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In the Kaplan text one paragraph reads:
With respect to LLP- “However there is no requirement for a capital contribution and any contribution made can be withdrawn at anytime.
The next page reads:
For company and LLP- The company cannot usually return capital to its members.
———————–Do LLP’s differentiate between returning and withdrawing capital?
Thank you!
Not so far as I am aware!
For a company, the repayment of capital is classed as a reduction of capital and, for the protection of the company’s creditors, requires permission in the articles, a special resolution and the consent of the Court. That last part, getting the consent of the Court would be, in reality, the most difficult of the three steps
Hence the sentence from Kaplan that you have quoted ‘The company cannot usually return capital to its members’
For an LLP, where a partner withdraws any part of capital introduced into the firm, that’s ok and doesn’t require the consent of special resolutions nor Court (presumably, the other partners consent)
But, on withdrawal, the partner BECOMES liable in a liquidation of the LLP up to the amount withdrawn. So, the simple act of withdrawing some or part of a partner’s capital does not exonerate that partner from the potential liability of contributing in an insolvent liquidation, but with the limit of the amount earlier withdrawn
I imagine that that’s the cunningly hidden message behind the Kaplan text
OK?
Ah! Thank you! Yes the text makes no mention of court approval or the liability on withdrawal. Appreciate the clarification!
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