Amity Business School

MBA, Semester 1 Legal Aspects of Business Ms. Shinu Vig

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Limited Liability Partnership Act, 2008

Section 2(n) says Limited Liability Partnership means a partnership formed and registered under this Act.
Nature of LLP: A LLP is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners. A LLP shall have a perpetual succession. Any change in the partners of LLP shall not affect the existence, rights or liabilities of the LLP.

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Limited Liability Partnership

It is a corporate business vehicle enables professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner provides benefits of limited liability allows its members the flexibility for organizing their internal structure as a partnership.

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Unique features of LLP:
1. LLP Agreement: The mutual rights and duties of Partners will be decided by the LLP Agreement between Partners or between the LLP and its Partners, if there is one. Otherwise, the First Schedule of the LLP Act will apply. 2. Designated Partners: LLP Act provides that every LLP should have a minimum of two Designated Partners who are individuals. One of the Designated Partners has to be resident in India. 3. Limited Liability: Liability of the partners is restricted only to the amount of their contribution. There is no exposure to the personal assets of the partners except in the case of fraud. (Contd.)

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4. Contribution by Partners A contribution by a Partner can be in the form of any tangible, movable or immovable or intangible property or other benefits. 6. Assignment and Transfer of Partnership Rights: As per the Act, partnership rights relating to share of profits and losses, right to receive distributions as per LLP agreement in whole or part can be assigned and transferred. 7. Registered Office: Every LLP shall have a registered office to which all the communications and notices may be addressed. 8. Statement of Account & Solvency / Annual Return Every LLP has to file a Statement of Account & Solvency with the Registrar within a period of 30 days from the end of 6 months of each financial year.

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Liabilities of Designated Partners A Designated Partner shall be : a) Responsible for doing all the acts as are required to be done by LLP in respect of compliance of the provisions of the LLP Act, including filing of any return, document or statement. b) Liable to any penalties imposed on LLP for any contravention of the above mentioned provisions.

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Merits of LLP: Easy and less expensive formation Flexibility in management No requirement of any minimum capital contribution by partners. No restriction as to maximum number of partners LLP is a separate legal entity. Partners are not liable for acts of other partners. Low Compliance cost. No exposure to personal assets of the partners except in case of fraud. Less requirement as to maintenance of statutory records Less Government Intervention Easy to dissolve or wind-up Professionals can form Multi-disciplinary Professional LLP, which was not allowed earlier

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Qualifications for becoming a partner: 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.

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Incorporation of LLP: 1. Acquire DPIN/ DIN and DSC. 2. Check name availability. 3. Download LLP forms. 4. File electronically. 5. Track status 6. Receive Certificate of Incorporation Name of LLP: Every LLP shall have either the words Limited liability partnership or the acronym LLP as the last words of its name.

Change in partners

Persons, who subscribed to the Incorporation Document at the time of incorporation of LLP, shall be partners of LLP. Subsequent to incorporation, new partners can be admitted in the LLP as per conditions and requirements of LLP Agreement.

 A person 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(a) on his death or dissolution of the limited liability partnership; or (b) if he is declared to be of unsound mind by a competent court; or (c) if he has applied to be adjudged as an insolvent or declared as an insolvent. Notice is required to be given to ROC when a person becomes or ceases to be partner or for any change in partners.

Accounts and audit

The LLP shall be under an obligation to maintain annual accounts reflecting true and fair view of its state of affairs. A statement of accounts and solvency shall be filed by every LLP with the Registrar every year. The accounts of LLPs shall also be audited, subject to any class of LLPs being exempted from this requirement by the Central Government.

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Conversion into LLP: Following entities may convert into LLP: 1. A firm 2. A private company 3. An unlisted public company

 A firm, private company or an unlisted public company is allowed to be converted into LLP in accordance with the provisions of the Act. Upon such conversion, on and from the date of certificate of registration issued by the Registrar in this regard, the effects of the conversion shall be such as are specified in the LLP Act. On and from the date of registration specified in the certificate of registration, all tangible (moveable or immoveable) and intangible property vested in the firm or the company, all assets, interests, rights, privileges, liabilities, obligations relating to the firm or the company, and the whole of the undertaking of the firm or the company, shall be transferred to and shall vest in the LLP The firm or the company, shall be deemed to be dissolved and removed from the records of the Registrar of Firms or Registrar of Companies, as the case may be.

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Winding up of LLP: The winding up of LLP can be either voluntary or by the Court of law. LLP can be wound up by the Tribunal: a. If the number of partners is reduced below two, for a period more than six months. b. If LLP is unable to pay its debts. c. LLP has acted against the interest of the sovereignty of the country d. If LLP has made a default in filing Statement of Account and Solvency or Annual Return for a consecutive period of 5 years. e. Any other reason which is just and equitable. * Tribunal means National Company Law Tribunal