THE LIMITED LIABILITY PARTNERSHIP ACT, 2008
The Parliament passed the bill 12th December, 2008
The President of India has assented the Bill 7th January, 2009
Act came into force 31 March 2009
st
The LLP Act, 2008 has 81 sections (of which section 81 is now omitted with
effect from 1st April 2022) and 4 schedules.
The First Schedule deals with mutual rights and duties of partners and
limited liability partnership and its partners where there is absence of a
formal agreement amongst them.
The Second Schedule conversion of a firm into LLP
The Third Schedule conversion of a private company into LLP
The Fourth Schedule conversion of unlisted public company into LLP
The provisions of the Indian Partnership Act, 1932 shall not apply to a LLP.
LLP is an alternative corporate business form that gives the benefits of limited liability
of a company and the flexibility of a partnership
Term Section Definition
Address Section • if an individual, his usual residential
2(1)(a) address; and
• if a body corporate, the address of its
registered office.
It means a company and includes— (i) a LLP
registered under this Act;
(ii) a LLP incorporated outside India; and
(iii) a company incorporated outside
India, but does not include— (i) a
Sectio n
Body corporation sole;
2(1)( d)
Corporate (ii) a co-operative society registered
under any law for the time being in force;
and
(iii) any other body corporate which the
Central
Government may, by notification in the
Official
Gazette, specify in this behalf
Section “Business” includes every trade, profession,
Business
2(1)(e) service and occupation
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Designated Section 2(1)(j) “Designated partner” means any partner
Partner designated as such pursuant to section 7.
‘’Entity” means any body corporate and
includes, for the purposes of sections 18, 46,
Entity Sec2( 1)(k)
47, 48, 49, 50, 52 and 53, a firm setup under
the Indian Partnership .
Features of LLP
1. LLP is a body corporate: LLP is a legal entity separate from that of its partners and
shall have perpetual succession. any change in the partners of a LLP shall not affect
the existence rights or liabilities of the LLP
2. Perpetual Succession Death, insanity, retirement or insolvency of partners has no
impact on the existence of LLP.
3. Separate Legal Entity : LLP liable to the full extent of its assets but liability of the
partners is limited to their agreed contribution
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4. Mutual Agency individual partners are shielded from joint liability created by
another partner’s wrongful business decisions
5. LLP Agreement Mutual rights and duties
6. Artificial Legal Person it is created by a legal process and is clothed with all rights of
an individual.
7. Common Seal shall remain under the custody of some responsible official and it shall
be affixed in the presence of at least 2 designated partners of the LLP
8. Limited Liability liability of the partners will be limited to their agreed contribution
in the LLP. contribution may be of tangible or intangible
9. Management of Business partners in the LLP manage the business only the
designated partners are responsible for legal compliances.
10. Minimum and Maximum number of Partners least two partners and shall also have
at least 2 individuals as designated partners(1 resident). no maximum limit
11. Business for Profit Only LLP cannot be formed for charitable or non-economic
purpose.
12. Investigation Central Government shall have powers to investigate
13. E-Filling of Documents Every form or application of document required to be filed
shall be filed in computer readable electronic form on its website www.mca.gov.in
14. Foreign LLPs can become a partner in an Indian LLP. incorporated, or registered
outside India which established a place of business within India
ADVANTAGES OF LLP FORM
• operates on the basis of an agreement.
• Provides flexibility without imposing legal requirements.
• Easy to form
• limited liability
• Flexible capital structure
• Easy to dissolve Partners [Section 5]
• Any individual or body corporate
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• an individual shall not be capable of becoming a partner o unsound
mind by a Court
o undischarged insolvent o adjudicated as an
insolvent and his application is pending.
• The following persons can become partner in LLP o Individuals
(Resident Indians including Non Resident Indians & Overseas Citizen of
India as well as foreign nationals)*
o LLP
o Company including foreign co o Foreign LLP*
o LLP incorporated outside India o Foreign co*
*FDI compliances needed
If at any time the number of partners of a LLP is reduced below two and the LLP carries
on business for more than six months then that person shall be liable personally for
the obligations of the LLP incurred during that period.
Designated Partners [Section 7]
• at least two designated partners o individuals o at least one resident
• If all partners are body corporate, at least two individual nominees of such bodies
corporate shall act as designated partners.
