In the event an LLP becomes insolvent, a partner’s liability should be limited to the amount of his capital contribution to the LLP subsisting at the time. However, if the partner (or a former partner) in the course of distribution knows or ought to have reasonably known that such distribution would result in insolvency and carried on anyway, he shall be personally liable to the limited liability partnership for the amount or value of the distribution if it was received within a period of two years before the commencement of the winding-up of the limited liability partnership. – S. 22(1) LPP ACT 2012:
“Notwithstanding anything under this Act, a partner or former partner of a limited liability partnership who receives a distribution from the limited liability partnership- (a) when the limited liability partnership is insolvent and knew or ought to have known at the time of the distribution that the limited liability partnership was insolvent; or (b) which results in the limited liability partnership becoming insolvent and knew or ought to have known at the time of distribution that the limited liability partnership would become insolvent as a result of the distribution, shall be personally liable to the limited liability partnership for the amount or value of the distribution if it was received within a period of two years before the commencement of the winding-up of the limited liability partnership.”
