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Is my LLP investment an associate?

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We are currently having a disagreement in our small firm and I'm looking for some external views to help settle matters.

We are acting for a corporate group (c10 members) who have a 24% investment in an LLP. Other than our group, there is a 66% investor and a handful of smaller investors making up the balance. The LLP owns and runs a large piece of plant. Our group constructed the plant, provides the bookkeeping services and attends board meetings (including a recent meeting where the first profit distribution was agreed). Based on this, I would argue we have significant influence in the LLP but am being challenged with the counter-argument that due to the 66% investor having sole control, our influence is limited.

Could anyone help clear this up?

Thanks

 

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By MBK
08th Nov 2016 12:58

It all depends on the Members Agreement (assuming there is one). There would typically be minority protection provisions in such an agreement which may well amount to the 24% having significant influence.

Not sure in relation to what you need to establish significant influence. A confirmation statement?

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By Portia Nina Levin
08th Nov 2016 13:42

The question is about whether the LLP is a subsidiary (no), an associate (possibly), a particpating interest (maybe), or a joint venture that is not an entity (perhaps), for accounting purposes.

My understanding is that most people treat LLPs (and 1890 & 1907 partnership interests) effectively as transparent. I have never been sure that that is correct, but it is not something I have to deal with.

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By MarkKing
08th Nov 2016 14:47

That is exactly it Portia.

I'm quite happy the LLP is not a subsidiary or a JV. In my opinion it is either an associate or a participating interest.

I have just established the bookkeeper (employed by a company in our group) has bank powers up to £10k which covers all transactions except profit distribution. Does this help anyone form an opinion between associate or participating interest? Or can anyone point me towards some more guidance to help me separate them?

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By Portia Nina Levin
08th Nov 2016 14:53

Paagraph 14.3(c) of FRS 102?

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By MarkKing
08th Nov 2016 15:10

Thanks Portia.

That pushes me towards the associate option which is what I had initially thought anyway. I'm awaiting a copy of the members agreement and will update if that yields anything.

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