LLP Capital Investment Increase or Decrease

Last Updated at: Oct 08, 2020
Unlimited Liability: Why Sole Proprietorships & Partnerships Must Be Careful

As per Section 32 of the Limited Liability Partnership Act, 2008 (hereafter referred to as the LLP Act, 2008), a contribution of a partner to the capital of LLP may consist of: Tangible property (movable or immovable) Intangible property Other benefit to the LLP (including money, promissory notes etc.)

Register a LLP 

Changing Capital Investment in an LLP: What does the LLP Act Say

Of these if a partner wished to increase or reduce a monetary contribution (or in other words increase or reduce capital investment) an amendment of the LLP Agreement is necessary. The flexibility of the LLP as a business model is clearly visible in such a situation. The LLP Act, 2008 is silent on the method to increase or reduce capital. This is due to the fact that the law wishes to provide the partners of an LLP with the ability to regulate their own business. Thus, as per Section 33 of the LLP Act, 2008, the obligation of a partner for their contribution to the LLP shall be decided as per the LLP agreement.

LLP Agreement Amendment

Amending the LLP Agreement itself to reduce the contribution that a partner is liable to pay must be done as per the procedure for amendment laid down in the LLP Agreement itself. Furthermore, to authenticate the change, E-Form 3 must be filed with a certified true copy of the minutes of the meeting wherein the decision to make the change was taken within 30 days of the change being consented to. Once this process is complete, the contribution payable is effectively reduced.