Unit 4
Partnership Laws
When we discuss about the forms a business organization can take, one of the most prominent ones is a partnership. In India mainly it's a really popular entity to hold out business allow us to take a glance at some important elements of a partnership and also some sorts of partners.
CONCEPT PARTNERSHIP
In India, we've a particular law that covers all factors and functioning of a partnership, The Indian Partnership Act 1932. The act also defines a partnership as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”
So in such a case two or more (maximum numbers will differ consistent with the business being carried) persons close as a unit to realize some common objective and therefore the profits earned in pursuit of this objective are going to be shared amongst themselves.
The entity is collectively called a “Partnership Firm” and every one the person members are the “Partners”. So allow us to check out some important features.
NATURE OF PARTNERSHIP ACT,1932
When two or more people join hands to set up an enterprise and share its gains and losses, they are said to be in partnership. Section 4 of the Indian Partnership Act 1932 states partnership as the ‘association between people who have consented to share the profits of an enterprise carried on by all or any of them acting for all’.
People who have entered into a partnership with one another are independently termed as ‘partners’ and comprehensively termed as ‘firm’. The name under which the trade is carried is called the ‘name of the firm’. A partnership enterprise has no distinct legal entity, apart from the partners comprising it. Hence, the vital features of the partnership are:
- Two or More Persons: In order to manifest a partnership, there should be at least two persons possessing a common goal. To put it in other words, the minimal number of partners in an enterprise can be 2. However, there is a constraint on their maximum number of people. By the uprightness of Section 464 of the Companies Act 2013, the Central Government is authorised to stipulate a maximum number of partners in an enterprise; however, the number of partners cannot exceed 100. The Central government has stipulated the maximum number of partners in an enterprise to be 50, under Rule 10 of the Companies (Miscellaneous) Rules, 2014. Hence, a partnership enterprise cannot have more than 50 people (partners)
- Agreement: It is the outcome of an accord between 2 or more people to regulate business and share its gains and losses. The agreement (accord) becomes the basis of the association between the partners. Such an agreement is in the written form. An oral agreement is evenhandedly legitimate. In order to avoid controversies, it is always good if the partners have a copy of the written agreement.
- Sharing of Profit: Another significant component of the partnership is, the accord between partners has to share gains and losses of a trading concern. However, the definition held in the Partnership Act elucidates – partnership as an association between people who have consented to share the gains of a business, the sharing of loss is implicit. Hence, sharing of gains and losses is vital.
CHARACTERTICS OF A PARTNERSHIP
1] Formation/Contract
A partnership firm is not a separate legal entity. But consistent with the act, a firm must be fashioned via a legal agreement between all the partners. So a contract must be entered into to make a partnership firm.
Its commercial activity must be lawful, and therefore the motive has got to be one among profit. So two people forming an alliance to hold out charity and/or welfare work won't constitute a partnership. Similarly, a partnership contract to scoop illegal work, like smuggling, is void also.
2] Unlimited Liability
In a unique feature, all partners have unlimited liability within the business. The partners are all individually and jointly responsible for the firm and therefore the payment of all debts. This suggests that even personal assets of a partner are often liquidated to satisfy the debts of the firm.
If the cash is recovered from one partner, he can, in turn, sue the opposite partners for his or her share of the debt as per the contract of the partnership.
3] Continuity
A partnership cannot perform in perpetuity. The death or retirement or bankruptcy or insolvency or insanity of a partner will dissolve the partnership. The remaining partners may continue the partnership if they so choose, but a replacement contract must be involved. Also, the partnership of a father can't be inherited by his son. If all the opposite partners agree, he are often added on as a replacement partner.
4] Number of Members
As we all know that there should be a minimum of two individuals for a partnership. However, the utmost number will vary consistent with a couple of conditions. The Partnership Act itself is silent on this issue, but the businesses Act, 2013 provides clarity.
For a banking business, the amount of partners must not exceed ten. For a business of the other nature, the utmost number is twenty. If the amount of partners increases it'll become an illegal entity or association.
5] Mutual Agency
In a partnership, the business must be administered by all the partners together. Or alternatively, it are often administered by any of the partners (one or several) acting for all of them or on behalf of all of them. So this suggests every partner is an agent as properly because the principal of the partnership.
He represents the opposite partners in some cases so he's their agent. But in several circumstances, he's bound by the actions of any of the opposite partners asking him the principal also.
As per the Partnership Act 1932, it is not compulsory to register a partnership firm. The firm does not have a separate legal identity and registration will not alter this fact. However, registration is the definite proof of the existence of the firm and its legality.
Non-registration of a firm has some real-life legal consequences for the partners and the firm itself. So it is always advisable to draw up a written partnership deed and register the firm with the Registrar of Firms. The consequences of not doing so are as follows,
- The firm cannot file legal proceedings against any third party for any situation. For example, if the client has not paid his dues to the firm, the firm cannot sue him if it is unregistered.
- An unregistered firm cannot fail a case against a partner for any reason (like mismanagement, theft etc)
- A partner of an unregistered firm cannot file a suit against one of the other partners either.
Procedure of Registration
According to the India Partnership Act 1932, there is no time limit as such for the registration of a firm. The firm can be registered on the date when it is incorporated or any such date after so. The requisite fees and fines must be paid. The procedure for such a registration is as follows,
1] Application to the Registrar of Firms in the prescribed form (Form A). Nowadays this facility is even available online. Such an application must contain certain basic details about the firm such as,
- Name of the Partnership Firm
- Name and address of all partners
- Place of business (address of main and branch offices)
- Duration of the partnership
- Date of joining of partners
- Date of commencement of business
2] The duly signed copy of the Partnership Deed (which contains all the terms and conditions) must be filled with the registrar
3] Deposit/pay the necessary fees and stamp duties
4] Once the registrar approves the application, the firm will be entered into the records. And the registrar will also issue a certificate of incorporation.
And this is how the process of registration will be completed and the firm will attain legal recognition.
Active Partner:Because the name suggests he takes active participation within the business of the firm. He contributes to the capital, features a share within the income and also participates within the daily activities of the firm. His liability within the company is going to be unlimited. And he often will act as an agent for the opposite partners.
Dormant Partner: Also referred to as a silent partner, he won't participate within the daily functioning of the business. But he will still need to make his share of contribution to the capital. In return, he will have a share within the profits. His liability will additionally be unlimited.
