Know the procedure for Add & Removal of Partner in LLP

The requirement to change of Partner may arise after the Online LLP Registration and incorporation. Various reasons are there affecting the changes in the partners of the LLP.

Following can be the prime reasons behind the change of Partners in LLP or their Designation after incorporation and LLP registration in India:

• Requirement to invest capital in LLP;
• Change of responsibilities or engagements of the Partner(s);
• Disability to perform to reach the expectations laid down under LLP Agreement or by Partners;
• Change of terms of agreement between Partners and LLP;
• Resignation and retirement of the Partner;
• Requirement to appoint expertise in specific field of operations of LLP.

Apart from the reasons mentioned above, there are number of reasons which require the addition or removal of Partner(s); or change in designation of Partner(s) after LLP Registration. In this article, we have provided the step-by-step guide to effect the change of partners or designation of partners in the Limited Liability Partnership.

Difference of Change of Partners & Change in Designation:

The term change in Partners includes addition, appointment, resignation or removal of the Partner in the LLP. Whereas the term change in designation does not include addition or removal of Partner in LLP however refers to change in position of designation of the Partners. The Partners of LLP are classified as Designated Partner and other normal Partners. Therefore, the procedure to change the designation includes following:

• Partner as Designated Partner; and
• Designated Partner as Partner

The change in Partners as well as change in designation requires following the same procedure with little changes. Below mentioned is the procedure to be followed to effect the changes.

When the application is filed for addition of Designated Partner or change of designation from Partner to Designated Partner, the concerned person shall also obtain DIN (Director Identification Number). If the said person has already applied and allotted, the same DIN shall be given and noted for his addition in the Limited Liability Partnership. In case of resignation of Partner or Designated Partner, the said person shall provide a Notice to the LLP for a minimum period of 30 days.

1. Pass resolution to affect the change
2. Execute Supplement Agreement
3. File an Application for approval of change

1. Pass resolution to affect the change:

To effect any changes in the Limited Liability Partnership, the Partners shall pass the resolution at the meeting of Partners as required by the LLP Agreement of concerned Limited Liability Partnership. Further, the resolution shall authorise any of the existing Designated Partner to act on behalf of the LLP and its Partners. Further, the authorised partners shall also hold a valid DSC to file the application to the Registrar.

2. Execute Supplement Agreement:

The supplement deed to the LLP Agreement shall be executed by the Partners of the LLP including the Partner who is to be added or removed.

• It should be taken care that the clauses, terms and conditions relating to addition/removal of partner provided in the LLP Agreement are complied with by the supplement.
• Any additional requirement or clause to can also be inserted or altered or removed through this Agreement.
• Further, the said supplement deed shall be executed on payment of Stamp Duty as required. The stamp duty payable will be decided based on the capital changed or introduced during the change.
• In case, there is no addition of the capital in the LLP during the change, the said agreement shall be executed by payment of Stamp Duty amounting Rs 100/- only.

Please refer another blog “When to change the LLP Agreement: Know reasons and procedure” to know what shall be complied taken care while execution of Supplement Agreement.

3. File an Application for approval of change:

As soon as the Supplement Agreement is executed by the Partners for change of partner or their respective designation, an application shall be filed with MCA to approve the changes of partner or the designation. The application shall be filed with the help of a Practising professional including Company Secretary or Chartered Accountant. The application shall be filed in the prescribed forms, i.e. LLP Form 3 & LLP Form 4.

The said application shall be filed along with the details and information of changes and following documents:

• Notice of Resignation/ removal (when applicable);
• Consent to act as Partner/ Designated Partner (when applicable);
• Resolution passed at the meeting of Partners;
• Original LLP Agreement; &
• Supplement Deed to LLP Agreement

The given application shall be filed within 30 days of the effective date of change or execution of agreement, whichever falls earlier. Failing to file the application within prescribed period, an additional fee will be levied at Rs 100 per day of delay.

The application of change of designation or addition and removal shall be reviewed by the registrar. The registrar on his satisfaction may grant the approval for the changes. Here, the changes shall be effective only after the approval received from the Registrar. However the said changes will be having retrospective effect to be in force, once approved.

Conclusion:

The procedure for change of partners in LLP along with drafting of agreement with necessary changes shall be followed in a well compliant manner which necessitates the consultancy with the Professional.