Adding a Designated Partner

Each Limited Liability Partnership must have a minimum of two designated partners. To appoint a new designated partner, a resolution must be passed, and the individual must have a DPIN, with their name updated in the LLP agreement.

adding a DESIGNATED partner - An Overview

In an LLP, at least two designated partners are required, and they must be named in the LLP agreement and hold a Designated Partner Identification Number (DPIN). The process of adding or removing partners is straightforward, and there is no upper limit to the number of partners in an LLP. Partners can easily join or exit, and ownership can be transferred without complexity.

The designated partners have specific duties and responsibilities. They are authorized to sign the Statement of Account and Solvency (Form 8), which is a declaration of financial health. LLPs must file their annual returns within 60 days after the financial year ends. Failure to do so can result in fines for the designated partners, which may exceed Rs 10,000. Additionally, designated partners may need to file documents and cooperate with authorities by providing required documents and signatures during inquiries or inspections. They are also responsible for reimbursing inspection-related expenses if an investigation occurs.

ELIGIBILITY AND PENALTIES ADDING A DESIGNATED PARTNER

To become a designated partner in an LLP, an individual must meet certain requirements as per the Limited Liability Partnership (LLP) Act, 2008. Here are the key eligibility criteria:

Minimum Age Requirement: The individual must be at least 18 years old.
Eligible Persons: Any individual or body corporate can be considered for a partnership in an LLP.
Unique Identification: The individual wishing to become a partner must have a unique identification number, such as an Aadhaar Card.
Minimum Designated Partners: Every LLP must have at least two designated partners.
Sound Mind: The individual should be of sound mind and capable of handling partnership responsibilities.
Fraud-Free: The individual should not be involved in any fraudulent activities.
Residency Requirement :At least one designated partner must be an Indian national residing in India.
Consent Letter: All designated partners must provide consent and relevant documents to the LLP.
No Bankruptcy: The individual must not have been adjudicated bankrupt in the past 5 years.
Debt Settlement: The individual must have settled payments with creditors or made agreements to do so within the last 5 years.
Change in Name or Address: If there is a change in the partner’s name or address, they must notify the LLP within 15 days. The LLP is responsible for updating this information with the Registrar within 30 days.

Minimum & Maximum Number of Designated Partners

Under the LLP Act, 2008, the following rules apply to the number of designated partners in an LLP:

Minimum Requirement: At least two designated partners are mandatory.
No Upper Limit: There is no cap on the number of designated partners an LLP can have.
Designation Details: The names of the designated partners must be mentioned in the LLP’s registration documents.

If a designated partner resigns, dies, or is expelled, the LLP must appoint a new designated partner within 30 days. Failing to have at least two designated partners will lead to the dissolution of the LLP.

Who Cannot Be Appointed as a Designated Partner in an LLP?

Certain individuals are disqualified from becoming designated partners in an LLP, according to the LLP Act, 2008:

Undischarged Insolvents: A person who has been declared insolvent by a court and has not repaid their debts.
Convicted Individuals: A person convicted of fraud, dishonesty, or an offence under the Companies Act, 2013, such as fraudulent trading or insider trading.
Disqualified Directors: A person who is disqualified from being a director of a company under the Companies Act or by the Securities and Exchange Board of India (SEBI).
Minors: Individuals under the age of 18 years are not eligible to become designated partners.
Body Corporates: A body corporate, such as another LLP or a company, cannot be a designated partner.

These are the primary disqualifications under the LLP Act. Other legal provisions may also impose additional restrictions.

Penalties for Failing to Appoint a Designated Partner in LLP

As per the Limited Liability Partnership (LLP) Act, 2008, every LLP must have at least two designated partners, with at least one being a resident of India. A designated partner is responsible for managing the LLP’s affairs and ensuring compliance with the legal requirements.

Consequences for Not Having Two Designated Partners

If an LLP fails to appoint or maintain the required number of designated partners, it may face significant consequences, including the dissolution of the LLP. Below are the key penalties for non-compliance:

Dissolution of LLP Upon Registration: If an LLP does not have at least two designated partners at the time of its registration, the Registrar of LLPs may dissolve the LLP.

Dissolution After Registration: If an LLP loses its two designated partners after registration, the LLP will be dissolved unless at least two designated partners are appointed within 30 days of the event leading to the vacancy.

Financial Penalties for Non-Appointment: If the LLP fails to appoint the required number of designated partners within the specified time frame, it may incur a penalty of up to ₹1 lakh.

Registrar’s Authority: The penalty is imposed by the Registrar of LLPs, and the LLP may be required to compensate individuals who incur losses or damages due to the failure to appoint a designated partner.

These penalties are specific to the LLP Act, 2008, and may be in addition to other legal penalties under various laws, such as the Companies Act, 2013. Therefore, it is crucial for LLPs to ensure compliance with the regulations regarding the appointment of designated partners to avoid legal and financial risks.

