Limited Liability Company Operating Agreement for the United Kingdom

Limited Liability Company Operating Agreement Template for England and Wales

A Limited Liability Company Operating Agreement under English and Welsh law is a comprehensive document that establishes the internal management structure, operational procedures, and governance framework for a limited liability company. It outlines members' rights and responsibilities, capital contributions, profit-sharing arrangements, decision-making processes, and procedures for handling various business scenarios. This document is crucial for establishing clear protocols and avoiding future disputes among members while ensuring compliance with Companies Act 2006 and related legislation.

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What is a Limited Liability Company Operating Agreement?

The Limited Liability Company Operating Agreement serves as the foundational document for companies registered in England and Wales, providing essential governance structure and operational guidelines. This agreement is particularly crucial when establishing new companies or reorganizing existing ones, as it defines member relationships, management responsibilities, and financial arrangements. It incorporates requirements from the Companies Act 2006 and related legislation, while allowing flexibility to accommodate specific business needs. The document typically includes provisions for capital contributions, profit distribution, voting rights, transfer restrictions, and dispute resolution mechanisms.

What sections should be included in a Limited Liability Company Operating Agreement?

1. Parties: Identification and details of all members/parties to the agreement

2. Background: Context and purpose of the operating agreement

3. Definitions: Key terms used throughout the agreement

4. Company Formation: Details of company establishment and structure

5. Capital Contributions: Member contributions and capital structure

6. Management Structure: Governance and management arrangements

7. Voting Rights: Decision-making procedures and voting thresholds

8. Profit and Loss Distribution: Financial distribution mechanisms

9. Transfer of Interests: Rules for transferring membership interests

10. Dissolution: Procedures for company dissolution

What sections are optional to include in a Limited Liability Company Operating Agreement?

1. Intellectual Property Rights: IP ownership and licensing arrangements - include when company owns or develops intellectual property

2. Non-Compete Provisions: Restrictions on competitive activities - include when protecting business interests from member competition

3. Tag-Along Rights: Minority shareholder protection mechanisms - include when dealing with multiple classes of shares/members

4. Drag-Along Rights: Majority shareholder exit mechanisms - include when planning for potential exit scenarios

What schedules should be included in a Limited Liability Company Operating Agreement?

1. Schedule 1: Members' Information: Detailed information about members including contact details and shareholdings

2. Schedule 2: Capital Contributions: Detailed breakdown of members' capital contributions

3. Schedule 3: Company Properties: List of company assets and properties

4. Appendix A: Voting Procedures: Detailed voting mechanisms and procedures

5. Appendix B: Financial Distribution Rules: Detailed profit sharing and distribution mechanisms

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Genie AI

Document Type

Operating Agreement

Sector

Sales

Cost

Free to use
Relevant legal definitions
Clauses
Industries

Companies Act 2006: Primary legislation governing company formation, operation, and management in the UK. Fundamental for structuring the Operating Agreement's core provisions.

Limited Liability Partnerships Act 2000: While specifically for LLPs, contains relevant principles for limited liability entities that may inform the Operating Agreement structure.

Companies (Model Articles) Regulations 2008: Provides default articles of association which can serve as a reference point for Operating Agreement provisions.

Company Directors Disqualification Act 1986: Governs the disqualification of directors and should be considered when drafting management provisions.

Insolvency Act 1986: Relevant for including provisions about company dissolution, winding up, and insolvency procedures.

Corporate Governance Code: Best practice guidelines for company governance, particularly relevant for larger companies.

Small Business, Enterprise and Employment Act 2015: Contains provisions affecting small businesses and should be considered for compliance requirements.

Companies House Requirements: Regulatory requirements for company registration and ongoing compliance with Companies House.

Financial Services and Markets Act 2000: Relevant if the company will be involved in financial services activities.

Data Protection Act 2018: UK's implementation of data protection requirements, relevant for handling member and company data.

UK GDPR: Data protection regulations that must be considered for handling personal data within the company.

Money Laundering Regulations 2017: Anti-money laundering requirements that may affect company operations and compliance obligations.

Corporation Tax Act 2010: Tax legislation affecting company profits and distributions that should be considered in financial provisions.

Income Tax Act 2007: Relevant for provisions dealing with member distributions and tax implications.

Employment Rights Act 1996: Important if the company will have employees, affecting employment-related provisions.

Equality Act 2010: Must be considered for provisions relating to members, employees, and company policies regarding discrimination.

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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