Procedure for Change in Partners of LLP

Narendra Kumar

16 Dec, 2020

Change in Partners of LLP or Changes in the management of Limited Liability Partnership (LLP) takes place in the form of addition /deletion of designated partners.

Who can be Partners in LLP? What is LLP?

Limited Liability Partnership governs by its Limited Liability Partnership Agreement. In case the Agreement is silent about the change in management then it follows the provisions of LLP Act, 2008. Any person eligible to become a  partner as per the provisions of LLP Act, 2008 can be admitted as a partner in LLP as per the provisions of the LLP agreement. The incoming partner has to see that he is not disqualified to become a partner as per the provisions of LLP Act; 2008. Any individual might cease to be a partner in accordance with the agreement or in the absence of agreement, by providing 30 days’ notice to the other partners.

A Partner of LLP ceases to exist In Following circumstances?

• On the death of the Partner
• On the dissolution of the LLP
• If the Partner is declared to be of unsound mind
• If the Partner is adjusted as an insolvent or declared as insolvent.

A Partner in an LLP will be considered to be a Partner unless other Partners have received written notification about the intent of the partner to resign or notice is given to the Registrar.

A management shall update the modifications amongst designated partner’s or partners’ or any change in any particulars of designated partners’ or partners’ of a LLP by filing E-Form 4 (Notice of appointment, cessation, change in name/ address/designation of a designated partner or partner and consent to become a partner/ designated partner) with Registrar.

An LLP agreement is a document which helps to determine the rights, duties, and obligation of Partners while governing the operations and management of the LLP. The Agreement describes the relation of Partner(s) and with the LLP. An LLP Agreement is a key document governing the operations, administration, and management of the Limited Liability Partnership. This important document is registered with the Registrar of Companies (LLP) after incorporation & online LLP Registration with MCA within 30 days of receipt of the Certificate of Incorporation. While running the business after registration of LLP with a number of partners, various changes are to be adopted in order to make the policy of operations more simplified and standardized while allotting obligations to the specified partner and benefiting him with few other rights combined with additional liability or obligation. Where the need arises for a change of any right, liability or any clause as per the business requirement after LLP Formation, the LLP shall look forward to changing in LLP Agreement.

Why change Limited Liability Partnership Agreement?

Below listed are situations which involve a change of LLP information and need to change LLP Agreement arises:

• Change of Business Activities of the LLP
• Change of any of the clause of the LLP Agreement
• Change of Capital Contribution by the Partners in the LLP
  • Addition of capital in LLP
  • Reduction in the capital of LLP
  • Change in the ratio of capital introduced by the Partner(s)
• Change in the Management structure of the LLP
• Change of terms or conditions for
  • Addition of Partner;
  • Appointment of Partner;
  • Expulsion of Partner;
  • Retirement of Partner; or/and
  • Resignation of Partner
• Change in Profit (loss) sharing ratio of the Partner(s)
• Modification of any rights and liabilities of the Partner in the LLP
• Change of period of LLP where the LLP is incorporated for the specified period of time

Any other change whether addition, alteration or deletion of a clause in the LLP Agreement.

Individuals, who are subscribed to the Incorporation Document at the time of incorporation of LLP, shall be partners of LLP. Once to incorporation, new partners can be appointed in the LLP as per conditions & requirements of LLP Agreement.

An individual may cease to be a partner in accordance with the agreement or in the absence of agreement, by giving 30 days notice to the other partners. A person shall also cease to be a partner of a limited liability partnership-

• On his death or dissolution of the limited liability partnership; or
• If he is declared to be of unsound mind by a competent court; or
• If he has applied to be adjudged as an insolvent or declared as an insolvent.

Notice is required to be given to Registrar when an individual becomes or ceases to be a partner or for any change in partners.

The management can alter or modify the LLP Agreement by filing Form 3 (Information with regard to the Limited Liability Partnership Agreement and changes, if any, made therein). E-Form 4 has to be filed along with E-Form 3, in case the change in LLP agreement which is due to change in partners/ designated partner.

A Limited Liability Partnership Agreement is the charter of the Limited Liability Partnership (LLP). The said agreement which can be updated or altered at any time after the online LLP Registration in India as per the up-to-date requirements arises during the existence of the LLP. The vibrant nature of the industry & field of operations may require changes and update the LLP Agreement from time to time.

Where the Limited Liability Partnership Act, 2008 does not restrict the changes in the LLP Agreement post LLP registration in India, it requires the approval of the Registrar of Companies (LLPs) for any change(s) proposed. The LLP Agreement at any time shall not override the provisions of the Limited Liability Partnership Act, 2008 and any other Act as may be applicable to the LLP from time to time.