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Executive Summary

This Report has been prepared to facilitate discussions with interested stakeholders and the general public regarding limited liability partnerships (LLPs). Service New Brunswick has been charged with the responsibility to seek public input in order to provide policy recommendations to government.

Section 1 sets out the two basic policy issues of the Report for discussion and feedback. First - Should New Brunswick enact limited liability partnership legislation? Second - If so, what particular legislative provisions should govern the creation, operation and registration of LLPs?

Section 2 discusses the unique characteristics of a limited liability partnership from that of a general partnership. The key difference is that in a negligence action against the LLP, a plaintiff can enforce a judgment against only the partnership assets and the personal assets of the negligent partner. The plaintiff will no longer be able to go after the personal assets of the non-negligent partner. This type of legislation is called the "partial shield" model, as it provides a shield to the partners in relation to the negligence of another partner. The partners continue to be personally liable for all other debts and obligations of the LLP. The negligent partner will continue to be personally liable for his or her own negligence.

Some jurisdictions have further broadened the shield so that a partner is not personally liable for any debts and liabilities of the partnership. The partners' shield is similar to the shield provided under corporate law to shareholders of a corporation. This type of legislation is called the "full shield" model. It should be noted the negligent partner will continue to be personally liable for his or her own negligence.

Sections 3, 4 and 5 of the Report set out the development of LLP legislation in United States, Canada and other jurisdictions. The push for LLP legislation has emanated from professional groups such as accountants and lawyers that have traditionally practised in general partnerships. Partners have become increasingly concerned over their personal exposure to clients and third parties and their ability to insure their professional risks They question why a partner who is not involved in a negligent act should continue to be personally liable for the negligence of another partner. Alberta, Ontario, Saskatchewan and most, if not all, states in the United States have enacted LLP legislation to address in part such concerns.

Section 6 discusses whether New Brunswick should enact LLP legislation. Is there an apparent need for such legislation in New Brunswick? LLP legislation will have the affect of changing the risk allocation between the partners in a partnership and those that deal with the partnership. At a minimum, the plaintiff will no longer be able to go after the personal assets of the non-negligent partner, but will have only the partnership assets and the personal assets of the negligent partner to go after. Is this shift in risk allocation required for today's environment?

Section 7 sets out major policy issues that need to be resolved for any LLP legislative package for New Brunswick. Certain issues may be viewed as more fundamental, while others may be more ancillary. The intent is to discuss and solicit feedback on important policy issues that relate to the creation, operation and registration of LLPs.

Section 7.1 discusses whether New Brunswick should limit the availability of LLPs to certain types of activities or professions or permit LLPs to carry on any business activity.

Sections 7.2 to 7.5 examine what type of liability shield should exist for a partner in a LLP. What will be the characteristics of the shield in relation to the actions of another partner? Will the shield be only in relation to negligence of another partner or be more inclusive? Will a shield exist on a similar basis in relation to actions by an employee of the partnership? Should a partner's personal liability for the negligence of an employee be dependent on whether the partner supervises that employee? Should the supervisory connection be sufficient to make the partner liable in all cases even if the partner performed those functions competently?

These Sections further discuss whether New Brunswick should follow a partial shield or full shield model approach. Which approach is best for New Brunswick? Under the later model, a partner is not normally personally liable for any debt and liabilities of the LLP. Under either model, the negligent partner will continue to be personally liable for his or her own negligence. Under either model, the partnership's assets are available to satisfy a debt or liability of the partnership. Are provisions necessary to restrict the distribution of partnership property to partners and if so, are exceptions needed?

Sections 7.6 to 7.8 deal with the major issue whether mandatory insurance should be required for LLPs as a counterbalance to allowing certain professional groups to practice as LLPs. Insurance is perceived to act as an offset given the plaintiff will no longer be able to go after the personal assets of the non-negligent partner. If insurance is required, what professional groups will be subject to the mandatory requirement? What will be the specific characteristics of mandatory insurance and will it be the same for each type of professional LLP? Who will make that determination?

Sections 7.9 to 7.13 focus on registration related issues. How will LLPs be created in New Brunswick and how will extra-provincial LLPS operate in New Brunswick? What circumstances, if any, will partners not be able to receive the protection of the shield? What happens when a LLP is not in compliance with the registration requirements? Will the effect of the shield in New Brunswick of an extra-provincial LLP be identical to a New Brunswick LLP? How will an existing partnership become a LLP and will it be required to give notice to its existing clients? What system will be put in place to disclose who are the partners in any LLP operating in New Brunswick? What will be the requirement for "LLP" to be in the name of an LLP that operates in New Brunswick?

Section 7.14 requests feedback to identify other issues that should be considered in relation to LLPs.

The Report attempts to cover the major public policy topics that relate to LLPs. Public input on these and any related issues is important in order to bring forward policy recommendation to government. Additional copies of the Report are available on request and are available also at www.snb.ca

We encourage interested parties to provide their feedback by June 30, 2002. Comments can be sent to:

	Service New Brunswick
	Corporate Affairs Branch
	Attention: Charles S. McAllister
	PO Box 1998
	Fredericton, NB  E3B 5G4

	Tel.: 	(506) 453-3860
	Fax:	(506) 453-2613

You may provide your response to this Discussion Report by:

  • Sending Back the Report and any additional comments

This Report has been prepared so you can provide your response directly in the Report. Please identify yourself so we may contact you for further information, if necessary.

Name

Name of organization

Address

Phone #

e-mail address

  • Sending Back a Concise Survey Response Form with any additional comments

A concise survey response form is available for download at www.snb.ca. This Form can be printed out and completed. Alternatively, you may complete the Response Form on-line.

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