• If the incorporation document specifies DP, such persons shall be such DP
• prior consent to act as DP
• consent filed with registrar in 30 days
• Every DP shall have Designated Partner Identification Number (DPIN) from the
Central Government
Liabilities of Designated Partners
• responsible for the doing of all acts for compliance of the provisions of this Act
• liable to all penalties imposed on LLp penalties imposed on the limited liability
partnership for
Changes in Designated Partners
LLP may appoint a DP within 30 days of a vacancy
if at any time there is only one designated partner, each partner shall be deemed
to be a designated partner
Punishment for contravention of sections 7 and 9
• the number of designated partners is less than two or none of the
designated partner is a resident in India o
LLP and each partner - 10,000 o
continuing contravention,
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▪ 100/day max 100000 for LLP 50000 for partner
• failure to file the consent of appointment of designated partner
within 30 days of his appointment o the LLP n DP `5,000 o 100 per
day maximum `50,000 for LLP and `25,000 for every designated
partner.
• Contravention of sec 7(5) or sec 9 o the LLP and its every partner
10000 o `100 per day maximum `1,00,000 for LLP and `50,000 for
every partner
Incorporation
For a LLP to be incorporated, the incorporation document shall be filed in
such manner and with such fees. The incorporation document shall state
the —
a) Name of the LLP
b) Proposed business of the LLP
c) Address of the registered office of the LLP
d) Name and address of each of the persons who are to be partners of the LLP on
incorporation
e) Name and address of the persons who are to be designated partners of the LLP
on incorporation
f) Other information For
a LLP to be incorporated
two or more persons shall subscribe their names
incorporation document shall be filed with the Registrar of the State
(1) Statement to be filed:
o made by advocate, or a Company Secretary or a Chartered Accountant or a
Cost Accountant, who is engaged in the formation and
o by any one who subscribed
o that all the requirements of this Act and the rules made thereunder have been
complied with,
o in respect of incorporation and matters precedent and incidental thereto.
(1) If a person makes a statement as discussed above which he—
(a) knows to be false; or
(b) does not believe to be true,
shall be punishable imprisonment may extend to 2 years
fine10,000 to `5 Lakhs
Incorporation by Registration
• Registrar shall retain the incorporation document and, unless the requirement
imposed by clause (a) of that sub-section has not been complied with
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• he shall, within a period of 14 days— give a certificate signed by the Registrar and
authenticated by his official seal.
• that the LLP is incorporated
• certificate shall be conclusive evidence
Registered Office of LLP
• Every LLP shall have a registered office to which all
communications and notices may be addressed
• A LLP may change the place of its registered office file the notice of such change
• If the LLP contravenes500 per day subject to maximum ` 50,000.
Effect of registration
• Suing and being sued
• common seal
• Acquiring, owning, holding and developing or disposing of property
Name [Section 15
• limited liability partnership shall have either the words “limited liability
partnership” or the acronym “LLP” as the last words
• name shall not be undesirable; or identical or too nearly resembles to other
LLP or a company or a registered trademark
Reservation of name [Section 16]
• the name of a proposed LLP; or
• the name to which a LLP proposes to change its name.
• The application for name approval should be made in E-Form 1 and if the
name is approved by the registrar, he shall reserve the name for 3 months
from the date of intimation.
Change in Name (Section 17)
• The Central Government may direct LLP to change its name if it is undesirable to
central government or identical or too nearly resembles to that of any other
partnership firm or LLP or body corporate or a trade mark.
• LLP shall comply with the said direction within 3 months after the date of the
direction.
• Owner of trademark can apply in 3 years of incorporation of LLP
• an LLP changes its name- give notice with the order of the Central Government
within15 days to registrar who shall issue a certificate in 30 days
• If LLP doesn’t comply with order of government then Central government can give a
new name to the LLP , Registrar shall enter new name in register and issue a new
certificate STEPS TO INCORPORATE LLP
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1. Reservation of name of LLP- RUNLLP
2. File e- Form FiLLiP for incorporating a new LLP: details of proposed LLP,
partners/designated partners and their consent.
3. Execution of LLP Agreement: e-Form 3 within 30 days of
incorporation
Partners and their relations (Section 23)
➢ The mutual rights and duties between partners of LLP and Between LLP and partners
are governed by LLP agreement
➢ LLP agreement and its further changes should be filed with registrar
➢ An agreement in writing made before the incorporation of a LLP may impose
obligations on the LLP, provided such agreement is ratified by all the partners after
the incorporation of the LLP
➢ In the absence of agreement, schedule 1 will be applicable
Cessation of a partner (Section 24)
A person may cease to be a partner of LLP in two ways
1. Voluntary Cessation
2. Involuntary Cessation
A person ceased to be a partner of LLP is called Former Partner
Voluntary Cessation Involuntary Cessation
A person may cease to be a partner of a A person cease to be a partner of a
LLP shall
a) In accordance with an agreement LLP—
with the other partners (a) On his death or
b) By giving a notice in writing of not dissolution of the LLP
less than 30 days to the other (b) If he is declared to be of
partners of his intention to resign as unsound mind by a
partner competent court
(c) If he has applied to be
adjudged as an insolvent or
(d) declared as an insolvent
Right of Former Partner
Former partner shall be entitled to receive from the LLP—
(a) An amount equal to the capital contribution
(b) His right to share in the accumulated profits of the LLP, after the
deduction of accumulated losses
Liability of Former Partner
Former partner will be regarded as still being a partner of the LLP to a third party unless
the third party has—
(a) Notice that the former partner has ceased to be a partner of the LLP (b) Notice of
cessation has been delivered to the Registrar.
