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In India, a partner could be removed from an LLP (limited liability partnership) or she or he could want to resign for a variety of circumstances. However, there are some rules and regulations that have to be followed in this case. The resignation or removal needs to be recorded in the right way and relevant filings have to be made with the Ministry of Corporate Affairs of India. This would make sure that the resignation or removal of the partner would come into effect properly.
Resignation and removal of a partner
As per the LLP agreement between partners a partner can stop being a partner. If there are no restrictions in the LLP agreement then a partner can resign just by providing a notice that she or he is resigning within a period of 30 days.
This notice needs to be given in writing to the other partners of the LLP. There are certain situations where a person’s status as a partner in an LLP comes to an end automatically. They may be mentioned as below:
A person will remain a partner in an LLP till the time that the other partners in the same LLP are not notified in a written manner regarding her or his intention to resign.
The same also applies till a notice is provided to the Registrar to that effect.
Liabilities and rights of partners at the time of resignation or removal
In case a person is unable to continue being a partner in an LLP owing to insolvency or death she or he would be entitled to a number of benefits from that entity itself. She or he would receive an amount that happens to be equal to the capital contribution that she or he made when she or he was a partner. Such a former partner would have also a right to a share in the accumulated profits that should be adjusted for accumulated losses provided there are any at all. The date of determination in this case would be the date when the concerned person stopped being a partner in that LLP. Such a partner also has the right to transfer her or his right to share in the company’s profits and losses.
She or he can also receive distribution that will be provided as per the LLP agreement. In case the partner has resigned or has been removed then the rights of this outgoing partner would be determined as per the provisions that have been mentioned in the LLP agreement. At the same time the former or outgoing partner will also be held responsible for the liabilities suffered by the LLP during her or his tenure. They shall continue and not be discharged under any circumstance whatsoever.
Removing an LLP partner through majority
A person cannot be forced out of her or his position as a partner in an LLP until and unless such rights are bestowed on the other partners by the LLP agreement. In that case Form 4 needs to be filed in order to eject that particular partner.
Filing LLP Form 4
In order to make sure a partner can resign, be removed, or secede from an LLP the firm needs to file the LLP Form 4. This needs to be done within a period of 30 days of the removal, cessation, or resignation of that partner.
The form needs to be signed by a designated partner and should be filed alongwith a certificate that is provided either by a practicing cost accountant or the Company Secretary or a chartered accountant. Whoever provides that certificate needs to certify the fact that the records and books of that LLP are correct and true.
Adding a designated partner in an LLP
In India an LLP is governed by the rules and regulations that have been mentioned in the Limited Liability Partnership Act, 2008. There are certain steps that have to be followed in order to appoint an individual as a designated partner in an LLP. In the first step the applicant has to apply for a Digital Signature Certificate (DSC). Normally, she or he would be asked to provide the following documents along with the application:
After this the applicant needs to apply for the DIN (Director Identification Number). Once the applicant gets her or his DSC she or he would have to use the DIN in the form DIR-3. She or he would also have to provide id and address proofs. After the proposed designated partner gets the DIN the other current partners of the LLP would call a meeting.
In this meeting they would pass a resolution whereby they would add the designated partner to the partnership deed. For this a supplementary partnership deed would have to be drafted and it is here that the name of the new partner would be added. After this the incoming partner would provide her or his consent in writing. Once these documents get ready the LLP would need to file the LLP Form 4. This needs to be done within a span of 30 days of appointing the partner. Along with this it would have to furnish the original partnership deed as well as the supplementary one.
Once all these forms have been filed the designated partner’s name would be added. It would also be visible on the official website of the Union Ministry of Corporate Affairs of India. If the LLP fails to file Form 3 and Form 4 within the stipulated period of 30 days it would have to pay an additional fee of INR 100 for each day of delay.
These days, it is being seen that LLP has become the company type of choice for many businesses and much of this has to do with its convenient nature as well as lack of compliances.
There are several issues may come why a director need to be fired, if a director engages in illegal activity, fraud, bankruptcy or some other wrongdoing, the company can remove or change the director for the cause.
