Limited Liability Partnership Agreement
Limited Liability Partnership is a body corporate that provides the benefits of limited liability but allows its members the flexibility of organizing the internal structure as partnership based on a mutual agreement. The provisions of Indian Partnership Act, 1932 will not apply to an LLP. It shall be governed by the Limited Liability Partnership Act, 2008 and the rules framed therein.
According to sub-section (n) of Section 2 of the Limited Liability Act, 1932, ” Limited Liability partnership means a partner formed and registered under this Act”. Every LLP shall have atleast two partners. Out of the total number of partners, atleast two shall be designated partners. Atleast one designated partner shall be resident in India.
Meaning of LLP Agreement –
According to Section 2(1)(o) of the LLP Act, 2008 “Limited Liability Partnership Agreement” means any written agreement between the partners of the limited liability partnership or between the limited liability partnership and its partners which determines the mutual rights and duties of the partners and their rights and duties in relation to that limited liability partnership.
The LLP Agreement is a document created between the partners of an LLP which governs how an LLP is going to be operated and maintained.
Major contents of LLP Agreement –
1. Effective date – The LLP Agreement can be executed before the incorporation of LLP and thus will be effective from the date it is signed by the partners. Irrespective of the date of LLP Agreement, the LLP can commence trading only after it has been incorporated.
2. Partners – Every LLP shall have atleast two partners. An individual or body corporate may be a partner in a LLP. The LLP Agreement shall contain the details and status of the partners in the LLP.
3. Name – The name under which the LLP is incorporated and registered with the Registrar is the LLP name. Section 15 of the LLP Act, 2008 states that every LLP shall have either the words “limited liability partnership” or the acronym “LLP” as the last words of its name.
4. Registered office – Every limited liability partnership shall have a registered office to which all communications and notices may be addressed and where they shall be received. Details of the LLP’s registered office must be included in the LLP agreement.
5. Business – In order to constitute an LLP, there must exist the objects or business for which it is formed. According to Sec 2(1)(e) of the LLP Act “business” includes every trade, profession, service and occupation.
6. Designated partners – According to Sec 2(1)(j) “designated partner” means any partner designated as such pursuant to section 7. Every LLP must have atleast two designated partners who are individuals and atleast one of them shall be a resident in India. Details of such designated partners should be available in the LLP Agreement.
7.Appointment and removal of partners – The Limited Liability Partnership Agreement should contain procedure for the appointment, removal, death, retirement, voluntary withdrawal and expulsion of partners.
8. Conduct of business – This clause should contain details on how the partners of LLP will conduct the business. It may also contain a list of matters on which all the partners must agree before a decision is taken.
9. Rights, duties and liabilities of partners and designated partners – Limitations and obligations on partner’s authority and details of their rights, duties and liabilities should be clearly specified in the agreement.
10. Capital contribution – This clause set out clearly the capital contributed by each of the partners. The consideration for any LLP business can be in cash or tangible property or intangible property etc.
11. Profit-loss sharing ratio – Partners of the LLP may agree to share the profits and loss in whatever ratio they like.
12. Voting rights of partners – The details of voting rights of each partner should be contained in the agreement.
13. Drawings and Expenses – This clause should set out the details of drawing and expenses to be withdrawn by the partners.
14. Remuneration of partners – Remuneration to partners should be specified in the LLP agreement.
15. Code of conduct – The business code of conduct and governance issues should be specified in the LLP agreement.
16. Accounts and Audit – Procedure for approving the accounts of the LLP and their audit should be laid down in the LLP agreement.
17. Meetings – The details of meetings of partners, notice and requisition of meetings, place and manner of holding meetings etc should be detailed in the agreement.
18. Winding up – Mechanics for winding up of LLP, the regulations to be followed, voluntary winding up etc should be laid down in the LLP agreement.
The Limited Liability Partnership Agreement, if executed and any changes made therein shall be filed in Form 3 with the Registrar within 30 days from the date of agreement or any change made therein.
Limited Liability Partnership Agreement
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