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The former partner will still be liable for obligations which he incurred while being a
partner.
A former partner or a person entitled to his share in consequence of the death or
insolvency of the former partner shall not have any right to interfere in the management
of the LLP.
1. Where a former partner feels LLP may not file the notice with the Registrar he may
himself file the notice of cessation
2. Registrar shall obtain a confirmation to this effect from the LLP
3. where no confirmation is given by the LLP within 15 days
4. registrar shall register the notice made by a person ceasing to be a partner
Registration of changes (Section 25)
• A LLP shall file a notice with the Registrar within 30 days when a person
becomes or ceases to be a partner.
• If it relates to an incoming partner, - statement of consent signed by him
Change in partner’s name or address
• partner shall inform the LLP of any change within15 days of such
change(Penalty 10000)
• LLP shall file a notice with the Registrar within 30 days of such
change(Penalty for LLP n DP liable to penalty of `10,000)
EXTENT AND LIMITATION OF LIABILITY OF LLP AND PARTNER
• Extent of liability of LLP: LLP is not bound by anything done by a partner if the
partner in fact has no authority
• the person knows that he has no authority
• does not know or believe him to be a partner of the LLP. LLP is liable for wrongful
act or omission of partner done in ordinary course of business
• obligation of the LLP- solely the obligation of the LLP
• liabilities of the LLP met out of the property of the LLP
Extent of liability of partner
• partner is not personally liable
• personal liability of a partner for his own wrongful act not for wrongful
act of others
Holding out [Section 29]
(1) Any person,
• who by words spoken or written or by conduct,
• represents himself, or knowingly permits himself to be
represented to be a partner in a LLP
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• is liable to any person
• who has on the faith of any such representation and given credit to
the LLP,
Where after a partner’s death the business is continued in the same LLP name, the
continued use of that name shall not make his legal representative or his estate liable
Unlimited liability in case of fraud
(1) In case of fraud: with intent to defraud creditors of the LLP or for any
fraudulent purpose,
(2) liability of the LLP and fraudulent partners shall be unlimited for all or
any of the debts
(3) unless it is established by the LLP that such act was without the
knowledge or the authority of the LLP
(4) punishment: imprisonment upto 5 years and fine 50000-500000
(5) the LLP and any such partner also liable to pay compensation to any
person who has suffered any loss
Whistle blowing [Section 31]
The Court or Tribunal may reduce or waive any penalty leviable against any
partner or employee of a LLP
• if they provided useful information during investigation
• any information given by them leads to conviction
• They shall not be discharged, demoted, suspended, threatened, harassed
or in any other manner discriminated
CONTRIBUTIONS
• A contribution of a partner may consist of tangible, movable or
immovable or intangible property or other benefit
• monetary value of contribution shall be accounted for and disclosed in the
accounts
Obligation to contribute
• shall be as per the limited liability partnership agreement.
A creditor which extends credit in reliance on that agreement, may
•
enforce the original obligation against such partner.
FINANCIAL DISCLOSURES
Proper Books of account
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• on cash basis or accrual basis
• double entry system
• at its registered office
• such period as may be prescribed.
• Penalty for non-compliance: LLP`25,000 to 500000
o Every designated partner 10000-
100000
Statement of Account and Solvency:
• within a period of 6 months from the end of each financial year
• as at the last day of financial year
• signed by the designated partners
• penalty : LLP – `100 per day maximum `1,00,000
• Every Designated Partners - `100 per day subject to maximum `50,000 Annual
Return [Section 35]
• within 60 days of closure of its financial year
• Penalty for non-filing o LLP – `100 per day subject to maximum `1,00,000
o Every Designated Partners - `100 per day subject to maximum `50,000 o
INSPECTION OF DOCUMENTS KEPT BY REGISTRAR
inspection by any person in such manner and on payment of such fee as may be prescribed
PENALTY FOR FALSE STATEMENT [SECTION 37] any person
makes a statement knowing it to be false which omits any
material fact knowing it to be material
Imprisonment up to 2 years
Fine 100000-500000
POWER OF REGISTRAR TO OBTAIN INFORMATION
• Registrar may require any person to answer any question or make any declaration or
supply any details or particulars within a reasonable period
• If no answer is received or when Registrar is not satisfied with the reply he may issue
summons to appear before him
• Any person who fails to comply with any summons then punishment 2000-25000
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COMPOUNDING OF OFFENCES
• Application for the compounding of an offence shall be made to the Registrar
• who shall forward to the Regional Director any other officer not below the rank of
Regional Director
• where offence is compounded whether before or after the institution of any
prosecution intimation to the Registrar within seven days
• no prosecution shall be instituted after compounding
• Registrar issues notice to court in which prosecution is pending such prosecution
shall be stopped
• No compounding for same offence for three years
• Offence punishable with fine only can be compounded
• amount in compounding : not lower than the minimum amount provided for the
offence.
