corporate law

Essential Steps for Adding a New Partner in an LLP

Introduction

Increasing contributions and introducing a new partner in a Limited Liability Partnership (LLP) necessitate a systematic approach to ensure compliance with all legal and procedural requirements. This checklist outlines the essential steps needed to review the LLP agreement and file the necessary forms with the Registrar. By adhering to these procedures, whether outlined in the LLP agreement or following standard protocols, you can facilitate a smooth transition while preserving the integrity of the LLP's operations.

Steps and Procedures

1. Check the LLP Agreement

  • Review the LLP agreement to determine if it specifies a procedure for increasing contributions.
  • If a procedure exists, follow it. If not, proceed with the steps outlined below.

2. Hold a Meeting of Partners

  • Convene a meeting of partners and provide notice to all partners as required.

3. Application for Designated Partner Identification Number (DPIN)

  • The new partner must apply for a DPIN by submitting an application to the Ministry of Corporate Affairs (MCA).

4. Consent to Act as Designated Partner in Form-9

  • The proposed partner must consent to act as a designated partner and submit their DPIN to the LLP.

5. Pass Partners Resolution/Consent of All Partners

  • During the partners’ meeting, pass a resolution to approve the introduction of the new partner and the increase in contributions being made.

6. Execute a Supplementary Agreement and Pay Requisite Stamp Duty

  • Draft and execute a supplementary agreement to modify relevant clauses in the original LLP agreement concerning the increase in capital.
  • Pay the applicable stamp duty, which is 1% per annum on the difference between the actual contribution and the proposed contribution.

7. Filing Web-Based LLP Form-3 & Form-4 with the Registrar

  • File the supplementary agreement using Form-3 within 30 days of the change, along with:

    • The initial LLP agreement
    • The supplementary LLP agreement
    • Any optional attachments, if necessary

  • Additionally, file Form LLP-4 to notify the Registrar of the new partner's appointment and provide consent within 30 days from the date of their joining the LLP.

Timeline

The approval process is estimated to conclude within 30 to 35 working days from the date of application submission to the MCA, provided all required information and documents are supplied.

Conclusion

Introducing a new partner and increasing their contribution in an LLP involves various vital steps, such as conducting partner meetings, obtaining necessary approvals, and executing supplementary agreements. By following this comprehensive checklist, you ensure compliance with all legal and procedural requirements, thus protecting the LLP from potential compliance risks. Adhering to these guidelines enables LLPs to effectively integrate new partners and adjust contributions while maintaining operational efficiency and legal integrity.