An LLP agreement is an important document that governs the relationship between two or more parties. It helps them understand their rights and obligations towards each other. In case of any dispute, the LLP agreement resolves it. However, if there are no disputes, then why do we need to amend our LLP agreement? Read on to know when to change the LLP agreement.
Limited Liability Partnerships: An Overview
An LLP agreement is a crucial part of Limited liability partnerships businesses. Despite being a crucial document, the business partners have the power to change an LLP agreement Under different scenarios. It outlines all the business objectives and functioning rules and the limited amount of legal liability. These companies can be structured with a minimum of 2 partners with no limitation on the maximum number of partners. Limited liability partnerships can also provide a way for people to invest without worrying about personal assets.
When to Change an LLP Agreement?
Limited liability partnership in India are becoming much more popular. As the business moves forward, various changes need to be adopted to make the policies simpler and streamlined. Amending or adjusting the active LLP agreement with necessary changes will continue to protect the partners’ rights. Below are some of the reasons that the LLP agreement needs modifications.
A Non-performing Partner
When a Limited Liability Partnership Agreement is made, the general partners can benefit by signing up as many members as possible. This agreement, in theory, is meant to protect the parties involved. However, suppose one of the general partners cannot perform their duties and responsibilities due to disability or illness. In that case, they can be relieved of their duties by a majority vote from the LLP Partners. This clause helps protect individual partners if something happens to them while on a trip.
Resignation of a Partner
The Limited Liability Partnership Agreement is the document that governs the partnership. It also sets some guidelines for how the company should operate, including what happens when a partner leaves the company. Generally, people who resign or retire from the company are released from liability, and their debts will be discharged. The LLP agreement needs to be amended with the necessary changes.
Change in Responsibilities
In a Limited Liability Partnership Agreement, it’s important to change the responsibilities or engagements of the partners in the partnership agreement if one partner can no longer fulfil their commitment and needs to leave, then the other partner should be able to take over their role and responsibility in the business. Suppose a partner cannot fulfil their responsibilities anymore. It could be beneficial for them to transfer ownership of the company to that partner to limit their losses and liabilities.
Detailed Procedure to Change an LLP Agreement
Agree with the Partners’ Consent:
Obtaining the consent of the LLP’s Partners is the first step in changing the LLP Agreement. At the Partners’ meeting that is being held, a resolution will be passed to give consent.
Consent to the Designated Partner:
One of the designated partners will be given permission to take the necessary steps to meet the requirement of appointing a professional and filing an application with the MCA during the meeting.
Implementation of the Additional LLP Agreement:
After the LLP has been registered in India, it can amend its LLP Agreement by signing a Supplementary Deed. Stamp duty, if any, must be paid before the Supplementary Deed can be signed.
Demand for Stamp Duty
If the addition of Capital Contribution to the Limited Liability Partnership (LLP) results in a change in the Agreement, stamp duty must be paid in accordance with the relevant State Stamp Act. The LLP Agreement’s Stamp Duty is determined by the State Stamp Act. The amount of stamp duty due will be determined by the Stamp Act of the state in which the LLP’s Registered Office is located.
The Supplementary Deed must be signed by paying Rs 100 toward the Stamp Duty if the change of LLP Agreement does not include the change of Capital.
Validity of the LLP Agreement and Supplementary Deed
Until the Limited Liability Partnership’s LLP Agreement is valid, the Supplementary Deed will remain in effect, similar to the legal stipulations observed in company registration in India.
Unless the Supplementary Agreement expressly excludes any of the terms and conditions outlined in the original LLP Agreement, they will continue to apply.
Partners’ seal of approval
In addition to their initials on the remaining pages, the parties to the Agreement must sign in the locations specified in the Supplementary Deed to the LLP Agreement.
Attestation from Observers/Witness
At least two agreement witnesses must sign the Supplementary Deed to the LLP Agreement. Non-Parties to the Supplementary Agreement may serve as witnesses to the Agreement in this instance.
Submission of a MCA Application:
By paying the fee outlined on the portal designated for filing, an application for approval of the Supplementary Deed of LLP must be submitted on LLP Form 3. The Digital Signature Certificates (DSC) of the Designated Partner (as authorized in this regard by passing the resolution) and Practising Professional, such as a Company Secretary or Chartered Accountant, must be attached to the application before it can be submitted.
Attachments
The following documents must be submitted with the request to change the LLP Agreement:
- Initial LLP Contract;
- Additional Deed to the LLP Agreement;
- Partners’ meeting saw the adoption of a resolution;
Within thirty days of the signing of the Supplementary Limited Liability Partnership Agreement, the application in the above-mentioned format must be submitted. A daily penalty of Rs 100 will be assessed if the electronic form is not submitted within 30 days of the execution.
When will the LLP Agreement’s changes take effect?
The Supplementary LLP Agreement’s changes won’t take effect until the MCA approves the application that was submitted in this regard. However, the changes will take effect on the date of execution or the effective date of the change(s) upon application approval.
What are the Benefits of LLP Agreement?
Limited liability partnerships, or LLCs, are a type of business entity with a single level of shareholders. The corporation is the sole entity responsible for any company liabilities while limiting the liability of individual shareholders to their capital investment in the company. The key benefits are that it allows people with minimal investment funds to start their businesses. It’s also beneficial for those who want to evade taxes since the LLC is treated as a disregarded entity for tax purposes.
Conclusion
We hope that this blog when to change in LLP Agreement is helpful. If you want to change an LLP Agreement reach out to the experts at Vakilsearch!
