4.1 Introducing Dutch equivalent of LLP (full shield)

French law features a special type of partnership which is available to lawyers only, called association d’avocats à responsibilité professionnelle individuelle (AARPI). The AARPI is a variation of the French SEP, discussed above. Like the SEP, it is not a legal entity. Its partners are liable as the partners of a SEP, except that a partner is not personally liable for any professional errors made by another partner. Where not all partners are liable, the damage cannot be recovered from the partnership assets either (in most cases). Hence, this type of partnership provides partial shield liability protection.

The Germans have their Partnerschaft and Partnerschaft mbB, the latter being a variation of the first. Both are types of partnership with legal capacity, just like Auβen-GbR and OHG. Partnerschaft and Partnerschaft mbB are available for the exercise of a liberal profession only. Their legal entity status entails that a client of the firm suffering a loss resulting from a professional error may claim damages from the firm (its contractual counterparty) and take recourse on the partnership assets. With respect to the partners’ personal liability for non-professional partnership debts, Partnership and Partnership mbB follow the rules of Auβen-GbR and OHG. Partnership and Partnership mbB offer different levels of protection against professional liability to the partners personally. In summary, they both provide a partial liability shield.

The great success of the English limited liability partnership (LLP) appears to derive from its full shield liability protection in combination with its legal entity status, the internal organisational freedom it features and its tax transparency. Reference to the far-reaching limitation of partner liability is made in the LLP’s name. The well-developed rules of director and professional liability offer the basis for reasonable exceptions to the full shield. Both conceptually and in practice, the LLP’s full shield solution is charmingly simple, compared to the French and German partial shield alternatives.

What can Dutch law ‘learn’ from all of this? Already briefly discussed above, in the context of (civil-law) partnerships, is a special rule in Dutch general law: if two or more persons have jointly agreed to provide professional services to a client, all of such persons will be jointly and severally liable for damages due to a professional error, except that an ‘innocent’ person may exculpate himself entirely. For Dutch (civil-law) partnerships, this rule will effectively create partial liability protection, if the personal liability of the partners is governed fully and solely by general law, as the author proposes. Also, if one or more partners are exculpated, the obligation to pay damages may not be regarded as partnership debt, providing the client with no recourse on the partnership assets.

In addition to this partial shield built-into the (civil-law) partnership, the author proposes the introduction of a Dutch law equivalent of a full shield limited liability partnership. The author refers to it as an M-BA (abbreviation of Dutch maatschap met beperkte aansprakelijkheid). He recommends to provide the M-BA with the same type of legal capacity as he proposes for the VOF (see above). The VOF rules on internal organisation of the partnership can be applied to the M-BA as well. The M-BA can borrow its partner liability rules from Dutch private limited liability companies (BVs) and it should be, or be allowed to be, tax transparent.