Secret Partner: Here the partner’s association with the firm isn't general knowledge. He won't signify the firm to outside agents or parties aside from this his participation with reference to capital, profits, management and liability are going to be an equivalent as all the opposite partners.
Nominal Partner: This partner is solely a partner in name only . He allows the firm to use the name of his firm, and therefore the connected goodwill. But he in no way contributes to the capital and hence has no share within the profits. He doesn't involve himself within the firm’s business. But his liabilities too are going to be unlimited.
Partner by Estoppel: If an individual makes it bent be, through their conduct or behaviour that they're partners during a firm and he doesn't correct them, then he becomes a partner by estoppel. However, this partner too will have unlimited liability.
TYPES OF PARTNERSHIPS
Various sorts of partnerships exist, including limited partnership, indebtedness partnership, joint liability, indebtedness, and joint ventures. The foremost important thing to know is that partnerships are agreements between two or more parties to realize a specific business goal. General partnerships are:
Equal agreements
Various responsibilities are often delegated among members
Partnerships force all parties to share sure risks and rewards during business endeavours
For instance, a partner can handle the investment angle by pouring capital within the business, while another can act during a management capacity. Additionally, one partner can bind group partners into one legal obligation. Under partnerships, each party takes responsibility for individual obligations or debts.
- Limited Partnerships (LPs)
A limited partnership allows each partner to avoid personal liability to the quantity of his or her business investment. Such an appointment requires one individual to require the role of general status, opening his or herself up to potential personal liabilities, while the limited partner takes less of a risk. However, the accepted partner retains control of the business, and therefore the limited partner is usually not involved in management operations.
- Limited Liability Partnerships (LLP)
LLPs accompany tax advantages within the same manner as general partnerships combined with liability protections. For instance , individuals aren't liable for any debts or liabilities arising from the business. LLPs are usually found among law or accounting partnerships. Where taxation cares , the IRS recognizes such businesses as partnerships and approves members to file taxes individually on personal returns. GPs, LLPs, and LPs are taxed within the same manner, however partnerships don't pay taxes.
LLPs permit members to figure together while retaining a measure of independence when it involves liability. With that, not all parties are held equally responsible, and other members aren't held responsible for the actions of others. Before engaging in any sort of partnership, know the terms before agreeing or signing any document.
- Limited Liability Protection
If you're concerned about indebtedness protection, remember that general partnerships don't afford you any protective measures. During a general capacity, partners are often held liable for movements or decisions of other partners. General partnerships pose the very best risk to general partners, but they're the simplest to make. LLCs became a well-liked alternative to general partnerships. LLCs are ideal for those that wish to take a position during a business, but don't want face exposure to any legal ramifications.
- Joint Ventures as Partnerships
According to the tiny Business Administration, a venture is another sort of partnership. Joint ventures occur when a variety of entities converge in pursuit of a group goal. For instance , businesses may forge a partnership to construct a building.
Qualified joint ventures are a special partnership that permits spouses to co-own a business but to file separate returns to avoid partnership returns.
- Joint Liabilities
A joint liability partnership holds all partners equally responsible for any financial and legal issues. Joint liability partnerships bind all parties into equal liability. Moreover, each party are often held responsible in pending lawsuits or other legal consequences. Joint liabilities are different than several liability principles within the respect that partnerships are persisted equal footing in the least times.
Several liability, on the opposite hand, is that the agreement to settle any legal disputes and is predicated on a partner’s standing or contribution to a partnership.
- Limited Liability Company
A Limited Liability company (LLC) offers each the foremost benefits and therefore the most protection for a business owner.
A Limited liability company allows members to forge one entity while taking benefits of liability protection. LLCs provide equivalent tax havens as partnerships, but with the brought liability benefits of an organization. Corporate law dictates that corporations are held responsible for start-up investments only. For instance , a $10 million business doesn't give others the proper to sue you for over $2 million if you started that business for less than $2 million.
The LLC provides for an equivalent tax protection as a partnership, but also gives the liability protection of an organization. Under corporate law, an organization is merely responsible for the entire start-up investment within the company. Also, certain states allow members to make what's recognized as knowledgeable LLC, which provides certain professionals like doctors or lawyers more limitations than regular businesses.
RIGHTS OF PARTNERS:
Broadly, the provisions of the Act regarding rights, responsibilities and powers of partners are as under:
(a) Every partner features a right to require part within the habits and management of business.
(b) Every partner features a right to be consulted and heard altogether matters affecting the business of the partnership.
(c) Every partner features a right of free access to all or any records, books and accounts of the business, and additionally to look at and replica them.
(d) Every partner is entitled to share the profits equally.
(e) A partner who has contributed quite the agreed share of capital is entitled to interest at the speed of 6 per cent once a year. But no interest is often claimed on capital.
(f) A associate is entitled to be indemnified by the firm for all acts done by him within the direction of the partnership business, for all payments made by him in respect of partnership debts or liabilities and for expenses and disbursements made in an emergency for shielding the firm from loss provided he acted as an individual of normal prudence would have acted in similar circumstances for his own personal matters.
(g) Every partner is, as a rule, joint owner of the partnership property. He’s entitled to possess the partnership property used exclusively for the needs of the partnership.
(h) A partner has power to act in an emergency for shielding the firm from loss, but he must act reasonably.
(i) Every partner is entitled to stop the introduction of a replacement partner into the firm without his consent.
(J) Every partner features a right to retire consistent with the Deed or with the consent of the opposite partners. If the partnership is at will, he can retire by giving note to other partners.
(k) Every partner features a right to continue within the partnership.
(l) A retiring partner or the heirs of a deceased partner are entitled to possess a share within the profits earned with the help of the proportion of assets belonging to such outgoing partner or interest at six per cent once a year at the choice of the outgoing partner (or his representative) until the accounts are finally settled.
DUTIES OF PARTNERS:
(a) Every partner is sure to diligently raise on the business of the firm to the best common advantage. Unless the agreement provides, there's no salary.
(b) Every partner must be just and faithful to the opposite partners.
(c) A partner is sure to keep and render true, proper, and proper accounts of the partnership and must permit other partners to see out and replica such accounts.
(d) Every partner is sure to indemnify the firm for any loss prompted by his delinquency or fraud within the conduct of the business.
(e) A partner needs to not keep it up competing business, nor use the property of the firm for his private purposes. In each cases, he must fork over to the firm any profit or gain made by him but he must himself suffer any loss which may have occurred.
