ADD/REMOVE DESIGNATED PARTNERS IN AN LLP

In a Limited Liability Partnership (LLP), the concept of “Designated Partners” plays a crucial role in managing legal and financial compliance. As per the LLP Act, 2008, every LLP must have a minimum of two Designated Partners, one of whom must be an Indian resident. The flexibility of an LLP allows partners to be added or removed as needed, making it an ideal structure for evolving business needs. Whether it’s retirement, resignation, or onboarding skilled professionals, changes in partnership are common and legally permissible—provided due process is followed.

Overview of ADD/REMOVE DESIGNATED PARTNERS IN AN LLP

TYPES OF CHANGES IN DESIGNATED PARTNERS

Addition of Partner – When a new individual is brought in for strategic growth or to meet compliance requirements.
Resignation of Partner – Voluntary exit by submitting a resignation with required documentation.
Retirement of Partner – Based on age or clauses in the LLP agreement.
Removal of Partner – Due to breach, negligence, or by majority vote under certain agreement terms.

PROCESS IN INDIA

The procedure for adding or removing designated partners in an LLP is governed by the Limited Liability Partnership Act, 2008 and monitored by the Ministry of Corporate Affairs (MCA). Every change must be legally documented and filed with the Registrar of Companies (ROC) using specific MCA forms within the prescribed timeline.

The process typically involves:

Reviewing the LLP Agreement to check existing provisions for partner changes.
Obtaining consent from all existing partners through a resolution.
Drafting a Supplementary LLP Agreement if there’s a change in profit-sharing ratios, roles, or responsibilities.
Filing the appropriate forms with MCA: Form 3 (for changes in agreement) and Form 4 (for partner change), along with Form 6 (consent of new partner, if applicable) or Form 13 (resignation).
Paying government fees and DSC verification for all forms.
Once approved by the ROC, the change is legally effective and reflected in the MCA records.

This ensures the LLP is in good legal standing and avoids penalties.

IMPORTANCE

Updating changes in designated partners with the MCA is not just a compliance requirement but also ensures transparency and maintains trust among stakeholders, creditors, and government agencies.

BENEFITS

Smooth business continuity
Flexibility in management structure
Enhanced governance
Ability to attract skilled professionals or investors

DOCUMENTS REQUIRED

Passport-size photograph of the incoming partner

PAN and address proof (Aadhar, DL, Voter ID)

Digital Signature Certificates (DSC) of continuing and changing partners

Existing LLP Agreement

Supplementary agreement (if LLP terms are modified)

PROCEDURE

1. Board Resolution

Pass a resolution approving the change.

Documentation

Prepare and sign necessary agreements (admission/resignation/retirement).

Filing with MCA

Form 3 (if LLP Agreement is changed)
Form 4 (change in partner/designated partner)
Form 6 (Consent from the new partner, if added)
Form 13 (for resignation, if applicable)

All forms must be submitted within 30 days of the change.

The step-by-step procedure for adding or removing a designated partner is as follows:

Review the LLP Agreement

Examine the original LLP agreement to understand the clauses regarding admission, resignation, or removal of partners. If such clauses are absent, amendments may be required.

Convene a Meeting of Partners

Hold a meeting with all existing partners to pass a resolution regarding the intended change (appointment or removal). Record the decision through a resolution.

Obtain Necessary Approvals and Documents

For adding a partner: Get written consent using Form 6 and supporting documents (PAN, ID, Address proof, Passport-size photo, DSC).
For resignation/removal: Obtain a signed resignation letter or removal notice as per the LLP agreement terms.
Draft a Supplementary Agreement if there are any changes in roles or profit-sharing ratios.

Prepare and File Forms with MCA

Form 4: Mandatory for adding, removing, or updating details of any partner/designated partner. Must be filed within 30 days of the change.
Form 3: Required if the LLP agreement is altered due to the change.
Form 6: Consent form for new partner (submitted with Form 4).
Form 13: Filed in case of a resignation.

These forms are filed online through the MCA portal using Digital Signatures and must be certified by a practicing CA/CS/CMA.

Pay the Government Fees

Make necessary payments as applicable for each form submission. The amount varies depending on the LLP’s capital contribution.

ROC Review and Approval

After successful submission and verification, the Registrar of Companies (ROC) updates the LLP’s master data and legal records.

7.Update Internal Records

Update all LLP internal registers, financial documents, and bank records to reflect the change in partners.

CONSEQUENCES OF NON-COMPLIANCE

Penalty of ₹10,000 per designated partner for failure to file mandatory forms
LLP considered non-compliant, affecting credibility
Legal actions in case of disputes or investigations

Conclusion

Adding or removing designated partners in an LLP is a routine yet legally significant process. With proper documentation and timely filings, businesses can easily adapt to changing requirements while remaining compliant with MCA regulations. For hassle-free processing, consult professionals who can manage all filings, agreements, and compliance seamlessly.