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Requirement of partners / designated partners

Minimum 2 members (called designated partners are required to form an LLP). An LLP requires at least 2 designated partners who should be individuals. Incorporated bodies such as a company, a society or another LLP can also become partners in an LLP. If only incorporated bodies are partners in an LLP, they will be required to nominate individuals who will perform the functions of a designated partner, on their behalf. There is no limit on the maximum number of partners unlike traditional partnerships, where there is an upper limit of 20 partners, or a private limited company, which can have a maximum of 50 shareholders. “Designated Partners” shall also be accountable for regulatory and legal compliances.

Foreign nationals including foreign companies and LLPs can incorporate LLPs in India, subject to compliance with foreign exchange laws. Further, it should be ensured that at least one of the Designated Partners is a resident of India. In case of an LLP in which all the partners are incorporated entities or in which one or more partners are individuals and incorporated entities, at least two individuals who are partners of such LLP or nominees of such incorporated entities shall act as designated partners. The Consolidated FDI Policy of India governs investment into Indian LLPs by foreign investors including corporate investors.

Note: See Consolidated FDI Policy Circular No.2 of 2011, w.e.f. October 2, 2011, Department of Industrial Policy and Promotion, para 3.2.5.

Disqualification from becoming a partner

Any individual or body corporate may be a partner in an LLP. However an individual shall not be capable of becoming a partner of an LLP, if—
(a)   he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;
(b)   he is an undischarged insolvent; or
(c)   he has applied to be adjudicated as an insolvent and his application is pending.
Reservation of name
The name can be reserved by Registrar of Companies on approval of Form 1, for a period of 3 months from the date of intimation by the Registrar. An LLP using that name should be created within 3 months, failing which the name reservation expires and beomes open for everyone.
Note that a search facility is available online under the head of “Check Company or LLP name” on the website of the Ministry of Corporate Affairs (http://mca.gov.in), which enables you to check whether the name you seek has already been taken by an existing company or not.

Admission and exit / retirement of partners

Persons, who subscribed to the “Incorporation Document” at the time of incorporation of LLP, shall be partners of LLP. Subsequent to incorporation, new partners can be admitted in the LLP as per conditions and requirements of LLP Agreement.

A person may cease to be a partner in accordance with the agreement or in the absence of agreement, by giving 30 days’ notice to the other partners.

A person shall also cease to be a partner of a limited liability partnership- 

(a) on his death or dissolution of the limited liability partnership; or

(b) if he is declared to be of unsound mind by a competent court; or

(c) if he has applied to be adjudged as an insolvent or declared as an insolvent.

Notice is required to be given to ROC when a person becomes or ceases to be partner or for any change in partners in Form 4.

In case of change in name or address of partner, such partner shall inform:

  • The LLP of any change in his name or address within a period of fifteen days of such change.
  • The LLP must file such details with the Registrar within thirty days of such change in Form 4 

Mode of partners’ contribution to capital

A partner may contribute capital either in cash or in kind. Contribution in kind requires a valuation to be conducted by a practising Chartered Accountant or a Cost Accountant. For example, if a partner provides office space to the LLP instead of cash contribution for his share of capital, his contribution will require a valuation as explained above.

The LLP is under an obligation to carry the value as given by the valuer to the books of the LLP.

Transfer of economic rights (without managerial role) of partners

A partner’s economic rights (i.e. rights of a partner to a share of the profits and losses of the LLP and to receive distribution at the time of winding up) in the LLP shall be transferable. However, such a transfer shall not by itself cause the partner’s disassociation or a dissolution and winding up of the LLP.

However, such transfer shall not entitle the transferee or assignee to participate in the management or conduct of the LLP’s activities. Therefore, the transferee would not be deemed to be a ‘partner’ of the LLP just because a partner has transferred him the ‘economic rights’. For becoming a partner of LLP, the manner specified in the LLP Agreement or the provisions of the Act in absence of specific provisions in the LLP Agreement would have to be followed.


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