Out of them just in below paragraph we have given a hint that can leads to change of a director and in this post you will get a brief information on legal process to add or remove a director in a company.
Every company has ups and down. If your business is always in growing position then you are performing well and this credit goes to management team and next to the director. And if it is going down gradually by mistakenly, surely many issues will come on the business and everyone’s eye will be focus to director what he is doing.
If he is not responding at all and not taking any concrete solution to business, company can take action on him/her and think about for option B, it may be replacement of that post.
So that's why, we prepared this post simple and concise to read, understand and acquired knowledge on how to change or add/remove a director in a company with respect to the company necessity.
Here we have given a real time example on this topic for better understanding and clear vision that helps you to know the logic behind it.
Scenario Based Example:
A client came to us and asks we want to change our director, so please tell us what are the legal formalities belongs to it.
As we are legal consultants, we should know the cause of replacement of director. Why they are so insisted to remove that director and what is the cause behind it? We asked the same thing to them why you want to change that director and did he made anything mistake. See what they said as their statement:
1. He got found bankruptcy
2. Not attending the office meeting
3. Not taking solid solution for company growth
3. Now he is becoming unsound mind
4. Pre-occupation in other/family business
5. Showing health issue
Just like any other legal procedure in India there are definite rules and regulations that have to be followed while changing the director or designated partner of a company. One of them is that you need proper legal papers in order to make such changes; there has to be a board resolution for the same; and the proper forms need to be filed the right way with the Registrar of Companies (ROC) in your state.
The appointment of directors
In India, directors are selected in a company by its Board of directors and in some cases the Shareholders. Their main task is to manage the company. The Companies Law of 2013 deals with this.
It states that there should be at least two directors in a private limited company and in a limited company there should be a minimum of three directors. When it comes to a limited liability partnership (LLP) there are designated partners. As per the Limited Liability Partnership Act, 2008 there should be at least two designated partners in a company. There could be several reasons as to why these companies may feel the need to appoint or remove directors.
Adding and Removing Directors
Procedure/Steps for Changing Director in a Company
Here we just simplified the procedure into certain steps to change the director of a company. I think you will be easy with this process for a quick hack and will get a brief explanation from the below steps.
Appointment of Additional Director
1. Obtain DSC (Digital Signature Certificate) for Director
2. Obtain DIN (Director Identification Number) for Director
3. Drafting of resolution for Board Meeting, letter of Appointment on issue of adding Director in a Company
4. Appointment of additional director has to be confirmed in upcoming EGM/AGM.
5. File eForm DIR-12 within 30 days from passing a Board Resolution towards Registrar of Companies certificate by Company Secretary/Chartered Accountant/Cost Accountant in practice.
6. It will be updated in the master data once we file the form.
Procedure for Removal of Director
For the removal of director in a company, the same process have to carry out as mentioned above in appointment of additional director process, but you have to leave the step.1 and step.2 which is not required at all for resigning process and you should follow the other remaining steps.
Once again we mentioned the steps below here for your better clarification and understanding
1. Removal of Director, by passing a Board Resolution.
2. File eform-DIR-12 within 30 days from passing a Board Resolution towards Registrar of Companies certificate by Company secretary/Chartered accountant/Cost accountant in practice.
3. It will be updated in the master data once we file the form.
The first thing that you need in order to add either one of the two designations being talked about over here is a digital signature.
Once you get the digital signature a director or designated partner could be added to the company. In case of a director the consent of shareholders is needed as well. As far as removing them is concerned, the first thing that needs to be ensured is that even after the removal there would be the requisite number of designated partners or directors in that company. After that the company in question needs to make sure that there is a proper resignation letter submitted with the form that needs to be filled up for the resignation to take effect.
As such the process of changing these office bearers, no matter how important they are, is not that a major one as such. In order to become the director of a company you need to be at least 18 years old and you should have a director identification number (DIN) as well. The nationality of the person is not really that important over here – she or he could be an Indian national or a foreign national as well.
Normally in order to remove a director a company needs to wait till its annual general meeting where it can pass an ordinary resolution to the effect.
