LIMITED LIABILITY PARTNERSHIP ACT, 2008 [LLP ACT]
With the growth of Indian economy, the role played
by its entrepreneurs as well as its technical and professional manpower has been
acknowledged internationally. In this background, a need was felt for a new
corporate form that would provide an alternative to the traditional partnership
which exposes its partners to unlimited personal liability and a statute based
governance structure of limited liability companies.
Limited Liability Partnership [LLP] is viewed as an
alternative corporate business vehicle that provides the benefits of the limited
liability but allows its members the flexibility of organizing their internal
structure as a partnership based on a mutually arrived agreement. LLP form is
expected to enable entrepreneurs, professionals and enterprises providing
services of any kind or engaged in scientific and technical disciplines, to form
commercially efficient vehicles suited to their requirements.
With this background, Limited Liability Partnership
Act, 2008 [LLP Act] was enacted on January 7, 2009.
Subsequently, Government of India [GOI] notified
various provisions of LLP Act on 31st March 2009. GOI has, on April 1, 2009,
also notified the Limited Liability Partnership Rules, 2009 [LLP Rules] in
respect of registration and operational aspects under the LLP Act.
Corporate" is defined to mean a company as defined under the Companies Act,
1956 and includes LLP, LLP incorporated outside India, a foreign company but
does not include a corporation sole, a registered co-operative society and any
other body corporate notified by the Central Government (not being a company
defined under the Companies Act, 1956 or LLP defined under LLP Act). [Section
"Business" includes every trade, profession, service and occupation. [Section
"Financial Year", in relation to LLP, means the period from 1st April of a
year to the 31st March of the following year. However, in case of LLP
incorporated after 30th September, financial year may end on 31st March of the
year next following that year. [Section 2(1)(l)]
"Foreign Limited Liability Partnership" means a LLP formed, incorporated or
registered outside India which establishes a place of business within India.
"Limited Liability Partnership" means a partnership formed and registered
under LLP Act. [Section 2(1)(n)]
"Limited liability partnership agreement" means any written agreement between
the partners of LLP or between the LLP and its partners which determines the
mutual rights and duties of the partners and their rights and duties in
relation to that LLP. [Section 2(1)(o)]
"Partner" in relation to LLP means a person who becomes a partner in a LLP in
accordance with the LLP agreement. [Section 2(1)(q)]
Nature of LLP
• LLP is a –
— "body corporate" formed and incorporated
under LLP Act;
— legal entity separate from its partners and
has perpetual succession.
• Two or more partners are required to form an
LLP. Any individual or a body corporate can be a partner in a LLP.
In case if individual is a partner, he should not
— found to be of unsound mind; or
— an undischarged insolvent; or
— a person who has applied to be adjudicated as
insolvent and the application is pending
[Sections 5 and 6]
Designated Partners [Section 7]
shall have at least two "designated partners" who are individuals and at least
one of them shall be "resident in India". In case one or more of the partners
of a LLP are bodies corporate at least two individuals who are partners of
such LLP or nominees of such bodies corporate shall act as "designated
"Resident in India" means a person who has stayed in India for minimum 182
days during the immediately preceding 1 year.
Designated partner is responsible for compliance with the provisions of LLP
Designated Partner is required to obtain Designated Partner Identification
Number [DPIN] from the Central Government.
Application for allotment of DPIN needs to be submitted online on the LLP
website along with the necessary proof duly attested and certified as
Incorporation of LLP [Sections 11 to 21]
Procedure for incorporation of LLP is similar to
the procedure for incorporation of a company under the Companies Act, 1956.
Applicants are first required to file the application for reservation of name
with the Registrar of Companies [ROC]. Once the name applied is approved by
the ROC, the documents for incorporation of LLP need to be filed.
of every LLP shall end with the words "Limited Liability Partnership" or "LLP".
which is undesirable or nearly resembles to that of any other partnership
firm or LLP or any body corporate or trade mark, is not allowed.
entity (body corporate/registered partnership firm) which has a name similar
to the name of LLP which has been incorporated subsequently may seek change
of name of such LLP through ROC within 24 months from date of registration
of such LLP.
person shall carry on business under any name/title which contains the words
"Limited Liability Partnership" or "LLP" without duly incorporating it as
LLP under the LLP Act.
is required to file with the ROC, the LLP agreement ratified by all the
partners within 30 days of incorporation of LLP.