(f) Every partner is sure to share the losses equally with the others.
(g) A partner is sure to act within the scope of his authority.
(h) No partner can assign or transfers his partnership interest to the other person soon make him a partner within the business.
Every partner has the implied authority to bind the firm and other partners by his acts done in the name of the firm, in the ordinary course of the firm’s business and with the intention to bind the firm.
A partner has the implied authority to do the following acts on behalf of his firm.
(i) To buy, sell and pledge goods on behalf of the firm.
(ii) To raise loans on the security of such assets.
(iii) To receive payments of debts due to the firm.
(iv) To accept, make an issue of bills of exchange, promissory notes, etc on behalf of the firm.
(v) To engage servants for the firm’s business
Incoming Partner (Sec. 31):
Subject to contract between the partners, no person can be admitted as a partner into a firm without the consent of all the existing partners. Mutual confidence and trust among the partners being an essential ingredient of an ideal partnership it is very much natural that there must be consent of all the partners to the introduction of a new partner, unless the partners have already agreed otherwise.
Liability of an incoming partner:
A new partner becomes liable for the debts and acts of the firm only from the date he is admitted as a partner. He cannot be held liable for the acts of the old firm.
A new partner may, however, agree to be liable for debts existing prior to his admission but such agreeing will not give to a prior creditor the right of suing him because of ‘absence of privily of contract.’
He will be liable to other co-partners only. The creditors can make him liable if he had agreed with them, expressly or impliedly, for being liable towards them for the past debts.
Retirement of a Partner (Sec. 32):
A partner is said to retire when the surviving partners continue to carry on the business of the firm, and the member retiring ceases to be a partner.
Method of retirement:
In case of a “particular partnership” a partner may retire with the consent of all the other partners, unless otherwise agreed.
Retirement of a Partner (Sec. 32):
A partner is said to retire when the surviving partners continue to carry on the business of the firm, and the member retiring ceases to be a partner.
Method of retirement:
In case of a “particular partnership” a partner may retire with the consent of all the other partners, unless otherwise agreed.
A partner is said to retire when the surviving partners continue to carry on the business of the firm, and the member retiring ceases to be a partner.
Liability of a retiring partner:
A retiring partner continues to be liable for the acts of the firm done before his retirement. He may, however, free himself from his liability towards third parties for the debts of the firm incurred before his retirement by an agreement with such third parties and the partners of the reconstituted firm discharging the outgoing partner from all liabilities.
The remaining partners alone cannot give this freedom to the retiring partner. He may be discharged only if the creditors agree.
A retiring partner also continues to be liable for the acts of the firm, even after retirement, until public notice is given of the fact of retirement. Similarly, the partners of the reconstituted firm continue, to be liable for the acts of the retired partner though done after retirement, until public notice is given of the retirement.
Such a public notice may be given either by the retiring partner or by any partner of the reconstituted firm. A dormant or sleeping partner, however, need not give any such notice.
DISSOLUTION
When the partnership between all the partners of a firm is dissolved, then it's called dissolution of a firm. It's important to word that the connection between all partners should be dissolved for the firm to be dissolved allow us to check out the legal provisions for the dissolution of a firm.
The dissolution of a firm means discontinuance of its activities. When the working of a firm is stopped and therefore the assets are realized to pay a variety of liabilities it amounts to dissolution of the firm. The dissolution of a firm shouldn't be confused with the dissolution of partnership. When a partner agrees to continue the firm underneath an equivalent name, even after the retirement or death of a partner, it amounts to dissolution of partnership and not of firm.
The remaining partners may purchase the share of the outgoing or deceased partner and proceed the business under an equivalent name; it involves solely the dissolution of partnership. The dissolution of firm includes the dissolution of partnership too. The partners have a contractual relationship among themselves. When this relationship is terminated it's an end of the firm.
A firm could also be dissolved under the subsequent circumstances:
(a) Dissolution by Agreement (Section 40):
A partnership firm is often dissolved by an agreement among all the partners. Section 40 of Indian Partnership Act, 1932 approves the dissolution of a partnership firm if all the partners agree to dissolve it. Partnership concern is created by settlement and similarly it are often dissolved by agreement this sort of dissolution is understood as voluntary dissolution.
(b) Dissolution by way of Notice (Section 43):
If a partnership is at will, it are often dissolved by any partner giving a notice to other partners. The notice for dissolution must be in writing. The dissolution are going to be effective from the date of the notice, just in case no date is mentioned within the notice, then it'll be dissolved from the date of receipt of notice. A notice as soon as given can't be withdrawn without the consent of all the partners.
(c) Compulsory Dissolution (Section 41):
A firm could also be compulsorily dissolved beneath the subsequent situations:
(i) Insolvency of Partners:
When all the partners of a firm are declared insolvent or about one partner are insolvent, then the firm is compulsorily dissolved.
(ii) Illegal Business:
The activities of the firm may find yourself illegal under the changed circumstances. If government enforces prohibition policy, then all the firms dealing in liquor will need to close their business because it'll be an unlawful undertaking under the new law. Similarly, a firm could also be trading with the businessmen of the other country. The trading are going to be lawful under present conditions.
After a while a war erupts between the 2 countries, it'll become a trading with an alien enemy and further trading with an equivalent events are going to be illegal. Under new circumstances the firm will need to be dissolved. Just in case a firm carries on quite one sort of business, then illegality of 1 work won't amount to dissolution of the firm. The firm can continue with the activities which are lawful.
(d) Contingent Dissolution (Section 42):
In case there's no agreement among partners associated with certain contingencies, partnership firm are going to be dissolved on the happening of any of the situations:
(i) Death of a Partner:
A partnership firm is dissolved on the demise of any of the partner.
(ii) Expiry of the Term:
A partnership firm could also be for a hard and fast period. On the expiry of that period, the firm is going to be dissolved.
(iii) Completion of Work:
A partnership concern could also be formed to hold out a specified work. On the completion of that employment the corporate are going to be automatically dissolved. If a firm is made to construct a road, then the second the road is completed the firm are going to be dissolved.
(iv) Resignation by Partner:
If a partner doesn't want to continue within the firm, his resignation from the priority will dissolve the partnership.
(e) Dissolution via Court (Section 44):
A partner can apply to the court for dissolution of the firm on any of those grounds:
(i) Insanity of a Partner:
If a partner goes insane, the partnership firm are often dissolved on the petition of various partners. The firm isn't automatically dissolved on the insanity of a partner. The court will act only on the petition of a partner who himself isn't insane.
