LLP ACT -2008
BUSINESS LAW
WHAT IS LLP ACT-
2008
INTRODUCTION
The Ministry of Law and Justice on 9 January 2007 notified the Limited Liability
Partnership Act, 2008
The Parliament passed the Limited Liability Partnership Bill on 12 December,
2008 the President of India has assented the Bill on 7 January, 2009 and called as the
Limited Liability Partnership Act, 2008
The LLP Act, 2008 is applicable to the whole of India.
This Act have been enacted to make provisions for the formation and regulation of
Limited Liability Partnerships and for matters connected there with or incidental thereto
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THE LLP Act 2008 has 81 section
and 4 schedules
The First Schedule deals with mutual rights and duties of partners, as
well limited liability partnership and its partners where there is absence
of a formal agreement with respect to them.
The Second Schedule deals with conversion of a firm into LLP.
The Third Schedule deals with conversion of a private company into LLP
The Fourth Schedule deals with conversion of unlisted public
company into LLP
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Salient FEATURES OF LLP
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LLP is a body corporate
Perpetual Succession
Separate Legal Entity
Mutual Agency
LLP Agreement
Artificial Legal Person
Limited Liability
Minimum and Maximum Number of Partners in an
LLP
Business for Profit Only
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Investigation
DIFFERENCE BETWEEN LLP
AND PARTNERSHIP
1 Legal entity- LLP is a separate legal entity and can hold assets in its name.
. The
status of partnership firm does not have separate identity from its
members
2 Liability of partners- The liability of a partner is limited to extent of
. contribution
their in LLP. Further one partner is not affected or not held liable for
actions of another partnerThe liability of partners is not limited and can extend
to
personal assets of partners .The action of active partner can hold another liable
3 Uninterrupted Existence -The existence of LLP is not affected by change in
. partners of LLP. The partnership firm dissolves due to removal or death of
partner subject to clauses of partnership
deed
4 Registration- Registration of LLP is mandatory. And it is registered with
. ROC . Partnership can be registered as well as unregistered . The registration if
required can be done with local registrar of firm
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DIFFERENCE LLP
AND PARTNERSHIP
6.Audit- In LLP audit is required in case the contribution is above 25 lacs or
ifannual turnover is above 40 lacs. Auditing is compulsory in case of Partnership
firm
7. Foreign national as partners- In LLP foreign nationals can be
partners
whereas In partnership foreign nationals cannot be partners.
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“ An LLP agreement is a written
document defining the agreement
between the partners of a Limited
Liability Partnership. It defines the
rights and duties of all the partners
towards each other and towards the
firm.
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“ ▪ ELEMENTS OF LLP
AGREEMENT
1. Name of proposed LLP
2. Name of partners and Designated partners
3.Form of contribution by partner
4.Profit sharing ratio
5. Rights and duties of partners
6.Proposed business 7.Rules of
governing the LLP
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CONTENTS OF LLP
“ AGREEMENT
Firstly, it contains the name of the limited liability partnership
firm. According to the Act, the name must always end with LLP.
It also contains the date of the agreement. The act states that
the agreement must be registered within 30 days after
incorporation.
Then we come to the partner’s contribution. The agreement has
the ratio of the capital invested by the partners, the profit
sharing ratio and other provisions regarding the capital
contribution if any.
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CONTENTS OF LLP
“ AGREEMENT
The agreement contains the terms of disassociation as well. If
any partners want to withdraw from the LLP, then the procedure
and process are listed out. Also, it contains the rights of the
exciting partners, rights of the continuing partners, the division
of firm assets etc.
Also contains the provisions for the admission of a new
partner into the LLP.
The agreement must also contain the procedural
information regarding the sale or transfer of partnership
rights. If such transfer of rights is prohibited, then it must
be mentioned.
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▪ Provisions in absence on an LLP
“
Agreement
All partners of LLP shall share profits and losses equally.
No partner is entitled to any remuneration or salary
for the management of the LLP
Admission of any new partner will require the permission of all the
partners
Any disputes between the partners of an LLP which are not resolved
amongst themselves must be referred for arbitration as per the act.
Majority of the partners cannot expel a partner unless there is an
express agreement between partners.
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“ REMEMBER
Under the Limited Liability Partnership Act, the
filing of an LLP agreement is mandatory while
registering the firm within 30 days of the
formation of the LLP.
A well-defined LLP agreement sets the solid
foundation for the business.
This helps avoid any conflict in the future.
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Partners in LLP
Any individual or body corporate may be a partner in a
LLP. However an individual shall not be capable of
becoming a partner of a 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.
Partners in LLP
▪ A partner in relation to a limited liability
partnership, means any person who becomes a
partner in the limited liability partnership in
accordance with the limited liability partnership
agreement.
A partner needs to fulfill the
following conditions
▪ He must be a person of a sound mind.
▪ He must not be an undischarged insolvent person.
Designated Partner in LLP
▪ Designated Partners are similar to Directors of a
Private Limited Company. This Partner in an LLP
when compared to the Director of a Company,
enjoy more rights and privileges.
Appointment of at least two “Designated Partners”
shall be mandatory for all LLPs.
Designated partner
▪ Designated Partner refers to any partner
who is appointed as such, in the
incorporation document, at the time of LLP
registration.
Conditions a designated partner needs
to fulfill
▪ There needs to be 2 partners who needs to be
Individuals
▪ One of them needs to be an Indian resident
The responsibilities and liabilities of the Partner
▪ Partners are Agent of Business
▪ Every partner of an LLP for the purpose of its business is an agent of the LLP but is not an
agent of other partners.
▪ LLP is not bound by the act of partners
▪ LLP is not bound by anything done by a partner in dealing with another person if the
partner had no authority to do the act on behalf of the LLP and the person either knows that
the partner had no authority; or did not know or did not believe him to be a partner of the
LLP
.
▪ Unlimited Liability in case of fraud to creditors
▪ If an LLP or any of its partners act with the intent to defraud creditors of the LLP or any
other person or for any fraudulent purpose, then the liability of the LLP and the concerned
partners is unlimited
.
The responsibilities and liabilities of the
designated partner
▪ Designated partners are Responsible for the acts
▪ The designated partner would be responsible for the doing of all acts, matters and things
as
are required to be done by the LLP in respect of compliance of the said Act; and liable
to all penalties imposed on the LLP for any contravention of those provisions.
▪ Accountable for Compliance
▪ The “Designated Partners” shall also be accountable for regulatory and legal compliance,
additionally their liability as partners.
▪ In case of Vacancy of Designated Partner
▪ The LLP Act has provided for a 30 days period for filling up of a vacancy of a
designated
partner. If no designated partner is appointed, or if at any time there is only one designated
partner, each partner of the LLP shall be deemed to be a designated partner.
▪ If the LLP fails to appoint designated partners, then the LLP and its every partner shall
be
punishable with fine.
▪ In case of death of Partner
▪ After a partner’s death, the business is continued in the same LLP, the continued use of that
name or of the deceased partner’s name as a part thereof shall not of itself make his legal
representative or his estate liable for any act of the LLP done after his death.
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