Partners and their relations and extent of
liability [Sections 22 to 31]
rights and duties of partners of an LLP inter se and those of the LLP
and its partners shall be governed by an agreement between the partners, or
agreement between the LLP and its partners. In absence of any such agreements,
the mutual rights and duties shall be governed by the LLP Act.
partner of a LLP is, for the purpose of the business of LLP, the agent of LLP,
but not of other partners.
being a separate legal entity, shall be liable to the full extent of its
assets whereas the liability of the partners of LLP shall be limited to their
agreed contribution in the LLP.
not bound by anything done by a partner in dealing with a person if –
— the partner in fact has no authority to act
for the LLP in doing a particular act; and
— the person knows that he has no authority or
does not know or believe him to be a partner of the LLP
liable if the partner of a LLP is liable to any person for wrongful
act/omission on his part in the course of business of LLP/with its authority
Obligation of LLP whether arising in contract or otherwise, shall solely be
the obligation of LLP. Liabilities of LLP shall be met out of properties of
is not personally liable for the obligations of LLP solely by reason of being
a partner of LLP.
partner is liable for the wrongful act or omission of any other partner of LLP,
but the partner will be personally liable for his own wrongful act or
liability of the LLP and partners who are found to have acted with intent to
defraud creditors or for any fraudulent purpose shall be unlimited for all or
any of the debts or other liabilities of the LLP.
Cessation of a partner on grounds like resignation, death, dissolution of LLP,
declaration that a person is of unsound mind, declared/applied to be adjudged
as insolvent etc. will not be effective unless —
— the person has notice that the partner has
ceased to be so; or
— notice of cessation has been delivered to
The notice of cessation may be filed by the
outgoing partner if he has reasonable cause to believe that LLP has not file
the said notice.
Contribution by partner [Sections 32 and 33]
contribution of a partner to the capital of LLP may consist of any of the –
tangible, movable or immovable property
benefit to the LLP including money, promissory notes, contracts for services
performed or to be performed.
obligation of a partner for the contribution shall be as per the LLP
Creditor, which extends credit or acts in reliance on an obligation described
in the LLP agreement, without the notice of any compromise made between the
partners, may enforce the original obligation against such partner.
Audit/financial disclosures [Sections 34 and 35]
shall maintain the prescribed books of accounts relating to its affairs on
cash or accrual basis and according to the double entry system of accounting.
accounts of every LLP are required to be audited, except in following
Turnover does not exceed Rs. 40,00,000 in any financial year; or
Contribution does not exceed Rs. 25,00,000
Government has powers to exempt certain class of LLP from requirement of
required to file following documents with the ROC –
Statement of Account and Solvency, within 30 days from the end of 6 months of
the financial year;
Annual return within 60 days from the end of the financial year.
Assignment & transfer of partnership rights
rights of a partner to a share of the profits and losses of the LLP and to
receive distribution in accordance with the LLP agreement are transferable,
either wholly or in part. However, such transfer of rights does not cause
either disassociation of the partner or a dissolution and winding up of the
transfer of right, shall not, by itself entitle, the assignee or the
transferee to participate in the management or conduct of the activities of
the LLP or access information concerning the transactions of the LLP.
Foreign LLP [Section 59 and Rule 34]
establishment of a place of business in India, foreign LLP are required to
file prescribed documents for registration with ROC within 30 days of the
establishment in India.
alteration in the constitution documents, overseas principle office address
and partner of foreign LLP are required to be filed with the ROC in the
prescribed form within 60 days of the close of the financial year.
alteration in the certificate of registration of foreign LLP, authorized
representative in India and principle place of business in India are required
to be filed with the ROC in the prescribed form within 30 days of alteration.
LLP ceasing to have a place of business in India, are required to give notice
to ROC in the prescribed form within 30 days of its intention to close the
place of business and from the date of such notice, the obligation of Foreign
LLP to file any document with the ROC shall cease, provided it has no other
place of business in India and it has filed all the documents due for filing
as on the date of the notice.
Conversion of partnership firm/private company/unlisted
public company into LLP [Sections 55 to 58, Second, Third and Fourth ScheduleS]
GOI has, on May 22, 2009, notified provisions relating to
conversion of –
• a partnership firm as defined under the Indian
Partnership Act,1932 into LLP;
• a private limited company into LLP;
• an unlisted public company into LLP.
Second, Third and Fourth Schedules to the LLP Act contain
provisions relating to conversion of a partnership firm into LLP, a private
limited company into LLP and unlisted public company into LLP, respectively.
• Eligibility for conversion:
— Firm into LLP: Firm can be converted into
LLP if all the partners of firm become the partners of LLP and no one else.
— Company into LLP: Private limited
company/unlisted public company can be converted if and only if -
(a) there is no security interest in its assets
subsisting or in force at the time of application for conversion; and
(b) all the shareholders of the company become partners
of LLP and no one else.
• For conversion of firm/private limited company/unlisted
public company into LLP, the partners of the firm/shareholders of company are
required to file a statement and incorporation documents in the prescribed
form with the ROC.
• On receiving the documents for conversion, ROC shall
register the documents and issue certificate of registration specifying the
date of registration as LLP. Upon registration by ROC, LLP shall intimate
Registrar of Firm [ROF]/ROC, as the case may be, about conversion within 15
days of registration.