(ii) Misconduct by the Partner:
When a partner is guilty of misconduct, the opposite partners can move the court for dissolution of the firm. The misconduct of a partner brings bad name to the firm and it adversely affects the reputation of the priority . The misconduct are often in business or otherwise. If a partner is jailed for committing a theft, it'll also affect the great name of the firm though it's nothing to try to with the business.
(iii) Incapacity of a Partner:
If a partner aside from the suing partner becomes incapable of performing his duties, then partnership are often dissolved.
(iv) Breach of Agreement:
When a partner willfully commits breach of agreement concerning business, it'll become a ground for getting the firm dissolved. Under such a situation it becomes hard to hold on the business smoothly.
(v) Transfer of Share:
If a partner sells his share to a 3rd party or transfers his share to a different person permanently, other partners can pass the court for dissolving the firm.
(vi) Regular Losses:
When the firm can't be carried on profitably, then the firm are often dissolved. Though there can also be losses in every sort of business but if the firm is incurring losses continuously and it's impossible to run it profitably, then the court can order the dissolution of the firm.
(vii) Disputes amongst Partners:
Partnership firm is predicated on mutual faith. If partners don't have faith one another , then it'll not be possible to run the business. When the partners quarrel with every other, then the very basis of partnership is lost and it'll be better to dissolve it.
Following are the ways during which dissolution of a partnership firm takes place:
1. Dissolution by Agreement
A firm could also be dissolved if all the partners comply with the dissolution. Also, if there exists a contract between the partners regarding the dissolution, the dissolution may happen in accordance with it.
2. Compulsory Dissolution
In the following cases the dissolution of a corporation takes place compulsorily:
• Insolvency of all the partners or about one partner as this makes them incompetent to enter into a contract.
• When the business of the firm becomes illegal thanks to some reason.
• When thanks to some event it turns into unlawful for the partnership firm to hold its business. For instance , a partnership firm features a companion who is of another country and India declares war against that country, then he becomes an enemy. Thus, the business becomes unlawful.
3. When certain contingencies happen
The dissolution of the association takes place subject to a contract among the partners, if:
• The firm is made for a hard and fast term, on the expiry of that term.
• The firm is made to hold out specific venture, on the completion of that venture.
• A partner dies.
• A partner becomes insolvent.
4. Dissolution by Notice
When the partnership is at will, the dissolution of a firm may happen if anybody of the partners gives a word in writing to the opposite partners stating his intention to dissolve the firm.
5. Dissolution by Court
When a partner files a suit within the court, the court may order the dissolution of the corporate on the idea of the subsequent grounds:
• In the case where a partner becomes insane
• In the case the place a partner becomes permanently incapable of performing his duties.
• When a partner will become guilty of misconduct and it affects the firm’s business adversely.
• When a partner continually commits a breach of the partnership agreement.
• In a case where a partner transfers the entire of his interest within the partnership company to a 3rd party.
• In a case where the business can't be carried on barring at a loss
• When the court regards the dissolution of the firm to be just and equitable on any ground.
A limited liability Partnership or LLP is an alternate corporate business form which offers the advantages of limited liability to the partners at low compliance costs. It also allows the partners to arrange their internal structure sort of a traditional partnership. A limited liability partnership may be a legal entity, responsible for the complete extent of its assets. The liability of the partners, however, is restricted. Hence, LLP may be a hybrid between a corporation and a partnership.
SALIENT FEATURES OF LLP
LLP may be a body corporate
According to Section 3 of the Limited Liability Partnership Act (LLP Act), 2008, an LLP may be a body corporate formed and incorporated under the Act. It's a legal entity break away its partners.
Perpetual Succession
Unlike a partnership firm, a limited liability partnership can proceed its existence even after the retirement, insanity, insolvency or maybe death of 1 or more partners. Further, it can enter into contracts and hold property in its name.
Separate Legal Entity
It is a separate legal entity. Further, it's absolutely responsible for its assets. Also, the liability of the partners is restricted to their contribution in the LLP. Hence, the lenders of the limited liability partnership aren't the creditors of individual partners.
Mutual Agency
Another difference between an LLP and a partnership firm is that independent or unauthorized actions of 1 partner don't make the opposite partners liable. All partners are agents of the LLP and therefore the actions of 1 partner don't bind the others.
LLP Agreement
The rights and duties of all partners are governed by an agreement between them. Also, the partners can devise the agreement as per their choice. If such an agreement isn't made, then the Act governs the mutual rights and duties of all partners.
Artificial Legal Person
For all legal purposes, an LLP is a man-made legal person. It's created by a legal process and has all the rights of a private . It’s invisible, intangible and immortal but not fictitious since it exists.
Common Seal
If the partners decide, the LLP can have a standard seal [Section 14(c)]. It's not mandatory though. However, if it decides to possess a seal, then it's necessary that the seal remains under the custody of a responsible official. Further, the harbour seal are often affixed only within the presence of a minimum of two designated partners of the LLP.
Limited Liability
According to Section 26 of the Act, every partner is an agent of the LLP for the aim of the business of the entity. However, he's not an agent of other partners. Further, the liability of every partner is restricted to his agreed contribution within the limited liability Partnership.
Minimum and Maximum Number of Partners
Every limited liability Partnership got to have a minimum of two partners and a minimum of two individuals as designated partners. At any time, a minimum of one designated partner should be resident in India. There’s no maximum limit on the amount of maximum partners within the entity.
Management of Business
The partners of the limited liability Partnership can manage its business. However, only the certain partners are liable for legal compliances.
Business for Profit Only
An indebtedness Partnership can't be created for charitable or non-profit purposes. It's essential that the entity is made to hold on a lawful business with a view to incomes a profit.
Investigation
The power to research the affairs of a limited liability Partnership resides with the Central Government. Further, they will appoint a competent authority for an equivalent.
Compromise or Arrangement
Any compromise or arrangement sort of a merger or amalgamation desires to be in accordance with the Act.
Concept of LLP: limited liability Partnership enterprise, the planet wide recognized sort of business, has now been brought in India by enacting the limited liability Partnership Act, 2008. LLP Act was notified on 31.03.2009.
A limited liability Partnership, popularly referred to as LLP combines the benefits of both the corporate and Partnership into one sort of organization. Limited liability Partnership (LLP) may be a new corporate form that permits expert knowledge and entrepreneurial skill to mix, organize and operate in an revolutionary and proficient manner.
