First Anniversary: Limited Liability Partnerships

One year has elapsed since the introduction of Limited Liability Partnerships (“LLPs”) for law firms in Hong Kong last March. There are currently 22 law firms practising as LLPs pursuant to the Legal Practitioners Ordinance. Eleven are Hong Kong law firms and 11 are registered foreign law firms, representing respectively 1.2 percent and 13.5 percent of the total number of Hong Kong firms and foreign firms. The uptake is modest but progressing steadily with five “conversions” to LLPs in the first month of implementation and then one to two new notifications nearly every subsequent month.

Once a firm has made its decision to operate as an LLP, the procedure to put the decision into effect is relatively simple:

  • designate the partnership as an LLP by a written agreement between the partners;
  • ensure that the requisite top-up insurance cover of at least HK$10 million per claim above the statutory professional indemnity level with no aggregate limit is in place;
  • Notify the Law Society seven days prior to the firm’s commencement as an LLP in a prescribed form;
  • ensure the name of the firm will include “Limited Liability Partnership”, “LLP” or “L.L.P.” and if it has a Chinese name, “有限法律責任合夥”; and the new name will be displayed clearly in all the firm’s stationery and websites;
  • submit a commencement notification to the Law Society together with a declaration in relation to the compliance with the statutory top-up insurance requirement within 14 days of commencement as an LLP;
  • obtain a confirmation from the Law Society on the filing of the commencement notification;
  • submit an application for a revised business registration certificate from the Business Registration Office within seven days of the date of the Law Society confirmation;
  • submit the revised business registration certificate to the Law Society as supporting evidence of the change of the name of the firm;
  • send a notification to the existing clients of the firm within 30 days of it becoming an LLP (“existing client” is defined in the Ordinance as a person who is a client of the firm at the time the firm becomes an LLP); and
  • notify clients of the overall supervising partner(s) for their particular matter within 21 days of acceptance of instructions and keep them so informed throughout.

The detailed explanatory notes on the application procedures and prescribed forms are contained in an Information Package publicly accessible on the Law Society website.

During the past year, the enquiries that we handled mostly related to the administrative steps to become an LLP which could involve how to complete the relevant forms, how to apply for a business registration certificate and where to obtain the necessary top-up insurance. In an earlier briefing session on LLPs, representatives from Aon had been invited to explain the top-up insurance requirements and for those who are interested, the materials are publicly accessible on the website of the Academy of Law.

Another aspect that has come up in the enquiries that we have received relate to the continuity of indemnity cover upon a conversion from a general partnership to an LLP. Section 7AP of the Legal Practitioners Ordinance provides that the fact that a partnership becomes an LLP does not cause the partnership to be dissolved or to cease continuing in existence as a partnership and it does not affect any of the rights and liabilities of the partnership that have been acquired, accrued or incurred before the partnership becomes a LLP. Accordingly, there is no issue of continuity of professional indemnity cover as both the general partnership and the LLP are required to maintain the primary indemnity cover pursuant to the statutory professional indemnity scheme. The top-up insurance required for LLPs will be additional cover for any claims made after the firm commences practice as an LLP.

As expected, after a firm has become an LLP, there generally follows an increase to its partnership size. We hope that the protection afforded to innocent partners of LLPs will enable those who wish to expand their practice to collaborate with diversified talents more readily.

According to the January 2017 statistics published by the Solicitors Regulation Authority in England & Wales, 15 percent of the solicitors’ practices are LLPs, but LLPs have been in place there for 16 years since 2001. In Hong Kong, an uptake of about 2 percent in total on our first anniversary of the implementation of LLPs is, by comparison, a good start and we look forward to seeing more firms taking advantage of this additional mode of operation in due course.

Jurisdictions: 

Secretary-General, Law Society of Hong Kong