Cessation of partnership interest in an LLP and its consequences

Ways of cessation (s. 24):

1. By agreement. A partner may cease to be a partner in accordance with an agreement with the other partners (s. 24(1)).
2. By notice. In the absence of such an agreement, by giving the other partners not less than thirty days' notice in writing of his intention to resign (s. 24(1)).
3. By operation of law (s. 24(2)). A person ceases to be a partner
   • 1. on his death or on the dissolution of the LLP;
   • 2. if a competent court declares him to be of unsound mind; or
   • 3. if he has applied to be adjudged an insolvent, or is declared an insolvent.

Consequences of cessation (s. 24, continued):

1. Liability to outsiders (s. 24(3)). A former partner is still regarded as a partner by any person dealing with the LLP unless that person has notice that he has ceased to be a partner, or notice of the cessation has been delivered to the Registrar.
2. Past obligations (s. 24(4)). Cessation does not by itself discharge him from any obligation to the LLP, the other partners or anyone else that he incurred while a partner.
3. His share (s. 24(5)). Unless the LLP agreement provides otherwise, the former partner, or the person entitled to his share on his death or insolvency, is entitled to receive from the LLP an amount equal to his capital contribution actually made and his right to share in the accumulated profits, after deducting his share of the accumulated losses, as at the date he ceased to be a partner.
4. No say in management (s. 24(6)). Neither the former partner nor his successor may interfere in the management of the LLP.
5. Filing (s. 25(2)). The LLP must file a notice of the cessation with the Registrar within thirty days.

Conclusion. A partner may leave by agreement, by thirty days' notice, or by operation of law; he then receives his share, loses any voice in management, and stays answerable for what he incurred as a partner, and to outsiders until notice of his cessation is given.