However, such decisions can be taken in an extraordinary general meeting as well. You need a simple majority in order to pass the ordinary resolution to remove the director. After the resolution has been passed the company has to file the same alongwith forms that are necessary for the purpose with the union ministry of corporate affairs of India. In fact, these days, such work can even be done by chartered accountants (CAs) as well. Apart from that there are plenty of companies that are willing to provide useful services in this regard.
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The rules and regulations regarding changing the registered office according to the Companies Act 2013 are stated in Section 12 of the Companies Act 2013. Over there it is stated that a company should have a registered office at least from the 15th day of being an incorporated entity. This is necessary so that it can receive all the notices and other communication that are addressed to it. It is also important for a company to submit verification of the registered office within 30 days of being incorporated to the ROC of companies (ROC). It also states that in case there is a change in the office’s location the ROC needs to be notified within 15 days of the change.
The company in question needs to use Form INC-22 in order to notify the ROC of companies regarding the changes. The Indian government has in Companies Rules 2014 prescribed a couple of rules – 25 and 27 – so that the new location of the company’s registered office can be verified properly.
Rule 27 deals with verification and notice of the change of the situation of a registered office of a company. It states that apart from having to file Form INC-22 to notify the ROC about the change within 15 days of having made the same, a certain amount of fees has to be attached to the form as well.
Sub section 2 of Section 12 of this rule mentions the documents that have to be attached with the application as well as the manner in which it needs to be done. The documents that have to be attached should provide information regarding the office’s location at the time when it was incorporated along with any and every change in the same. The documents that have to be provided for verifying the change in registered office address normally depend on the ownership status of the property in question.
If the company itself owns the registered office it would have to provide the conveyance deed of the property in question. It is also important for the deed to be in the name of the company itself. If the company has rented or leased the property it would have to furnish the rent agreement or lease deed. In case, it is a rented property it would have to show the rental receipts as well. It is very important that the rent receipt is not older than by a month.
If the premises have not been leased by the company and if the director or any other individual owns them the company would have to show the proof that it has the permission necessary to operate from that particular location. It could be done in the shape of a no objection certificate by the owner. It would also have to furnish copies of utility bills such as mobile phone bill, electricity bill, telephone bill, and gas bill. It is very important that these bills are in the name of the company itself and they should also have the address that is being used by the company as its registered address.
It is also important that they are not more than two months old. It is also important for the company to pass certain resolutions such as board resolution and special resolution in this regard. The special resolution has to be passed at a general meeting in case the registered office is being shifted to a place that is outside the local lists in that city, village, or town, where the office is located at present. The board resolution needs to be passed so that the director can be authorized to sign and then submit the Form INC-22.
Changing the registered office to a different ROC but in the same state
If the company is looking to amend its registered office from the jurisdiction of one ROC to another it needs to apply in order to receive the permission to do so from the regional director (RD). This has to be done exactly the way it has been stated in Form INC-23. After the RD allows this change to happen it has to file with the ROC within a period of 60 days so that it can get confirmation from there as well.
Normally the ROC confirms the change within 30 days of having filed for the same.
Changing the registered office to another state
If the company wants to change its registered office to another state then it would have to change its memorandum of association (MOA) for that. The company has to pass a particular declaration in order to alter the MOA. Within 30 days of passing the resolution it would have to file the same in the Form MGT-14 with the concerned ROC. The company also needs to file Form INC-23 with the CG in order to get the approval necessary to change its registered office from one state to another.
For this it needs to attach documents such as a copy of the special resolution that sanctions the alteration – it should be passed by the company’s members; a copy of the MOA and the articles of association (AOA); a copy of the notice that conveys the general meeting with a proper descriptive statement; a copy of the minutes of the general meeting where the resolution that permitted this change was taken; a list of debenture holders and creditors; a copy of power of attorney or board resolution; and documents related to paying the application fee.
Within 60 days of making the application the central government will give its nod to the change and make it happen. However, before it does that the government will also find out if this is being done in accordance with the wishes of the debenture holders and creditors. After the Indian government provides its approval the company shall file it with the ROCs in both the states where the new and the old registered offices are. The ROC of the new office location would register the same and provide the applicant a new certificate of incorporation.