Financial Reporting Standards.
What else has already changed?
New deadlines for filing of accounts means that for financial years starting on or after 6 April 2008, unless you are filing your first accounts, the time normally allowed for delivering accounts to Companies House will reduce from 10 months to 9.
For financial years starting on or after 6 April 2008 if you are filing your LLP’s first accounts and those accounts cover a period of more than 12 months they must be delivered to Companies House within 21 months of the date of incorporation (and not 22 months) or 3 months from the end of the accounting reference period (whichever is longer).
When calculating the period allowed for filing accounts, a period of months after a given date ends on the corresponding date in the appropriate month. For example, an LLP with an accounting reference date of 8 April has a period of 9 months until midnight on 8 January of the following year to deliver its accounts, not 31 January.
This does not apply if your accounting reference date is the last day of the month. In this case, the period allowed for filing accounts would end with the last day of the appropriate month. For example, an LLP with an accounting reference date of 30 April has until midnight on 31 January of the following year to deliver its accounts, not 30 January.
New levels of penalties for late filing of accounts will not apply until 1st February 2009 for accounts filed late on or after that date.
Double penalties for consecutive late delivery of accounts
The doubling of penalties for the late filing of accounts in two successive years will apply for two successive late filings of accounts for financial years beginning on or after 1 October 2008.
Northern Ireland
The Regulations extend to the United Kingdom (reflecting the extent of the CA 2006). The LLP Act is extended to Northern Ireland by section 1286(1)(a) of the CA 2006. That section has been commenced in part (so far as relating to the application to LLPs of the subject matter of Part 15 (accounts and reports), Part 16 (audit) and Part 42 (statutory auditors)) by the Companies Act 2006 (Commencement No. 7 and Transitional Provisions) Order 2008 . That Order also commences section 1286(2)(a) of the CA 2006 in part to repeal the corresponding Northern Ireland Act.
What are the changes for LLPs of applying Part 15 (accounts) of the CA 2006 from October 2008?
The main changes affecting LLPs will be:
Section 410A, which requires disclosure in the notes to accounts of off-balance sheet arrangements, is applied to large and medium-sized LLPs;
Section 453 and regulations made under it on late filing penalties are applied to LLPs;
the new thresholds that define small and medium-sized companies are applied to LLPs;
the requirement for LLPs to send copies of their annual accounts and auditor’s report to members and others within a month of the accounts being signed has been removed, aligning the requirement with that for companies (i.e. they must be sent to members within the period for filing the accounts at Companies House or, if earlier, no later than the date on which they are actually delivered to Companies House).
Exclusions from small LLPs exemptions
Excluded are those with securities admitted to trading on an EEA regulated market, LLPs in the financial services sector and those which are members of “ineligible groups”. Additional restrictions apply to LLPs wishing to claim exemption from audit.
What are the main changes for LLPs under Part 16 (Audit) of the CA 2006?
The main changes are:
The requirement for the audit report to be signed in person on behalf of an audit firm by the senior statutory auditor for the audit;
The new offence in connection with the audit report;
Additional provisions requiring statements of reasons to be sent to the audit authorities when the auditor ceases to hold office;
Some provisions in regulations on Disclosure of Auditor Remuneration will apply to LLPs for the first time.
The provisions of Part 16 on Liability Limitation Agreements will not apply to LLPs. LLPs have been and remain free to agree limitations of liability with their auditors.
What are the main changes for LLPs under Part 42 (Statutory auditors) of the CA 2006?
Part 42 of the CA 2006 implements the limited changes in the audit regulatory framework required for compliance with the Audit Directive. It is being applied to the audit of LLPs as part of the general application to LLPs of the accounting and audit provisions in the CA 2006. While there will be some changes affecting the auditors of LLPs, there should be no significant practical impact on LLPs themselves.
Get ready for October 2009
In 2009, and certainly before October 2009, a number of other provisions will change, mostly likely amending the law on:
LLP Names;
Members addresses;
Annual Returns;
The Registrar;
Striking-off;
Charge.
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