It provides an alternate to the normal partnership association with unlimited liability. By incorporating an LLP, its members can avail the advantage of limited liability and therefore the flexibility of organizing their internal management on the idea of a mutually-arrived agreement, as is that the case during a partnership firm.
CHARACTERISTICS OF AN LLP:
1. LLP is governed by way of the limited liability Partnership Act 2008, which has inherit force with effect from April 1, 2009. The Indian Partnership Act, 1932 isn't applicable to LLP.
2. LLP may be a body incorporate and a legal entity breaks away its partners having perpetual succession, can own assets in its name, sue and be sued.
3. The partners have the proper to manage the business directly, unlike corporate shareholders.
4. One partner isn't responsible or in charge of another partner’s, misconduct or negligence.
5. Minimum of two partners and no maximum limit.
6. Should be ‘for profit’ business.
7. The rights and duties of partners in an LLP, are going to be governed by the agreement between partners and therefore the partners have the pliability to plan the agreement as per their choice. The duties and obligations of Designated Partners shall be as provided within the law.
8 Limited liability of the partners to the extent of their contributions within the LLP. No exposure of private assets of the partner, except in cases of fraud.
9. LLP shall maintain annual accounts. However, audit of the accounts is required solely if the contribution exceeds Rs. 25 lakh or annual turnover exceeds Rs. 40 lakh. a press release of accounts and solvency shall be filed by every LLP with the Registrar of Companies (ROC) per annum .
NATURE OF LIMITED LIABILITY PARTNERSHIP
Limited Liability Partnership to be body corporate.—
(1)A indebtedness partnership may be a body corporate formed and incorporated under this Act and may be a legal entity breaks away that of its partners.
(2) A limited liability partnership shall have perpetual succession.
(3) Any change within the partners of a limited liability partnership shall not affect the existence, rights liabilities of the limited liability partnership.
4. Non-applicability of the Indian Partnership Act, 1932.—Save as otherwise provided, the provisions of the Indian Partnership Act, 1932 (9 of 1932) shall not apply to a limited liability partnership.
5. Partners.—Any individual or body corporate could also be a partner during a limited liability partnership:
Provided that a private shall not be capable of becoming a partner of a limited liability partnership, if—
(a) he has been found to be of unsound mind by a Court of competent jurisdiction and therefore the finding is in force;
(b) he's an discharged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending.
6. Minimum number of partners.
(1) Every limited liability partnership shall have a minimum of two partners.
(2) If at any time the amount of partners of a limited liability partnership is reduced below two and
The limited liability partnership carries on business for quite six months while the amount is so reduced, the person, who is that the only partner of the limited liability partnership during the time that it so carries on business after those six months and has the knowledge of the very fact that it's carrying on business with him alone, shall be liable personally for the obligations of the limited liability partnership incurred during that period.
S. No. | Basis | Partnership | Private Limited Company | Limited Liability Partnership |
1 | Prevailing Law | Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made thereunder | Companies are prevailed by ‘Companies Act, 2013’ | Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made thereunder |
2 | Capital Required | No minimum amount | Normally Rs. 1 Lacs | No minimum amount |
3 | Time of Registration | 5-7 days | 7-10 days in complete process | 7-10 days in complete process |
4 | Name of Entity | Any name as per choice | Name to contain ‘Private Limited’ in case of Private Company as suffix. | Name to contain ‘Limited Liability Partnership’ or ‘LLP’ as suffix. |
5 | Registration | Registration is optional | Registration with Registrar of ROC required. | Registration with Registrar of LLP required. |
6 | Creation | Created by contract with 2 persons | Created by Law | Created by Law |
7 | Distinct entity | Not a separate legal entity | Is a separate legal entity under the Companies Act, 2013. | Is a separate legal entity under the Limited Liability Partnership Act, 2008. |
8 | Cost of Formation | The Cost of Formation is negligible | Minimum Statutory fee for incorporation of Company is Relatively High | The cost of Formation is statutory filling fees, comparatively lesser than the cost of formation of Company. |
9 | Perpetual Succession | It does not have perpetual succession as this depends upon the will of partners | It has perpetual succession and members may come and go. | It has perpetual succession and partners may come and go |
10 | Charter Document | Partnership Deed is a charter of the firm which denotes its scope of operation and rights and duties of the partners | Memorandum and Article of Association is the charter of the company that defines its scope of operations. | LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. |
11 | Common Seal | There is no concept of common seal in partnership | It denotes the signature of the company and every company shall have its own common seal | It denotes the signature and LLP may have its own common seal, dependant upon the terms of the Agreement |
12 | Formalities of Incorporation | In case of registration, Partnership Deed along with form / affidavit required to be filled with Registrar of firms along with requisite filing fee | Various eforms along the Memorandum & Articles of Association are filled with Registrar of Companies with prescribed fees | Various eforms are filled with Registrar of LLP with prescribed fees |
13 | Foreign Participation | Foreign Nationals can not form Partnership Firm in India | Foreign Nationals can be a member in a Company. | Foreign Nationals can be a Partner in a LLP. |
14 | Number of Members | Minimum 2 and Maximum 20 | 2 to 200 members in case of Private Company | Minimum 2 partners and there is no limitation of maximum number of partners. |
15 | Ownership of Assets | Partners have joint ownership of all the assets belonging to partnership firm | The company independent of the members has ownership of assets | The LLP independent of the partners has ownership of assets |
16 | Legal Proceedings | Only registered partnership can sue third party | A company is a legal entity which can sue and be sued | A LLP is a legal entity can sue and be sued |
17 | Liability of Partners/Members | Unlimited. Partners are severally and jointly liable for actions of other partners and the firm and liability extend to their personal assets. | Generally limited to the amount required to be paid up on each share. | Limited, to the extent their contribution towards LLP, except in case of intentional fraud or wrongful act of omission or commission by the partner. |
18 | Tax Liability | Income of Partnership is taxed at a Flat rate of 30% plus education cess as applicable. | Income of Company is Taxed at a Flat rate of 30% Plus surcharge as applicable. | Income of LLP is taxed at a Flat rate of 30% plus education cess as applicable. |
19 | Principal/Agent Relationship | Partners are agents of the firm and other partners. | The directors act as agents of the company and not of the members | Partners act as agents of LLP and not of the other partners. |
20 | Transfer / Inheritance of Rights | Not transferable. In case of death the legal heir receives the financial value of share. | Ownership is easily transferable. | Regulations relating to transfer are governed by the LLP Agreement . |