Step and Documents for ADDING A DESIGNATED PARTNER

One of the key advantages of a Limited Liability Partnership (LLP) is the flexibility it offers in terms of adding or removing partners. However, before appointing a new designated partner, it is crucial to ensure they understand their roles and responsibilities. Below is a detailed guide to the steps involved in adding a designated partner to an LLP. Steps to Appoint a Designated Partner :-

Obtain DIN and Digital Signature: The first step is to acquire a Director Identification Number (DIN) and a Digital Signature for the new partner. These are essential for the official documentation process.
Obtain Consent from the New Partner: The individual who is to be appointed as the designated partner must provide a written consent letter confirming their willingness to join the LLP.
Decision through Partnership Meeting: A meeting of the existing partners should be held to formally decide on adding the new designated partner. This decision must be documented in the meeting minutes.
Update the Partnership Deed: Once the decision is made, the partnership deed should be updated to reflect the new partner’s details. This updated deed must be signed by all partners.
Filing Form-4: Within 30 days of the partner’s appointment, Form-4 must be filed with the Registrar of Companies (ROC) to officially notify the appointment. This form should be accompanied by the updated partnership deed and consent letter.
Filing Form-3: After submitting Form-4, Form-3 should also be filed within 30 days. This form is used to inform the ROC about the changes in the partnership deed, including the addition of the new partner.
MCA Update: Once the forms are processed, the name of the newly appointed designated partner will be updated in the LLP’s records on the Ministry of Corporate Affairs (MCA) website, confirming the addition.

Key Considerations

Understanding of Responsibilities: It is important that the new designated partner understands their roles, which may include signing the Statement of Account and Solvency, filing returns, and taking responsibility for compliance matters.
Timeliness of Filing: All necessary forms must be filed within the stipulated timelines to avoid penalties and ensure the legal standing of the LLP.

By following these steps, the LLP can ensure that the addition of a designated partner is done in compliance with the relevant laws and regulations, and that the changes are accurately reflected in official records.

Frequently Asked Questions

Who Is Not Eligible to Become a Designated Partner in an LLP?

Not everyone is allowed to be appointed as a designated partner in a Limited Liability Partnership (LLP). There are specific legal restrictions that apply to certain individuals. Here’s who is not eligible:

Minors (Below 18 Years of Age): An individual must be legally an adult to hold the role of a designated partner.
Insolvent Individuals: If someone has been declared insolvent and hasn’t been discharged yet, they are not permitted to be a designated partner.
Mentally Incapacitated Persons: A person declared to be of unsound mind by a recognized court cannot take up this role.
Legally Disqualified Individuals: Those who are barred under various laws, such as the Companies Act, or other legal provisions, are also not allowed to act as designated partners.

These rules ensure that only qualified and responsible individuals are involved in the management of an LLP.

Is It Possible to Remove a Designated Partner from an LLP?

Yes, a designated partner can be removed from a Limited Liability Partnership (LLP) under specific situations. The process of removal can be carried out through various methods, depending on the circumstances:

Voluntary Resignation: A designated partner can step down by submitting a resignation letter to the LLP. This resignation must then be reported to the Registrar of Companies (ROC) using the appropriate form.
Partner Resolution: The remaining partners may decide to remove a designated partner by passing a resolution, provided the LLP agreement allows for it.
Based on the LLP Agreement: Many LLP agreements include detailed procedures and grounds for removing a designated partner. These rules should be followed strictly.
Through Legal Action: If a partner is involved in serious misconduct or violations, a court may issue an order for their removal.

The exact steps can vary depending on what is written in the LLP agreement and the nature of the situation.

What Is the Procedure to Add a Designated Partner in an LLP?

To include a new designated partner in a Limited Liability Partnership (LLP), the following steps should be followed:

Check the LLP Agreement: Make sure the current LLP agreement permits the appointment of an additional designated partner and outlines the required process.
Get Consent from the New Partner: The individual to be added must provide formal consent and fulfill all eligibility criteria set by LLP laws.
Approval from Partners: Conduct a partners’ meeting to pass a resolution approving the inclusion of the new designated partner.
ROC Compliance: Submit the relevant forms to the Registrar of Companies (ROC), along with the new partner’s consent and necessary documentation, within the prescribed deadline.
Notification to ROC: Ensure that the ROC is informed of the appointment within 30 days from the effective date.
Update Documentation: Modify the LLP agreement to reflect the addition and update internal and external records as required.
Public Announcement (If Required): If applicable, publish an official notice about the new designated partner’s appointment in a local newspaper as per legal norms.

Is Appointing a Designated Partner in an LLP Compulsory?

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Is It Possible to Make Changes to the Designated Partner in an LLP?

Yes, changes in the designated partner of an LLP can be made. If a change occurs—whether by addition, removal, or replacement—the LLP must file Form 4, linked with Form 3, within 30 days of updating the LLP Agreement to reflect the change in partners or designated partners.

How is a Designated Partner Different from a Regular Partner in an LLP?

A regular partner is an individual who joins with others to form a partnership in an LLP. On the other hand, a designated partner is specifically named as such in the LLP agreement at the time of incorporation or through a formal amendment. Designated partners hold additional responsibilities, including compliance and regulatory duties under the LLP Act.

What is the Procedure to Obtain a Designated Partner Identification Number (DPIN)?

To apply for a DPIN, the following documents are needed:

A recent passport-sized photograph of the applicant.
Valid identity proof: PAN card is mandatory for Indian citizens, while a passport is essential for foreign nationals.
Proof of current residential address of the applicant.

Once these documents are ready, the application for a DPIN can be submitted through the official MCA portal.