• The Regional Director may, by an order, direct LLP to file such return, account or other
document within such time as may be specified
• if order not followed then fine twice the amount provided in the corresponding
section in which punishment for such offence is provided.
PARTNER'S TRANSFERABLE INTEREST
• Right to share profit and losses is transferable either wholly or in part.
• Its not equivalent to disassociation of the partner or a dissolution
• transferee or assignee cant conduct activities of the limited liability partnership or
access information
Registration and effect of conversion
• The Registrar issue a certificate of registration on satisfying that a firm, private
company or an unlisted public company, has complied with the respective Schedules,
• The LLP shall inform the concerned Registrar of Firms or Registrar of Companies, as
the case may be within 15 days
• all tangible (movable or immovable) and intangible property vested in the firm or
the company shall be transferred to and shall vest in the limited liability partnership
COMPROMISE, ARRANGEMENT OR RECONSTRUCTION OF LIMITED LIABILITY
PARTNERSHIPS
Where a compromise or arrangement is proposed
• between a limited liability partnership and its creditors; or
• between a limited liability partnership and its partners
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1. Application to Tribunal
2. Tribunal orders for meeting of partner or creditor as the case may be
3. If a majority representing three-fourths in value of the creditors, or partners
agree then tribunal passes order which is binding on all
4. Tribunal shall ensure that all material facts relating to the limited liability
partnership have been disclosed
5. Copy of order to registrar in 30 days(penalty 10000 for LLP and designated
partner then 100/ day maximum 100000 for LLP and 50000 for Designated
partner)
6. Tribunal can supervise the carrying out of the compromise or an arrangement;
7. It can give directions or make modifications as it may consider necessary
8. If the Tribunal is satisfied that scheme cannot be carried out it may order winding
up
Provisions for facilitating reconstruction or amalgamation
Where an application is made to the Tribunal, the Tribunal may order,
• the transfer of the whole or any part of the undertaking, property
or liabilities of transferor LLP to transferee LLP
• Tribunal may order that property shall be freed from charge if any
• the continuation of any legal proceedings against the transferee
• the dissolution without winding up, of transferor(order not given unless the Official
Liquidator has, , made a report to the Tribunal that the affairs of the LLP not
prejudicial to the interests of its partners or to public interest)
• provision to be made for any person who dissents
• such incidental, consequential and supplemental matters
compromise or arrangement of a limited liability partnership, which is being wound up,
shall not be sanctioned by Tribunal unless report from the Registrar that the affairs of the
LLP were not prejudicial to the interests of its partners or to public interest
Copy of order to registrar in 30 days(penalty 10000 for LLP and designated partner then
100/ day maximum 100000 for LLP and 50000 for Designated partner)
Winding up and dissolution Circumstances in which LLP may be wound up by
Tribunal
• if the LLP decides that LLP be wound up by the Tribunal
• the number of partners of the LLP is reduced below two for more than 6 months
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• LLP has acted against the interests of the sovereignty and integrity of India, the
security of the State
• default in filing with the Registrar the Statement of Account and Solvency or annual
return for any 5 consecutive financial years; or
• any just and equitable ground
Application of the Provisions of the Companies Act
The Central Government may, by notification in the Official Gazette direct that any of
the provisions of the Companies Act, applies to LLP as it is or with modifications
copy of every notification proposed
• laid in draft before each House of Parliament(in sessions)
• for a total period of 30 days
• if both Houses disapproves or agree for modification
• then the notification shall not be issued
Payment of Additional Fee
• Any document or return not filed timely may be filed after that time, on payment of
such additional fee as may be prescribed
• a different fee or additional fee may be prescribed for different classes of limited
liability partnerships or for different documents
Enhanced Punishment
• Where same offence Is repeated
• for the second or subsequent offence, be punishable with imprisonment as
provided,
• offences for which fine is prescribed either along with or exclusive of
imprisonment, with fine which shall be twice the amount of fine for such offence.
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