Two Parties Limited Liability Partnership Agreement (an LLP) will be established under local law. It provides a basic Partnership framework between two parties (P1 and P2) and the LLP agreement is drafted in Neutral Form.
It outlines the commencement of the limited liability partnership, the business of the partnership and its effective implementation and the members' respective contributions. Additionally, it describes the financial elements of the agreement, particularly concerns the funding (particularly in circumstances which require further funding), profits and losses, the role of the directors and partnership board of the business, executive management, budgets, indemnities and termination. Finally, it outlines the necessary approach of the parties in situations of dispute resolution.
Limited Liability Partnership is one specific type of partnership, different from a general or limited partnership. In a limited liability partnership, there will be no unlimited partner, meaning, it could be the case where all partners have only limited liability under this type of partnership. It is similar, but different from the idea of shareholders in a limited company. Similar to both have limited liability. However, the main difference between a partner under limited liability partnership and a shareholder in a limited company is that a partner could directly engage in the management of the company, but a shareholder can only be involved in the management if he is elected as a member of the board of directors.
The percentage of shares taken by each partner shall be in accordance with the percentage of contributions made by the partners. The profit and loss distribution shall be carried out in accordance with the percentage of shares each partner have taken as stated in the agreement. For partners with only limited liability, the maximum amount of loss he or she has to bear would subject to the amount of contribution he or she has made.
The Limited Liability Partnership Board is established in order to conduct the overall supervision of the management of the business. The LLP Board has authority to act on behalf of the LLP in all matters in connection with the Business and will carry out its duties in such manner as the LLP Board considers to be in the best interests of the LLP. The Board is required to meet quarterly and there is a requirement as to quorum in those meetings. Regarding decision-making by the Board on a certain list of Reserved Matters as listed in the agreement, a majority of not less than 75 percent of votes from the Board members is required.
Generally, no assignment of shares shall be made without any prior notice and approval from other members within the partnership. But a member shall be entitled to make intra and ultra-group transfers of all of his or her shares, complying with all the listed conditions in the agreement.
In case of a fundamental deadlock in the limited liability partnership, where a partner can no longer pursue the purpose of the business as agreed in the agreement, it shall give as early an indication as practicable to the other Member of that concern so that orderly arrangements for the continuation of the Business can, if possible, be agreed on an amicable basis. Where termination of the partnership due to a deadlock or any other reasons possible happens, realization and distribution of assets shall be conducted in accordance with the percentage of shares each partner holds. A proper balance sheet shall be prepared to indicate the amount of flow of assets and profit and loss, together with a proper auditing process of the accounts, for clear reference and ensures fairness is upheld.
Other common contract law clauses are also present in the agreement, such as entire agreement clause, dispute settlement procedures clauses, no rights for third parties under this agreement clause, etc. This is for clear reference and protection of interests of all members involved in the limited liability partnership agreement.
This document should be carefully read by the parties within the partnership.
This Limited Liability Partnership agreement (LLP agreement) may be used upon the formation of a two parties LLP, whereby the basic Partnership framework needs to be set out.
Both parties should sign and return a copy, and once signed, both parties should get a copy. To avoid any future disputes, both parties may wish to have their signatures witnessed.
If either party wishes to amend the agreement in the future, both parties should agree to do so, and the original agreement and amendments should be recorded in writing and signed by both parties.
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limited liability partnership,