Section 214A of the Insolvency Act 1986 applies only to LLPs. It lets a liquidator ask the court to make a member or former member repay withdrawals taken in the two years before the winding up began, if the member knew or had reasonable ground to believe the LLP could not pay its debts, or would not be able to once the withdrawals were taken, and knew or ought to have concluded that insolvent liquidation could not reasonably be avoided. The court can order up to the total withdrawn in that period.

Why does section 214A exist?

Section 1(4) of the Limited Liability Partnerships Act 2000 says members are liable to contribute to an LLP’s assets on a winding up only as provided under the Act. Section 74 of the Insolvency Act 1986, as substituted for LLPs, makes present and past members liable to contribute only to the extent they have agreed to do so. In most LLPs that agreed contribution is small or nil.

At the same time, members take their rewards as drawings and profit shares, often monthly and often in advance of the year’s profits being known. Without a specific rule, members could keep drawing as the business failed and leave creditors with an empty shell. Section 214A, inserted for LLPs by Schedule 3 to the Limited Liability Partnerships Regulations 2001, closes that gap. It sits alongside wrongful trading rather than replacing it.

What counts as a withdrawal?

Section 214A(2)(a) is deliberately wide. It covers any withdrawal of property of the LLP by a member, “whether in the form of a share of profits, salary, repayment of or payment of interest on a loan to the limited liability partnership or any other withdrawal of property”. So monthly drawings, a fixed profit share, a return of capital, repayment of a member’s loan account and interest on that loan all count, as would taking an asset out of the LLP.

Only withdrawals made within the period of two years ending with the commencement of the winding up are caught. For a voluntary winding up of an LLP, the winding up is deemed to commence when the LLP determines that it be wound up voluntarily (section 86 as modified for LLPs). For a winding up by the court, it is deemed to commence when the petition is presented, unless the LLP had already determined to wind up voluntarily, in which case that earlier time applies (section 129).

What does the liquidator have to prove?

Two separate tests must be met.

The solvency test at the time of each withdrawal

Under section 214A(2)(b), the liquidator must prove to the satisfaction of the court that, when the withdrawal was made, the member knew or had reasonable ground for believing that the LLP either:

  • was already unable to pay its debts within the meaning of section 123; or
  • would become unable to pay its debts after its assets had been depleted by that withdrawal taken together with all other withdrawals made by members at the same time or in contemplation when that withdrawal was made.

Section 123 contains both a cash flow test (unable to pay debts as they fall due) and a balance sheet test (assets worth less than liabilities, taking into account contingent and prospective liabilities). It also deems a debtor unable to pay where a creditor owed more than £750 serves a statutory demand that is not paid, secured or compounded for within three weeks. These tests are explained in the insolvency tests.

The second limb is the one that catches a collective decision. If members agree a large distribution that would itself tip the LLP into insolvency, each member’s share is judged against the combined effect of all of them.

The no reasonable prospect test

Section 214A(5) adds that no declaration can be made unless the member knew or ought to have concluded that, after each withdrawal, there was no reasonable prospect that the LLP would avoid going into insolvent liquidation. An LLP goes into insolvent liquidation if it goes into liquidation when its assets are insufficient to pay its debts, other liabilities and the expenses of the winding up (section 214A(7)).

The standard in section 214A(6) is the same mixed test used for wrongful trading. A member is judged by what a reasonably diligent person would know, ascertain or conclude, having both the general knowledge, skill and experience reasonably expected of someone carrying out that member’s functions and the knowledge, skill and experience the member actually has. A finance partner is held to a higher standard than a junior fee earner, but nobody is judged below the reasonable minimum for their role.

How much can the court order a member to pay?

If both tests are met, section 214A(3) lets the court declare that the member must make “such contribution (if any) to the limited liability partnership’s assets as the court thinks proper”. Section 214A(4) caps the order at the total amount or value of all the withdrawals made by that member within the two year period. The court has discretion below the cap and can order nothing at all.

The money goes into the LLP’s assets for the benefit of creditors generally, not to any particular creditor. The section applies to anyone who “is or has been” a member, so a member who retired before the liquidation can still be pursued for withdrawals taken while they were a member and within the two years. Under section 214A(8), “member” also includes a shadow member.

How does section 214A differ from wrongful trading?

Regulation 5 of the 2001 Regulations applies section 214 to LLPs, reading references to directors as including members, so members face wrongful trading claims as well. Section 214A(9) says it is without prejudice to section 214. The differences are significant:

Point Section 214 (wrongful trading) Section 214A (withdrawals)
What is attacked Continuing to trade when insolvent liquidation was unavoidable Specific withdrawals of property in the two years before winding up
Measure Contribution the court thinks proper, with no statutory cap Contribution the court thinks proper, capped at the member’s withdrawals in the period
Knowledge Knew or ought to have concluded no reasonable prospect of avoiding insolvent liquidation The same, plus knowledge or reasonable ground for belief that the LLP was, or would be made, unable to pay its debts
Defence Every step taken to minimise loss to creditors (section 214(3)) No equivalent every step defence in the section

A liquidator can bring both claims against the same member. Conduct that supports either claim may also feature in a report leading to disqualification proceedings, because regulation 4(2) applies the Company Directors Disqualification Act 1986 to LLP members.

How might a claim work in practice?

Illustration only. An LLP has three equal members. Its management accounts at the end of March show it cannot pay suppliers on time and that its liabilities exceed its assets. The members carry on drawing £4,000 a month each in the hope of a large contract. The contract does not arrive and the LLP determines to wind up voluntarily the following February. In the two years before that determination, member A drew £96,000 in total, of which £44,000 was drawn from April onwards.

The liquidator can show that from April each member knew the LLP could not pay its debts and ought to have concluded that liquidation was unavoidable. The cap on any declaration against A is the £96,000 drawn in the full two year period, but the tests are applied withdrawal by withdrawal, so the drawings exposed are those taken once both tests were met, here the £44,000. Within that, the court decides what contribution is proper and may order less.

How can members reduce the risk?

  • Link drawings to solvency. Many LLP agreements allow drawings to be suspended or reduced on a vote of the management board when cash flow tightens. Use that power and minute the decision.
  • Review management information before each distribution. The test is applied at each withdrawal, so a documented solvency review at that time is the best evidence the member had no reasonable ground to believe the LLP was insolvent.
  • Treat loan account repayments as withdrawals. Repaying a member’s loan ahead of trade creditors is caught just as much as profit drawings, and may also be challenged as a preference under section 239, which regulation 5 applies to LLPs.
  • Take advice early. Once insolvency is possible, the members’ position is closer to that of directors and the safest course is to consult a licensed insolvency practitioner before any further withdrawals. See the role of insolvency practitioners.

What mistakes do LLP members make about section 214A?

  • Believing limited liability means no personal exposure. Members are protected from the LLP’s debts but not from repaying their own withdrawals. See LLPs explained and duties of LLP members.
  • Thinking retirement ends the risk. A former member remains exposed for withdrawals within the two year window.
  • Relying on the every step defence. That defence is written into section 214 only.
  • Looking only at their own drawings. The test takes account of withdrawals made by other members at the same time or in contemplation, so a collective distribution can make each member liable.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.