MODULE 4
LLP ACT -2008
BUSINESS
LAW
WHAT IS LLP ACT-2008
INTRODUCTION
The Ministry of Law and Justice on 9 January 2007 notified the Limited Liability
Partnership Act, 2008
The Parliament passed the Limited Liability Partnership Bill on 12 December,
2008 the President of India has assented the Bill on 7 January, 2009 and called
as the Limited Liability Partnership Act, 2008
The LLP Act, 2008 is applicable to the whole of India.
This Act have been enacted to make provisions for the formation and regulation of
Limited Liability Partnerships and for matters connected there with or incidental
thereto
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THE LLP Act 2008 has 81 section and 4 schedules
The First Schedule deals with mutual rights and duties of partners,
as well limited liability partnership and its partners where there is
absence of a formal agreement with respect to them.
The Second Schedule deals with conversion of a firm into LLP.
The Third Schedule deals with conversion of a private company into
LLP
.The Fourth Schedule deals with conversion of unlisted public
company into LLP
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Sailient FEATURES OF LLP
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LLP is a body corporate
Perpetual Succession
Separate Legal Entity
Mutual Agency
LLP Agreement
Artificial Legal Person
Limited Liability
Minimum and Maximum Number of Partners in an LLP
Business for Profit Only
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Investigation
DIFFERENCE LLP AND
PARTNERSHIP
1. legal entity- LLP is a separate legal entity and can hold assets in its name. The
status of partnership firm does not have separate identity from its members
2. Liability of partners- The liability of a partner is limited to extent of their
contribution in LLP. Further one partner is not affected or not held liable for
actions of another partnerThe liability of partners is not limited and can extend to
personal assets of partners .The action of active partner can hold another liable
3. Uninterrupted Existence -The existence of LLP is not affected by change in
partners of LLP. The partnership firm dissolves due to removal or death of
partner subject to clauses of partnership deed
4. Registration- Registration of LLP is mandatory. And it is registered with
ROC . Partnership can be registered as well as unregistered . The registration if
required can be done with local registrar of firm
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DIFFERENCE LLP AND
PARTNERSHIP
[Link]- In LLP audit is required in case the contribution is above 25 lacs or if
annual turnover is above 40 lacs. Auditing is compulsory in case of Partnership firm
7. Foreign national as partners- In LLP foreign nationals can be partners
whereas In partnership foreign nationals cannot be partners.
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“ An LLP agreement is a written document
defining the agreement between the
partners of a Limited Liability
Partnership. It defines the rights and
duties of all the partners towards each
other and towards the firm.
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“ ▪ ELEMENTS OF LLP
AGREEMENT
[Link] of proposed LLP
[Link] of partners and Designated partners
[Link] of contribution by partner
[Link] sharing ratio
[Link] and duties of partners
[Link] business
[Link] of governing the LLP
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CONTENTS OF LLP AGREEMENT
“ Firstly, it contains the name of the limited liability partnership
firm. According to the Act, the name must always end with LLP.
It also contains the date of the agreement. The act states that
the agreement must be registered within 30 days after
incorporation.
Then we come to the partner’s contribution. The agreement has
the ratio of the capital invested by the partners, the profit
sharing ratio and other provisions regarding the capital
contribution if any.
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CONTENTS OF LLP AGREEMENT
“ The agreement contains the terms of disassociation as well. If
any partners want to withdraw from the LLP, then the procedure
and process are listed out. Also, it contains the rights of the
exciting partners, rights of the continuing partners, the division
of firm assets etc.
Also contains the provisions for the admission of a new
partner into the LLP.
The agreement must also contain the procedural information
regarding the sale or transfer of partnership rights. If such
transfer of rights is prohibited, then it must be mentioned.
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▪ Provisions in absence on an LLP Agreement
“ All partners of LLP shall share profits and losses equally.
No partner is entitled to any remuneration or salary for
the management of the LLP
Admission of any new partner will require the permission of all the
partners
Any disputes between the partners of an LLP which are not resolved
amongst themselves must be referred for arbitration as per the act.
Majority of the partners cannot expel a partner unless there is an
express agreement between partners.
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“ ▪ REMEMBER
▪ Under the Limited Liability Partnership Act, the
filing of an LLP agreement is mandatory while
registering the firm within 30 days of the
formation of the LLP.
▪ A well-defined LLP agreement sets the solid
foundation for the business.
▪ This helps avoid any conflict in the future.
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Partners in LLP
Any individual or body corporate may be a partner in a
LLP. However an individual shall not be capable of
becoming a partner of a LLP, if—
(a) he has been found to be of unsound mind by a Court
of competent jurisdiction and the finding is in force;
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and
his application is pending.
Partners in LLP
▪ A partner in relation to a limited liability
partnership, means any person who becomes a
partner in the limited liability partnership in
accordance with the limited liability partnership
agreement.
A partner needs to fulfill the following
conditions
▪ He must be a person of a sound mind.
