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.
Here's look at the simple steps about resigning a designated partner from limited liability partnership (LLP)
Legal procedure to remove a designated partner of LLP
1. Notice of partner's resignation/ removal
2. Change in LLP agreement
3. Intimate to ROC through Form 4 along with amendment of LLP agreement
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.
Let's take a look at the process of appointing a partner in limited liability partnership (LLP)
Procedure for adding a designated partner in LLP
1. Notification of appointment of designated partner
2. Apply Digital Signature Certificate (DSC) for new designated partner
3. Apply DIN for incoming designated partner
4. Hold a meeting of all existing partners
5. Pass the resolution in the meeting
6. File the LLP Form 4 along with the amendment of LLP agreement
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.