In Tribe v Elborne Mitchell LLP [2021] EWHC 1863 (Ch), a long-term LLP partner claimed he was not awarded a fair profit share for multiple years. Fortunately, this new High Court decision confirms that managing members of an LLP are held to a particular standard when allocating profits—but that evidence of a reasonable and explicable process makes it difficult to challenge any ultimate decision as to profit allocation.

In Tribe, the court found that the profit allocation had been within the range of reasonable proposals.

The court here reaffirmed discretionary LLP profit distribution principles developed in Braganza v BP Shipping Ltd Braganza v BP Shipping Ltd [2015] UKSC 17. Senior partners should not “take into account irrelevant matters or ignore relevant ones” or make distribution recommendations “outside the range of reasonable proposals that might be made in the circumstances.”