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Under the terms of an LLP Agreement, each individual member will usually have a profit share. Some members (e.g. founders) will have a significantly higher profit share than others and will also have a share in the capital of the LLP (ie: over and above the amount of their own capital contribution). Individual members will also be subject to certain notice provisions, garden leave obligations during notice and restrictive covenants that govern what they can do once they cease to be a member (e.g. non-compete, non-solicitation of and non-dealing with clients of the LLP).

Up until now, disgruntled members who claimed that the LLP (and sometimes other members) had committed a repudiatory breach of the LLP Agreement have asserted that the breach discharges the member and the LLP from any further performance of the contract (ie: the LLP Agreement). In accordance with the doctrine of repudiatory breach, rights that have already accrued continue unaffected. However, and here is the mischief from an LLP's perspective, the discharge from further performance under the LLP Agreement extends to: notice provisions (the disgruntled member can walk away immediately), the post termination restrictive covenants (the disgruntled member is not bound by them, so is free to compete with, solicit and act for the LLP's clients) andallows the disgruntled member to rely on Regulation 7 of the default provisions in the LLP Regulations (LLPR) to gain a (very) substantially increased share in both the capital and profits of the LLP - the argument being that a repudiatory breach of the LLP Agreement means that that agreement falls away so there is "no agreement" for the purposes of the LLP Act 2000 (LLPA). In those circumstances, the default provisions in Regulation 7 of the LLPR apply to give that member an equal share in the capital and profits of the LLP. Allowing repudiatory breach to operate in this way can result in a minority member who, for example, may, under the LLP Agreement, only have an entitlement to 1% of the profits of the LLP and no entitlement to the capital, suddenly sharing equally with, say, 10 other members in both the capital and profits. Such a minority member would get a huge windfall - an extra 9% of the profits plus 10% of the capital. Such a scenario makes the use of LLPs potentially very unattractive and could result in businesses deciding not to operate in England.

Flanagan v Liontrust Investment Partners LLP and Others [2015] EWHC 2171...