21 | Transfer of Share / Partnership rights in case of death | In case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners | In case of death of member, shares are transmitted to the legal heirs. | In case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners |
22 | Director Identification Number / Designated Partner Identification Number (DIN / DPIN) | The partners are not required to obtain any identification number | Each director is required to have a Director Identification Number before being appointed as Director of any company. | Each Designated Partners is required to have a DPIN before being appointed as Designated Partner of LLP. |
23 | Digital Signature | There is no requirement of obtaining Digital Signature | As eforms are filled electronically, atleast one Director should have Digital Signatures | As eforms are filled electronically, atleast one Designated Partner should have Digital Signatures. |
24 | Dissolution | By agreement, mutual consent, insolvency, certain contingencies, and by court order. | Voluntary or by order of National Company Law Tribunal. | Voluntary or by order of National Company Law Tribunal. |
25 | Admission as partner / member | A person can be admitted as a partner as per the partnership Agreement | A person can become member by buying shares of a company. | A person can be admitted as a partner as per the LLP Agreement |
26 | Admission as partner / member | A person can be admitted as a partner as per the partnership Agreement | A person can become member by buying shares of a company. | A person can be admitted as a partner as per the LLP Agreement |
27 | Cessation as partner / member | A person can cease to be a partner as per the agreement | A member / shareholder can cease to be a member by selling his shares. | A person can cease to be a partner as per the LLP Agreement or in absence of the same by giving 30 days prior notice to the LLP. |
28 | Requirement of Managerial Personnel for day to day administration | No requirement of any managerial; personnel , partners themselves administer the business | Directors are appointed to manage the business and other statutory compliances on behalf of the members. | Designated Partners are responsible for managing the day to day business and other statutory compliances. |
29 | Statutory Meetings | There is no provision in regard to holding of any meeting | Board Meetings and General Meetings are required to conducted at appropriate time. | There is no provision in regard to holding of any meeting. |
30 | Maintenance of Minutes | There is no concept of any minutes | The proceedings of meeting of the board of directors / shareholders are required to be recorded in minutes. | A LLP by agreement may decide to record the proceedings of meetings of the Partners/Designated Partners |
31 | Voting Rights | It depends upon the partnership Agreement | Voting rights are decided as per the number of shares held by the members. | Voting rights shall be as decided as per the terms of LLP Agreement. |
32 | Remuneration of Managerial Personnel for day to day administration | The firm can pay remuneration to its partners | Company can pay remuneration to its Directors subject to law. | Remuneration to partner will depend upon LLP Agreement. |
33 | Contracts with Partners/Director | Partners are free to enter into any contract. | Restrictions on Board regarding some specified contracts, in which directors are interested. | Partners are free to enter into any contract. |
34 | Maintenance of Statutory Records | Required to maintain books of accounts as Tax laws | Required to maintain books of accounts, statutory registers, minutes etc. | Required to maintain books of accounts. |
35 | Annual Filing | No return is required to be filed with Registrar of Firms | Annual Financial Statement and Annual Return is required to be filed with the Registrar of Companies every year. | Annual Statement of accounts and Solvency & Annual Return is required to be filed with Registrar of Companies every year. |
36 | Share Certificate | The ownership of the partners in the firm is evidenced by Partnership Deed, if any. | Share Certificates are proof of ownership of shares held by the members in the Company | The ownership of the partners in the firm is evidenced by LLP Agreement. |
37 | Audit of accounts | Partnership firms are only required to have tax audit of their accounts as per the provisions of the Income Tax Act | Companies are required to get their accounts audited annually as per the provisions of the Companies Act, 2013 | All LLP except for those having turnover less than Rs.40 Lacs or Rs.25 Lacs contribution in any financial year are required to get their accounts audited annually as per the provisions of LLP Act 2008. |
38 | Applicability of Accounting Standards. | No Accounting Standards are applicable | Companies have to mandatorily comply with accounting standards | The necessary rules in regard to the application of accounting standards are not yet issued. |
39 | Compromise / arrangements / merger / amalgamation | Partnership cannot merge with other firm or enter into compromise or arrangement with creditors or partners | Companies can enter into Compromise / arrangements / merger / amalgamation | LLP’s can enter into Compromise / arrangements / merger / amalgamation |
40 | Oppression and mismanagement | No remedy exist , in case of oppression of any partner or mismanagement of Partnership | Provisions providing for remedy against Oppression and mismanagement exists | No provision relating to redressal in case of oppression and mismanagement |
41 | Credit Worthiness of organization | Creditworthiness of firm depends upon goodwill and creditworthiness of its partners | Due to Stringent Compliances & disclosures under various laws, Companies enjoys high degree of creditworthiness. | Will enjoy Comparatively higher creditworthiness from Partnership due to Stringent regulatory framework but lesser than a company. |
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Meaning of LLP Agreement and Importance
LLP Agreement is a written contract between the partners of the LLP or between the LLP and its designated partners. It establishes the rights and a duty of the designated partners toward each other as well toward the LLP. It is compulsory to execute and file the LLP agreement with MCA within 30 days of the incorporation of LLP.
It creates the foundation for the smooth running of Limited Liability Partnership. It defined the outlook and set well define concepts for decision making, adding a new partner and leaving of existing partners or change in roles.
Therefore, well structured detailed LLP Agreement set the groundwork and act as a backbone to strengthen the firm. It is the guide that gives directions to the LLP registration.
Content of LLP Agreement
A well structured and briefly summarized agreement is very much required for the successful functioning of an LLP.
Every standard agreement contains the below-mentioned provisions:
- Name of the LLP
The name must end with LLP or Limited Liability Partnership as per the provisions of the LLP Act, 2008.
2. Date of the agreement and parties to the agreement
After incorporation, the agreement is to be executed within 30 days as per the LLP Act, 2008. LLP agreement is between all the partners and designated partner. The agreement must contain the date and of entering into an agreement.
3. Introductory provisions
It includes all the definitions of terms used in the LLP agreement.
4. Place of business
The agreement must contain the place of business which is the registered office of the LLP.
5. Business activity
It is important to include the business activities to be carried on by the LLP. It must be in the same nature as approved by the MCA at the time of incorporation of LLP.
