Salaried Members: Condition B: The LLP agreement
The starting point for Condition B is the LLP agreement. As noted in BIM82112, the LLP agreement is wider and includes verbal or implied agreements.
In looking at whether or not an individual member has significant influence it is important not only to look at the written agreement, but also to look at how the LLP operates in practice.
If the written agreement is not being followed and on a realistic view of the facts, the member does exercise significant influence over the affairs of the LLP as a whole then Condition B is not satisfied.
This is an example of how Condition B applies to the facts of the case, where the written agreement does not reflect the current position
The Family Farm LLP has as members, a couple, A & B, and their adult son, X.
The LLP Agreement has not been amended since before X was admitted. The way that the LLP operates in practice is that A, B and X all have a say in the running of the business, with A having a casting vote.
Although the written agreement was not amended when X was admitted, the implied terms of the agreement under which X was admitted was that he would have a significant say in the business. As a result, Condition B is not satisfied and X is not a Salaried Member. The fact that A has a casting vote does not mean that only he can meet condition B. More than one person can have significant influence and that influence can be exerted in different ways.
Sometimes, an individual who has no apparent role in the management of the business may wield considerable influence. If, on a realistic view of the facts, the members defer to the views of that individual, then the individual can fail Condition B.
This example illustrates an influential individual who is not a manager of the business.
T was the founder of the firm. Officially she is semi-retired and plays no role in either the management or the strategy of the business. In reality, if T indicates her views on the strategy of the business, and the strategy board will almost invariably follow her guidance. T is still associated with the firm and if she was to disassociate herself from the firm, it would be catastrophic for business.
Although T officially has no role, she continues to set the direction and strategy of the firm. T continues to hold significant influence and fails Condition B.