Designated Partners play a crucial role in Limited Liability Partnerships (LLPs), bringing their expertise and contributions to the organization. Adding a Designated Partner involves specific legal procedures and documentation. In this blog, we will provide a step-by-step guide on how to add a Designated Partner to an LLP, along with relevant examples to illustrate the process.
Understand the Eligibility Criteria :
Before adding a Designated Partner to an LLP, it is essential to understand the eligibility criteria outlined in the Limited Liability Partnership Act, 2008. According to the Act, individuals who are at least 18 years old, possess a Director Identification Number (DIN), and have not been declared of unsound mind or insolvent are eligible to become Designated Partners.
Example: Let’s consider an LLP named “ABC Solutions LLP” that wishes to add a new Designated Partner to their existing partnership.
Obtain Consent and Disclosure :
The LLP must obtain the consent of the individual proposed as the Designated Partner. The individual must also provide a declaration of his/her eligibility, confirming that he/she fulfills the necessary criteria and is not disqualified from becoming a Designated Partner. This consent and disclosure form should be drafted in compliance with the LLP agreement and applicable legal requirements.
Example: Mr. John Smith, a senior executive at ABC Solutions LLP, has been approached by the partners to become a Designated Partner. After careful consideration, Mr. Smith provides his written consent and declaration of eligibility to the existing partners.
Prepare Supplementary LLP Agreement :
The existing partners of the LLP should draft a supplementary LLP agreement to reflect the addition of the new Designated Partner. The agreement should outline the rights, duties, and obligations of the Designated Partner, as well as the profit-sharing ratio, capital contribution, and any other relevant provisions. It is crucial to ensure that the supplementary agreement adheres to the provisions of the original LLP agreement.
Example: ABC Solutions LLP prepares a supplementary LLP agreement, specifying Mr. John Smith’s role as a Designated Partner, his profit-sharing ratio, and other relevant terms, which is reviewed and approved by all partners.
File the Required Forms with Registrar:
To formalize the addition of a Designated Partner, the LLP must file the necessary forms with the Registrar of Companies (RoC). The LLP Form 4, along with the supplementary agreement and other supporting documents, such as consent letters, declarations, and identity proofs of the Designated Partner, should be submitted within the specified time frame. The RoC will verify the documents and update the LLP’s records accordingly.
Example: ABC Solutions LLP completes the required forms, including LLP Form 4, and submits them to the RoC along with the supplementary agreement, Mr. John Smith’s consent letter, and other supporting documents.
Obtain Certificate of Incorporation :
Upon successful verification and acceptance of the filed documents, the RoC will issue a Certificate of Incorporation with the updated information reflecting the addition of the new Designated Partner. This certificate serves as legal proof of the Designated Partner’s appointment and the LLP’s compliance with the required procedures.
Example: ABC Solutions LLP receives the updated Certificate of Incorporation, confirming the addition of Mr. John Smith as a Designated Partner.
Adding a Designated Partner to an LLP involves following a systematic procedure, adhering to legal requirements, and completing the necessary documentation. By understanding the eligibility criteria, obtaining consent and disclosure, preparing a supplementary LLP agreement, filing the required forms, and obtaining the Certificate of Incorporate .