6. Duration
If the LLP is formed for the specific period, then such period must be mention after which the LLP must be dissolved. LLP can also be formed for certain object, after completion of such object; the LLP must be closed. In the absence of specific period or object, one can include the duration of LLP as up to the period until which, it is terminated with the consent of the partners of the LLP.
7. Accounting and auditing etc.
This includes how to maintain the books of accounts, whether it is cash basis or accrual basis. During which period a partner can access books of accounts, whether an audit is mandatory or will follow the rules mentioned in the LLP Act.
8. Partners’ contribution and method of contribution
Represents the contribution ratio of partners in terms of capital invested, interest on contribution, Profit Sharing Ratio as well as the time period after which the capital can be withdrawn by any of the designated partners. It is important for maintaining a good relationship between partners.
9. Record keeping and bank arrangement
It includes the maintenance, storage, and recording of books and other related documents.
10. Allocation and distribution
It clarifies the system of profit sharing among all partners and distribution including interim distribution or final distribution. It portrays the distribution of Profit between the partners as per the decided ratio.
11. Disassociation of partner
Specifies the terms and conditions when partners can withdraw or disassociate from the LLP. This is one of the vital clauses of the LLP Agreement. It states the rights of partners and rights on assets after disassociation.
12. Partners’ rights to records
Each partner has the right to check the records for avoiding misappropriation.
13. Management and fiduciary duty
It takes into account the liability of the management of a LLP and the appointment of the person liable for taking care of confidential information of the LLP.
14. Arbitration and general provisions
In the case of conflict between parties, the parties may involve the third person known as an arbitrator who listens to both the parties and takes a decision, which is to accepted by both the parties concerned and the final order must be applied on both parties.
15. Other Provisions
Several other provisions also come under the LLP Agreement such as admission of new partners and its rights thereafter and changes in the designation. It includes the right to take part in business, title and interest in assets, right to access, right to continue the independent business, right to recover the due debt and selling, transferring of partnership right to existing partner and another partner. It covers the mode, time period of the meeting of partners, the decision-making process, agenda and the voting rights of the partners.
It also includes the rights of designated partners as well as how those rights can be availed from the LLP. It considers methods of readmission of partners as well as cross purchase. This clause illustrates the right of redemption of a partner’s rights.
DESIGNATED PARTNERS
(1) Every limited liability partnership shall have a minimum of two designated partners who are individuals and a minimum of one among them shall be a resident in India: as long as just in case of a limited liability partnership during which all the partners are bodies corporate or during which one or more partners are individuals and bodies corporate, a minimum of two individuals who are partners of such limited liability partnership or nominees of such bodies corporate shall act as designated partners.
Explanation.—For the needs of this section, the term "resident in India" means an individual who has stayed in India for a period of not but 100 and eighty-two days during the immediately preceding one year.
(2) Subject to the provisions of sub-section (1),
(i) if the incorporation document
(a) specifies who are to be designated partners, such persons shall be designated partners on incorporation; or
(b) states that every of the partners from time to time of limited liability partnership is to be designated partner, every such partner shall be a designated partner;
(ii) any partner may become a designated partner by and in accordance with the indebtedness partnership agreement and a partner may cease to be a chosen partner in accordance with limited liability partnership agreement.
(3) a private shall not become a designated partner in any limited liability partnership unless he has given his prior consent to act intrinsically to the limited liability partnership in such form and manner as could also be prescribed.
(4) Every limited liability partnership shall file with the registrar the particulars of each individual who has given his consent to act as designated partner in such form and manner as could also be prescribed within thirty days of his appointment.
(5) a private eligible to be a delegated partner shall satisfy such conditions and requirements as could also be prescribed.
(6) Every designated partner of a limited liability partnership shall obtain a designated Partner
Identification Number (DPIN) from the Central Government and therefore the provisions of sections 266A to 266G8 (both inclusive) of the businesses Act, 1956 (1 of 1956) shall apply mutatis mutandis for the said purpose.
LIABILITIES OF DESIGNATED PARTNERS.
Unless expressly provided otherwise during this Act, a delegated partner shall be—
(a) Liable for the doing of all acts, matters and things as are required to be done by the limited liability partnership in respect of compliance of the provisions of this Act including filing of any document, return, statement and therefore the like report pursuant to the provisions of this Act and as could also be laid out in the limited liability partnership agreement; and
(b) Susceptible to all penalties imposed on the limited liability partnership for any contravention of these provisions.
CHANGES IN DESIGNATED PARTNERS
A limited liability partnership may appoint a designated partner within thirty days of a vacancy arising for any reason and provisions of sub-section (4) and sub-section (5) of section 7 shall apply in respect of such new designated partner:
Provided that if no designated partner is appointed, or if at any time there's just one designated partner, each partner shall be deemed to be a delegated partner.
Punishment for contravention of sections 7, 8 and 9.—(1) If the limited liability partnership contravenes the provisions of sub-section (1) of section 7, the limited liability partnership and its every partner shall be punishable with fine which shall not be but ten thousand rupees but which can reach five lakh rupees.
(2) If the limited liability partnership contravenes the provisions of sub-section (4) and sub-section (5) of section 7, section 8 or section 9, the limited liability partnership and its every partner shall be punishable with fine which shall not be but ten thousand rupees but which can reach one lakh rupees.
A certificate of incorporation is a legal document/license relating to the formation of a company or corporation. It is a license to form a corporation issued by state government or, in some jurisdictions, by non-governmental entity/corporation. Its precise meaning depends upon the legal system in which it is used.
The Incorporation Document of a LLP contains key information about the business to be registered and should:
(i) Be in a form as may be specified i.e Form FiLLiP
(ii) State the proposed name of the LLP under which the business is to be registered
(iii) state the proposed business of the LLP under incorporation;
(iv) state the details of proposed registered office of the LLP
(v) state the name and address of every individual proposing to be partners of the LLP on incorporation;
(vi) state the name and address of every individual who are to be the designated partners of the LLP on incorporation
(vii) contain any other information concerning the proposed LLP as may be prescribed.
Limited Liability Partnership is a perfect blend of “Company and Partnership” with less compliances compared to company as there is no requirement to hold minimum Board meetings etc., filing of MSME Returns, Deposits returns, mandatory appointment of Auditor etc.
Basic requirement: –
Minimum of two partners are required to incorporate a LLP and all LLPs are governed by Limited Liability Partnership Act, 2008.LLP Agreement is the basic and most important document which defines the role and responsibilities of Partners, their profit sharing ratio etc.
