Change in Partners of LLP
Preparation of necessary documents and completing compliances as per Secretarial standards
Preparation of new LLP Deed
Attaining new DIN through DIR 3 form
Filing of Form 3 and Form-4 with MCA
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Changes in Partners of LLP - Introduction:
Making changes in partners is a significant event in the life of a Limited Liability Partnership (LLP). It impacts the very foundation of an LLP and requires careful compliance with legal requirements. This article outlines the essential steps and compliance measures involved in altering partners within an LLP. Whether it's admitting a new partner, facilitating the retirement of a partner, or changing designations, understanding the compliance pROCess is crucial to maintaining regulatory adherence and ensuring a smooth transition.
Admission of a New Partner:
One of the most common changes in an LLP is the admission of a new partner. When admitting a new partner, the following compliance measures should be undertaken:
- a) Director Identification Number (DIN) Acquisition:
- If the proposed partner is to become a designated partner, they must acquire a Director Identification Number (DIN).
- The partner should file Form DIR-3, which requires attestation from both the existing partner and the new partner.
- Identity and residence proofs of the new partner should be attached to the Form DIR-3.
- The Form DIR-3 must be digitally signed by both the existing and new partners.
- b) Documentation:
Forms 3 and 4 should be prepared, including the Amendment Deed as an attachment.
These forms should accurately reflect the changes in partners and provide details of the new partner’s rights, obligations, and profit sharing ratios.
List of Documents Required
KYC Documents of new Partner
Digital Signature Certificate of existing and new director
Certificate of Incorporation
Resolutions (Formats will be provided)
LLP Agreement
Details of resigning director ( if any)
How Does It Works?
Form Submission
Callback From Our Team
Final Quote And Payment
Document Submission
Preparation of New LLP Deed
Payment of Challans
Retirement of a Partner:
Retirement of a partner is another important change that may occur within an LLP. To ensure compliance during this pROCess, the following steps should be taken:
- a) Execution of Retirement Deed:
Retirement Deed should be executed, clearly documenting the partner’s decision to retire. The Deed should outline the terms and conditions of retirement, including the settlement of rights, liabilities, and profit-sharing arrangements.
- b) Filing of Forms:
- Form 3, along with the Amendment Deed, should be filed with the Registrar of Companies (ROC) within the stipulated time frame.
- The Amendment Deed must accurately reflect the retirement of the partner and any changes in the rights and obligations of the remaining partners.
Admission cum Retirement of Partner:
In some cases, an LLP may experience both the admission and retirement of partners simultaneously. To ensure compliance in such scenarios, the following steps are essential:
Combined Compliance:
The pROCedures for admitting a new partner and retiring an existing partner should be followed concurrently, as mentioned above.
The necessary forms, including Form DIR-3, Retirement Deed, and Amendment Deed, should be prepared and filed accordingly.
Change in Partners' Designation:
Designated Partners play a crucial role in LLPs, similar to directors in a company. If a partner’s designation needs to be changed, the following compliance measures should be observed:
- a) Resolution and Amendment Deed:
A resolution should be passed by all the partners, authorizing the change in designation of the concerned partner. An Amendment Deed should be prepared, reflecting the change in designation and its implications on rights, obligations, and profit sharing ratios.
- b) Filing of Forms:
Form 3, along with the Amendment Deed, should be filed with the ROC to record the change in designation.
Conclusion:
Making changes in partners within an LLP necessitates adherence to specific compliance requirements to ensure a smooth transition and maintain legal compliance. Whether it involves admitting a new partner, facilitating the retirement of a partner, or altering designations, following the prescribed pROCedures and filing the required forms with the ROC is crucial. By understanding and fulfilling these compliance obligations, LLPs can effectively manage changes in partners and continue their operations in a legally compliant manner.
FAQs
The stamp duty for change in partners of LLP will be paid on registering the amended LLP Agreement and the amount will be dependent on the particular stamp act of the state in which the LLP is registered.
Partners can be added or removed in an LLP by filing Form-3 and Form-4.
Designated partners are responsible for notifying the changes in LLP to ROC.
The departure of a partner may result in a change in the ownership and management structure of the LLP. The remaining partners may need to re-evaluate the allocation of profits, decision-making authority, and responsibilities among themselves.
In a Limited Liability Partnership (LLP), partners generally have the ability to remove or expel another partner, subject to the provisions outlined in the LLP agreement and relevant laws governing LLPs.
Yes, a partner can voluntarily leave an LLP subject to the procedure specified in the LLP agreement.
The following documents are required for change in partners:
- Amended LLP Agreement
- Partner’s Resolution
- Consent of the old partners
- Consent of new partners
Form-3 and Form-4 is required to be filed for change in partners.
The rights and obligations of a departing partner in a Limited Liability Partnership (LLP) can be determined by the LLP agreement.
Rights of a Departing Partner:
- Withdrawal of Capital: A departing partner typically has the right to receive their capital contribution back from the LLP, subject to any provisions in the LLP agreement.
- Share of Profits or Losses: The departing partner may be entitled to receive their share of profits or bear their share of losses up until the date of departure, as outlined in the LLP agreement.
- Rights to Intellectual Property: If the departing partner has contributed any intellectual property to the LLP, their rights and usage of that intellectual property may need to be addressed upon departure.
Obligations of a Departing Partner:
- Notice and Transition: The departing partner is usually obligated to provide notice of their intention to leave the LLP, allowing for a smooth transition. The LLP agreement may specify the required notice period.
- Financial Obligations: The departing partner may be responsible for fulfilling any financial obligations owed to the LLP or other partners, such as repaying any outstanding loans or debts.
c. Confidentiality and Non-Compete: The LLP agreement may include provisions regarding confidentiality and non-compete obligations that continue even after the partner’s departure. The departing partner may be obligated to maintain confidentiality of the LLP’s information and refrain from competing with the LLP’s business for a specified period.
Yes, any changes in the partners of an LLP shall be intimated within 30 days.
Any individual or body corporate can become a partner of an LLP, provided that individual shall not be:
- of unsound mind as declared by a Court of competent jurisdiction and the finding is in force;
- an undischarged insolvent; or
- adjudicated as an insolvent and his application is pending.
To change the partners in an LLP, consent of previous partners and amendment in the LLP agreement is required and the same is to be reported to the Registrar by filing Form-3 and Form-4.
Yes, it is possible for a partner to be expelled from a Limited Liability Partnership (LLP) under certain circumstances. The ability to expel a partner from an LLP is usually governed by the LLP agreement, which outlines the rights, obligations, and procedures for partnership matters. Some circumstances may be breach of LLP Agreement, misconduct or unethical behavior, incompetence or incapacity or financial mismanagement.
In case of change in the name or address, then the partner shall intimate the change within 15 days.
The partners cannot transfer their ownership interest in an LLP.
To change the partners in an LLP, consent of previous partners and amendment in the LLP agreement is required and the change is to be reported to the Registrar by filing Form-3 and Form-4.
The following individual cannot be a partner in LLP if :
- he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;
- he is an undischarged insolvent; or
- he has applied to be adjudicated as an insolvent and his application is pending.
Yes, it is mandatory to appoint 2 (Two) designated partners in an LLP.
To appoint designated partner in LLP, Form-3 and linked Form-4 needs to filed after taking the approval of partners.
Yes, an LLP can become a partner in another LLP.
No, DIN is not required to become a partner in LLP. However, DIN is required to become designated partner in an LLP.
No, a new partner cannot be added to an LLP without the consent of all existing partners.