• On and from the date specified in the certificate of
registration issued by ROC -
— all tangible (movable/immovable) & intangible property,
liabilities, interest, obligation etc. relating to the firm/private limited
company/unlisted public company and the whole of the undertaking of the
firm/private limited company/unlisted public company, shall be transferred
to and shall vest in the LLP without further assurance, act or deed.
— firm/private limited company/unlisted public company
shall be deemed to be dissolved and removed from the records of ROF/ROC, as
the case may be.
• If any property/rights, etc. of the partnership
firm/private limited company/unlisted public company is registered with any
authority, LLP shall take steps to notify the authority of the conversion.
• Upon conversion, following things/events in favour of or
against the firm/private limited company/unlisted public company on the date
of registration may be continued, completed and enforced by or against the LLP:
— all proceedings, conviction, ruling, order or judgment
of any Court, Tribunal or other authority pending in any Court or Tribunal
or before any authority on the date of registration
— every agreement irrespective of whether or not the
rights and liabilities thereunder could be assigned,
— deeds, contracts, schemes, bonds, agreements,
applications, instruments and arrangements
— every contract of employment
— appointment in any role or capacity
— any approval, permit or licence issued under any other
• In case of a firm, every partner of a firm which is
converted into a LLP shall continue to be personally liable (jointly and
severally with LLP) for the liabilities and obligations of the firm incurred
prior to the conversion or which arose from any contract entered into prior to
the conversion. In case any such partner discharges any such liability or
obligation he shall be entitled (subject to any agreement with the LLP to the
contrary) to be fully indemnified by LLP in respect of such liability or
• For a period of 12 months commencing on or before 14 days
from the date of registration, LLP shall ensure that every official
correspondence of LLP bears the following:
— a statement that it was, as from the date of
registration, converted from a firm/private limited company/unlisted public
company into a LLP; and
— the name and registration number, if applicable, of the
firm/a private limited company/an unlisted public company from which it was
Compromise, arrangement or reconstruction of LLPs [Section
been made in the LLP Act for allowing a compromise and arrangement including
mergers and amalgamations.
arrangement can be between LLP and its creditors or between LLP and its
representing 3/4th in value of creditors or partners, at the meeting, agree to
compromise or arrangement shall, if sanctioned by National Company Law
Tribunal [NCLT] be binding on all the creditors, all the partners and LLP.
NCLT to pass order subject to disclosure of all material facts/latest
financial position and pendency of investigation proceedings.
NCLT order shall
be filed with the ROC within 30 days, in order to be effective.
In case of scheme
of the amalgamation, NCLT shall pass order only on receipt of report from the
ROC that the affairs of the LLP (transferor LLP) have not been conducted in
the manner prejudicial to the interest of the partner/public.
Winding-up of LLP [Sections 63 and 64]
LLPs may be wound-up either voluntarily or by NCLT. LLP may
be wound up by NCLT if –
• LLP decides to wound up by NCLT;
• Number of partners is reduced below 2 for a period of
more than 6 months;
• LLP is unable to pay its debts;
• LLP has acted against the interests of the sovereignty
and integrity of India, the security of the State or public order;
• LLP has defaulted in filing Statement of Account and
Solvency or annual return with the ROC for 5 consecutive financial years; or
• NCLT is of the opinion that it is just and equitable that
the LLP be wound up
In January 2010, MCA had notified that certain provisions
relating to winding-up of a company under the Companies Act, 1956 will also be
applicable to a LLP. The notification also provides details of modification in
the provisions of the Companies Act relating to winding up for its
applicability to winding up of LLP under the LLP Act. Subsequently, on 30
March 2010, issued Limited Liability Partnership (Winding up and Dissolution)
government has been empowered to apply any of the provisions of the Companies
Act, 1956 to LLPs with suitable changes or modification. [Section 67]
ROC may strike
off the name of LLP from the register of LLP if LLP is not carrying on
business or its operation, in accordance with the provisions of LLP Act in the
manner prescribed. [Section 75]
required to be filed under the LLP shall be filed in electronic form online on
the LLP portal duly authenticated by the partner/designated partner with a
digital signature and further attested by the practicing chartered
accountant/company secretary/cost accountant whenever required. [Section 68]
Presently all the
provisions of the LLP Act, other than those relating to winding-up and
dissolution of LLP and appellate provisions to be exercised by NCLT and
National Company Law Appellate Tribunal [NCLAT], have been brought into force.
constitution of NCLT and NCLAT under the Companies Act, 1956, the powers of
NCLT and NCLAT will be exercised by the Company Law Board or High Court as is
specified in the LLP Act. [Section 81]
specifically provided, the provisions of the Indian Partnership Act, 1932 are
not applicable to LLPs. [Section 4]