▪ He must not be an undischarged insolvent person.
Designated Partner in LLP
▪ Designated Partners are similar to Directors of a
Private Limited Company. This Partner in an LLP
when compared to the Director of a Company,
enjoy more rights and privileges.
Appointment of at least two “Designated Partners”
shall be mandatory for all LLPs.
Designated partner
▪ Designated Partner refers to any partner
who is appointed as such, in the
incorporation document, at the time of LLP
registration.
Conditions a designated partner needs
to fulfill
▪ There needs to be 2 partners who needs to be
Individuals
▪ One of them needs to be an Indian resident
The responsibilities and liabilities of the Partner
▪ Partners are Agent of Business
▪ Every partner of an LLP for the purpose of its business is an agent of the LLP but is not an
agent of other partners.
▪ LLP is not bound by the act of partners
▪ LLP is not bound by anything done by a partner in dealing with another person if the
partner had no authority to do the act on behalf of the LLP and the person either knows that
the partner had no authority; or did not know or did not believe him to be a partner of the
LLP.
▪ Unlimited Liability in case of fraud to creditors
▪ If an LLP or any of its partners act with the intent to defraud creditors of the LLP or any
other person or for any fraudulent purpose, then the liability of the LLP and the concerned
partners is unlimited
.
The responsibilities and liabilities of the
designated partner
▪ Designated partners are Responsible for the acts
▪ The designated partner would be responsible for the doing of all acts, matters and things as
are required to be done by the LLP in respect of compliance of the said Act; and liable to
all penalties imposed on the LLP for any contravention of those provisions.
▪ Accountable for Compliance
▪ The “Designated Partners” shall also be accountable for regulatory and legal compliance,
additionally their liability as partners.
▪ In case of Vacancy of Designated Partner
▪ The LLP Act has provided for a 30 days period for filling up of a vacancy of a designated
partner. If no designated partner is appointed, or if at any time there is only one designated
partner, each partner of the LLP shall be deemed to be a designated partner.
▪ If the LLP fails to appoint designated partners, then the LLP and its every partner shall be
punishable with fine.
▪ In case of death of Partner
▪ After a partner’s death, the business is continued in the same LLP, the continued use of that
name or of the deceased partner’s name as a part thereof shall not of itself make his legal
representative or his estate liable for any act of the LLP done after his death.
“ ▪ Incorporation Document
▪ Incorporation document (Section 11): The most important
documentneeded for registration is theincorporation document.
▪ (1)For a LLP to be incorporated:
▪ (a)two or more persons associated for carrying on a lawful business
with a view to profit shall subscribe their names to an incorporation
document;
▪ b) the incorporation document shall be filed in such manner and with
such fees, as may beprescribed with the Registrar of the State in which
the registered office of the LLP is to be situated; and
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“ ▪ Incorporation Document
▪
▪
(c)Statement to be filed:
there shall be filed along with the incorporation document, a statement
in the prescribed form,
▪ made by either an advocate, or a Company Secretary or a Chartered
Accountant or a Cost Accountant, who is engaged in the formation of
the LLP and
▪ by any one who subscribed his name to the incorporation document,
▪ that all the requirements of this Act and the rules made thereunder
have been complied with
▪ in respect of incorporation and matters precedent and incidental
thereto
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“ Incorporation Document
The incorporation document shall
▪ (a) be in a form as may be prescribed;
▪ (b) state the name of the LLP;
▪ (c) state the proposed business of the LLP
▪ ;(d) state the address of the registered office of the LLP
▪ ;(e) state the name and address of each of the persons who are to be
partners of the LLP on incorporation;
▪ (f) state the name and address of the persons who are to be designated
partners of the LLP on incorporation;
▪ (g) contain such other information concerning the proposed LLP as may be
prescribed
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“ ▪ Incorporation Document
▪ (3) If a person makes a statement as discussed above which he
▪ (a) knows to be false; or
▪ (b) does not believe to be true, shall be punishable
▪ with imprisonment for a term which may extend to 2 years and
with fine which shall not be less than 10,000 but which may extend to
5 Lakhs
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“
▪ Incorporation by registration (Section 12)
1) When the requirements imposed by clauses (b) and (c) of sub-section (1) of
section 11 have been complied with, the Registrar shall retain the incorporation
document and, unless the requirement imposed by clause (a) of that sub-section
has not been complied with, he shall, within a period of 14 days—
a:- register the incorporation document; and
(b) give a certificate that the LLP is incorporated by the name specified therein
2) The Registrar may accept the statement delivered under clause (c) of sub-
section (1) of section 11 as sufficient evidence that the requirement imposed by
clause (a) of that sub-section has been complied with
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“
▪ Incorporation by registration (Section 12)
3) The certificate issued under clause (b) of sub-section (1) shall be
signed by the Registrar and authenticated by his official seal
4) The certificate shall be conclusive evidence that the LLP is
incorporated
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