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Change in Partners of LLP
A Limited Liability Partnership or LLP is managed and run by its partners. All aspects of the business are run by its partners. There are possibilities of adding new partners or existing partners exiting. It doesn’t affect the status of the company but may affect the business or operations. Any change of partners must be approved by the MCA. To add or remove a partner in an LLP, a consent from the existing partners is mandatory followed by suitable changes in the agreement. These changes must updated with the MCA too. From the effective date of change, the change must be updated with the MCA in 30 days.
Possible Reasons for change of partner in LLP?
A partner who brings a specific skillset to the business or additional capital is valuable for the business. As the capital increases, the ability to borrow also increases giving wings to the business goals.
There may be instances where the existing partner is either not able to deliver as per the business goals for various reasons. In such cases a new partner may be inducted to meet the compliance for the business structure. This is followed my procedures to update these changes with the MCA.
Its mandatory to have minimum of 2 Designated Partners in every LLP. If the resignation of one partner causes the numbers to reduce below 2, then the LLP should appoint a new designated partner to comply with the regulations.
Addition or Removal of Partner
Documents required for Addition or Removal of partner
THE PROCEDURE
Procedure for addition or removal of partners
There are a series of steps before the company formation is completed. They are listed below for easy reference. The entire procedure takes 10 to 12 working days to complete (Based on standard government processing time).
- Discuss the requirement of change of partners
- Collect basic Information & documents
- Application of DSC if the new partner doesn’t have one.
- Drafting of required documents and collect signatures.
- Payment of stamp duty on the supplementary agreement
- Filing of the application.
FREQUENTLY ASKED QUESTIONS
Explore Add or Remove Partner in LLP
Is it mandatory to update the LLP agreement for change of partners?
Yes, It is mandatory. The LLP agreement must be modified with terms of addition or removal by execution of the supplementary deed. Any details including change of capital and any other changes in the agreement should be updated. The change of partners should also be intimated to the MCA.
When should the Supplementary deed be filed with MCA?
It should be filed within 30 days of the date of change. Delay in filing attracts a penalty of Rs. 100 per day till the date of filing.
Is there a Stamp Duty to be paid on Supplementary Deed?
The stamp duty applicable is based on the added capital in the company as per the prevailing rates in the state. If there is addition of capital while addition or removal, the Supplementary Agreement will be executed. A stamp duty of Rs. 100 is applicable here.
Who qualifies to be a Partner/ Designated Partner of the LLP?
Any individual including a foreign national can become a partner in an LLP. However, one partner should be a resident Indian. The proposed Designated Partner shall hold valid DIN.
Is it mandatory for Partner Designated Partner to contribute capital?
The contribution can be in the form of tangibles or intangibles. It is not mandatory to contribute capital.
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