The partners run a Limited Liability Partnership. From management to operations, the partners direct the LLP toward its objectives and vision. New partners are added, or existing partners leave; this has no effect on the LLP’s status, but it does have an impact on the growth of the business and the responsibilities of other partners. Only with the approval of the Ministry of Corporate Affairs can a change in partners and their details be implemented.
Procedure for Adding Partner to LLP
- Adding a new Partner to an existing LLP usually necessitates the approval of all existing Partners. However, if the LLP agreement allows it, one Partner may have the authority to admit new Partners to the LLP without the consent of all of the existing Partners.
- The new Partner who wishes to join the LLP must indicate his or her intention to do so. Once the individual is admitted as a new Partner, the LLP must file Form 4 within 30 days of the date he or she becomes a Partner in the LLP. An existing Designated Partner must sign LLP Form 4.
- a certificate from a practicing Company Secretary or Chartered Accountant stating that the CS/CA has verified all of the details of the Partner addition, including the LLP’s books and records, and found them to be correct is required.
- In addition, an LLP agreement for the addition of a Partner must be executed as an addendum to the existing LLP Agreement.
- In order to become a designated partner in an LLP, the incoming partner must first obtain a digital signature certificate (DSC). Following DSC, the New Designated Partner must apply for DIN (Director Identification Number).
- The government (MCA) charges its own charges for DIN registration. It is necessary to obtain the permission of the existing partners.
- The firm must also prepare documentation for the addition of a partner. The same procedure will apply if the partner status changes from Partner to Designated Partner.
Process
Step 1: Obtain the consent of all the partners or resolution of partners in the LLP meeting for the Addition of Partners. Pass resolution for admission of Partner
Step 2: Revise the LLP agreement for the addition of partners. Execute Amendment to LLP Agreement
Step 3: File the LLP Forms 3 and 4 for the addition of partner LLP. File an Application for approval of change Form 4 & Form3
List of documents for Adding Partner in LLP
- PAN card of New Partner
- Address Proof of New Partner (including PAN)
- Consent form
Who can become a partner?
According to the Limited Liability Partnership Act, 2008 – Section 22 which defines Eligibility to be partners states that On the incorporation of a limited liability partnership, the persons who subscribed their names to the incorporation document shall be its partners and any other person may become a partner of the limited liability partnership by and in accordance with the limited liability partnership agreement.
Appointment of Designated Partner
Every LLP must have at least two Designated Partners (“DP”) as well as two partners. The DP / Partner is accountable for all acts, matters, and things done by the LLP.
Process
Step 1- Firstly the partner has to obtain the DSC and DPIN. If the partner already has a DIN then there is no requirement of a new DPIN.
Step 2 – Draft and execute an Amended LLP Agreement and other related documents that incorporate the relevant changes pertaining to the appointment of a new DP/Partner.
Step 3 – Signing and Execution of documents.
Step 4 –The necessary Form(s) must be filed with the Registrar of Companies (“ROC”) within 30 days of the date of appointment. (Form 3 and Form 4 has to be filed as mentioned above)
Resignation or Removal of Partner
A Partner in an LLP may resign from the LLP in accordance with the Partners’ LLP agreement. If the LLP agreement contains no restrictions, a Partner in an LLP may resign from the LLP by providing notice of resignation in writing to the other Partners in the LLP within 30 days.
Circumstances where an LLP Partner would cease to be a Partner in the LLP:
- On the death of the Partner
- On dissolution of the LLP
- If the Partner is found/proved to be of unsound mind
- If the Partner is declared insolvent.
A Partner in an LLP will be considered a Partner unless other Partners receive written notice of the partner’s intention to resign or notice is given to the Registrar.
Procedure for Removal/ Resign Partner from LLP
In order to remove a partner from an LLP, The government (MCA) charges Rs.500/- for DIN registration. Exiting partners’ written consent is required. In addition, the firm must prepare documentation for the removal of a partner. The same procedure will apply if the partner status changes from Partner to Designated Partner.
Step 1: Pass resolution for removal and/or admission as well as the removal of Partner
Step 2: Execute Amendment to LLP Agreement
Step 3: File an Application for approval of change Form 4 & Form 3
List of documents for Removal Partner from LLP
- Existing LLP Agreement
- Consent letter
- Declaration
- Resolution for authorizing partner
- Resignation letter
- DIN & DSC of Authorized Partner
Note- A LLP partner may be removed or expelled in accordance with the terms of the LLP agreement. If the agreement is silent on this issue, then Schedule I apply to the LLP, which states that the majority of partners cannot expel a partner. In other words, to expel a partner, the consent of all partners would be required.
Simultaneous, the Addition and Removal of Partners from LLP
When a simultaneous addition and removal of Partners need to take place, the basic 3-step procedure remains the same wherein Removal and Addition should be drafted in a single agreement with all of the necessary documents (same as above) attached to it.
Conclusion
The procedure for changing partners in an LLP, as well as the drafting of an agreement with the necessary changes, must be followed in a compliant manner, which necessitates consulting with a professional.
The procedure for adding and removing a partner to an LLP, as well as the necessary documents, DIN, and DSC, can take up to 3-7 working days. All documents must be uploaded as soft copies to MCA.
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