Limited Liability Partnership (LLP) is a form of business that combines the features of a traditional partnership and limited liability. This form of business is governed by the provisions of the Limited Liability Partnership Act, 2008. Limited Liability Partnership (LLP) is governed through the rules of Limited Liability Partnership Act, 2008. In today’s time an LLP is more popular than a Private Limited Company because of its easy nature and the lesser compliances. In this article we’ll discuss about Procedure for Change in Partners of LLP.
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Quick Look
Limited Liability Partnership is an alternative form of business that offers the benefits of limited to the partners. On February 11, 2022, the Ministry of Corporate Affairs (MCA) published the Limited Liability Partnership (Amendment) Rules, 2022 that came into existence on April 1, 2022 and amended the Limited Liability Partnership Rules, 2009.
What is Limited Liability Partnership?
LLP is a new concept in the world of businesses. Section 3 of the Limited Liability Partnership Act, 2008 defines about LLP. It defines LLP as a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners. Simply it is understood as an amalgamation of a company and partnership due to its business model which allows the organisation to benefit from limited liability to the partners at relatively low costs compared to traditional models. This form of organisation is fit for small and medium-size businesses.
Documents Required for Change in Partner
The following are the document required for Change in Partner and Resignation of Partner:
Appointment of Designated Partner
- Passport size photograph of the partner;
- Self-attested copy of PAN Card of the partner
- Also Self-attested copy of Proof of Identity (Driving License/Voter ID Card/Passport) of the Partners
- Digital Signature Certificate
Resignation of Partner
- LLP Agreement
- Resignation Letter
- Digital Signature Certificate (DSC)
Change of Partners in an LLP
The Limited Liability Partnership Act, 2008 provides for change in partners of an LLP by the addition of a new partner or by the resignation or removal of partner. Any change in an existing partner’s name or address also counts as a change in partners, which is required to be intimated to the Registrar of companies as pee The Limited Liability Partnership Act, 2008. Section 25 of the LLP Act states that any change in the address or name of a partner must be intimated to the LLP within 15 days of such change.
Every partner has to update the change in their name or address by filling out Form 6 of the LLP. The provision also includes when a person becomes a new partner or ceases to be a partner, a notice is required to be filled within 30 days of such change by the partner and submitted to the Registrar. Any change in the partner’s name or address shall be intimated to the Registrar within 30 days.
The procedure for change in partners of LLP can be broadly classified into two categories:
- Change in partners due to resignation or death, and
- Change in partners due to induction of new partners.
Change in Partners Due to Resignation or Death
When a partner resigns or dies, the following steps need to be taken to remove the partner from the LLP:
- Step 1: Intimate Registrar of Companies (RoC): The LLP has to intimate the Registrar of Companies (RoC) within 30 days of the partner’s resignation or death. The LLP has to file Form-4 with the RoC along with the necessary documents like the resignation letter or death certificate.
- Step 2: Amendment to LLP Agreement: The LLP agreement has to be amended to reflect the change in partners. The remaining partners have to execute a supplementary agreement to remove the resigned partner or the deceased partner from the LLP.
- Step 3: Fresh Filing of LLP Agreement: The amended LLP agreement has to be filed with the RoC in Form-3 within 30 days of execution of the supplementary agreement.
Change in Partners Due to Induction of New Partners
When a new partner is inducted into the LLP, the following steps need to be taken:
- Step 1: Consent of Existing Partners: The existing partners have to give their consent for the induction of new partners. The LLP agreement has to be amended to reflect the change in partners. The terms of the partnership, profit sharing ratio, and other clauses have to be revised accordingly.
- Step 2: Execution of Supplementary Agreement: The new partner has to execute a supplementary agreement with the LLP and the existing partners. The supplementary agreement should contain the terms and conditions of the partnership, the profit-sharing ratio, the capital contribution, and other clauses.
- Step 3: Filing of Form 4: The LLP has to file Form-4 with the RoC within 30 days of the execution of the supplementary agreement.
Resignation of a Partner from LLP
Sections 24 and 25 of the LLP Act provide that A partner can resign as per the LLP Agreement, If LLP Agreement is silent then he may resign from LLP after giving a notice of thirty days and the LLP will then file the notice given by the partner in FORM-4 signed by the designated partner/LLP with ROC and also file FORM-3 for the change in LLP.
Important Points to be kept in Mind
Some of the important points to be kept in mind while effecting a change in partners of LLP are:
- The LLP agreement has to be amended to reflect the change in partners. The amended agreement has to be filed with the RoC.
- The resignation or death of a partner does not dissolve the LLP. The remaining partners can continue the business of the LLP.
- The inducted partner has to obtain a DPIN (Designated Partner Identification Number) or DIN (Director Identification Number) and must be designated as a partner in the LLP agreement.
- The LLP has to comply with the provisions of the LLP Act, 2008, while effecting a change in partners.
Conclusion
In conclusion, the procedure for change in partners of LLP under the LLP Act, 2008, is relatively straightforward. The consent of all the partners must be obtained, a new LLP agreement must be executed, Form 4 must be filed with the Registrar of Companies, and the PAN and TAN must be amended. It is important to ensure that all legal documents are updated to reflect the change in partners. This will ensure that the LLP can continue to operate smoothly without any legal or financial issues.