Procedure of incorporation of Limited Liability Partnership is as follows:-
1)Obtaining Digital Signature
Class – 2 DSC will be required to be obtained for the designated partners of the proposed LLP
2)Proposed LLP Name
Unique name is required which is not identical or resemble with any existing LLP
3) MCA RUN Service (Reserve Unique Name)
Name will be applied using MCA RUN LLP service i.e. two names can be applied first using RUN LLP service. One resubmission is also allowed in RUN in which another two names can be applied further.
4) Proposed Main Object, contribution of the LLP
Proposed business activity of the LLP in brief is required envisaging the activities to be carried out along with contribution etc.
5) Proposed Registered office of the LLP
Address of the registered office of the LLP is required
6) Ownership Proof
If the registered office is owned by LLP, then ownership Proof is required.
If the Property is owned by any other entity/person, then ownership proof and NOC from that person is required to use premises as registered office of LLP
7) Utility Bill
Utility Bill like Electricity Bill or Mobile Bill or Telephone Bill (not older than two months) is required
8) Proposed Member/Partners info
It means whether the proposed Partners are already having DPIN or not. In case proposed partners don’t have DPIN, then DSC needs to be availed first
9) Filing of form FILLIP & information required from the subscribers/partners
Subscribers Sheet and Consent needs to be taken. Identity and Residential Address Proof of proposed subscribers/partners will be required
10) Filing of LLP Agreement
LLP agreement needs to be filed within 30 days & is to be printed on stamp paper and stamp duty will be determined as per the state & contribution of partners.
Eligibility to be partners.—On the incorporation of a limited liability partnership, the persons who subscribed their names to the incorporation document shall be its partners and the other person may become a partner of the limited liability partnership by and in accordance with the limited liability partnership agreement.
Relationship of partners.—
(1) Save as otherwise provided by this Act, the mutual rights andduties of the partners of a limited liability partnership, and therefore the mutual rights and duties of a indebtedness partnership and its partners, shall be governed by the limited liability partnership agreement between the partners, or between the limited liability partnership and its partners.
(2) The limited liability partnership agreement and any changes, if any, made therein shall be filed with the Registrar in such form, manner and amid such fees as could also be prescribed.
(3) An agreement in writing made before the incorporation of a indebtedness partnership between the persons who subscribe their names to the incorporation document may impose obligations on the limited liability partnership, provided such agreement is ratified by all the partners after the incorporation of the limited liability partnership.
(4) within the absence of agreement on any matter, the mutual rights and duties of the partners and therefore before the mutual rights and duties of the limited liability partnership and the partners shall be determined by the provisions concerning that matter as are set-out within the First Schedule.
Cessation of partnership interest.—
(1) an individual may cease to be a partner of a limited liability partnership in accordance with an agreement with the opposite partners or, within the absence of agreement with the opposite partners on cessation of being a partner, by giving a notice in writing of not but thirty days to the opposite partners of his intention to resign as partner.
(2) an individual shall cease to be a partner of a limited liability partnership—
(a) on his death or dissolution of the limited liability partnership; or
(b) if he's declared to be of unsound mind by a competent court; or
(c) if he has applied to be adjudged as an insolvent or declared as an insolvent.
(3) Where an individual has ceased to be a partner of a limited liability partnership (hereinafter mentioned as "former partner"), the previous partner is to be regarded (in reference to a person handling the limited liability partnership) as still being a partner of the limited liability partnership unless—
(a) The person has notice that the previous partner has ceased to be a partner of the limited liability partnership; or
(b) Notice that the previous partner has ceased to be a partner of the limited liability partnership has been delivered to the Registrar.
(4) The cessation of a partner from the limited liability partnership doesn't by itself discharge the partner from any obligation to the limited liability partnership or to the opposite partners or to the other person which he incurred while being a partner.
(5) Where a partner of a limited liability partnership ceases to be a partner, unless otherwise provided within the limited liability partnership agreement, the previous partner or an individual entitled to his share in consequence of the death or insolvency of the previous partner, shall be entitled to receive from the indebtedness partnership—
(a) an amount adequate to the capital contribution of the previous partner actually made to the limited liability partnership; and
(b) his right to share within the accumulated profits of the limited liability partnership, after the deduction of accumulated losses of the limited liability partnership, determined as at the date the previous partner ceased to be a partner.
(6) A former partner or an individual entitled to his share in consequence of the death or insolvency of the previous partner shall not have any right to interfere within the management of the limited liability partnership.
Registration of changes in partners.—
(1) Every partner shall inform the limited liability partnership of any change in his name or address within a period of fifteen days of such change.
(2) A limited liability partnership shall—
(a) where an individual becomes or ceases to be a partner, file a notice with the Registrar within thirty days from the date he becomes or ceases to be a partner; and
(b) Where there's any change within the name or address of a partner, file a notice with the Registrar within thirty days of such change.
(3) A notice filed with the Registrar under sub-section (2)—
(a) shall be in such form and amid such fees as could also be prescribed;
(b) shall be signed by the designated partner of the limited liability partnership and authenticated during a manner as could also be prescribed; and
(c) if it relates to an incoming partner, shall contain a press release by such partner that he consents to becoming a partner, signed by him and authenticated within the manner as could also be prescribed.
(4) If the limited liability partnership contravenes the provisions of sub-section (2), the indebtedness partnership and each designated partner of the indebtedness partnership shall be punishable with fine which shall not be but two thousand rupees but which can reach twenty-five thousand rupees.
(5) If any partner contravenes the provisions of sub-section (1), such partner shall be punishable with fine which shall not be but two thousand rupees but which can reach twenty-five thousand rupees.
(6) a person who ceases to be a partner of a limited liability partnership may himself file with the Registrar the notice mentioned in sub-section (3) if he has reasonable cause to believe that the indebtedness partnership might not file the notice with the Registrar and just in case of any such notice filed by a partner, the Registrar shall obtain a confirmation to the present effect from the limited liability partnership unless the limited liability partnership has also filed such notice:
Provided that where no confirmation is given by the limited liability partnership within fifteen days, the registrar shall register the notice made by an individual ceasing to be a partner under this section.
References
- Business Law by N.D. Kapoor
- Business Law by M.C. Kucchal and Vivek Kucchal
- Elements of Merchantile Law by N. D. Kapoor
