Partners and Their Relations in LLP

Eligibility

On incorporation of a Limited Liability Partnership, the persons who subscribed their names to the incorporation document shall be partners and any other person may become partner by and according to Limited Liability Partnership agreement.

 


Relationship

The mutual right and duties of partners are governed by Limited Liability Partnership agreement between them and Limited Liability Partnership. The agreement, and any changes, if any, made therein shall be filed with the Registrar. Any agreement between partners before incorporation may impose obligations on Limited Liability Partnership provided such agreement is ratified after incorporation of Limited Liability Partnership. If no agreement is made, the mutual rights and duties shall be determined by provisions set out in first schedule of the Act. The schedule provides e.g., equal share of all partners, indemnify for all losses caused by fraud by any partner, take part in management, entitled for remuneration and admission of a new partner with consent by all.

 

Cessation of Partnership Interest

A person may cease to be a partner of Limited Liability Partnership in accordance with an agreement with other partners or by giving a notice in writing of not less than 30 days to other partners. A person shall cease to be a partner of Limited Liability Partnership –

a) on his death or dissolution of Limited Liability Partnership; or

b) if he is declared of unsound mind by Court; or

c) if he is declared insolvent or applied to be declared as insolvent.

Where any person has ceased to be a partner (former partner) is to be regarded as still being a partner in relation to any person dealing with Limited Liability Partnership unless the person has notice that the former partner has ceased to be a partner or notice that former partner has ceased to be partner of Limited Liability Partnership has been delivered to the Registrar.

The former partner will not be discharged from any obligation to the Limited Liability Partnership or to other partners or to any other person which he incurred while being a partner. The former partner or a person entitled to his share because of death or insolvency of former partner shall be entitled to receive from Limited Liability Partnership the amount equal to his capital contribution made to Limited Liability Partnership and his right to share in accumulated profits of Limited Liability Partnership, after deduction of accumulated loses of Limited Liability Partnership as at the date the former partner ceased to be a partner. The former partner or a person entitled to his share due to death or insolvency of former partner shall not have any right to interfere in the management of Limited Liability Partnership.

 

Registration of Changes in Partners

Any change in name or address of any partner, the Limited Liability Partnership shall file a notice within 30 days to the Registrar. The partner shall inform changes within 15 days of such change to Limited Liability Partnership.  Notice should be in prescribed form, signed by designated partner.  The incoming partner shall sign his written consent.  A fine of not less than two thousand rupees and up to 25 thousand rupees or contravention of above provisions shall be imposed on Limited Liability Partnership and every designated partner (Sec. 25).

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