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Partners are persons (whether natural or artificial) who have subscribed their name to the incorporation document and further any new person can be admitted to the LLP as per the provisions of LLP Agreement. The LLP Act 2008 defines the term partner under Section 2(q) as “Partner”, in relation to a limited liability partnership, as any person who becomes a partner in the Limited Liability Partnership in accordance with the Limited Liability Partnership Agreement.
Who can be a Partner?
There should be atleast 2 persons (natural or artificial) required to form a LLP. In case any Body Corporate is a partner, than it will be required to nominate any person (natural) as its nominee for the purpose of the LLP.
Following can become a partner in the LLP:
a) Company incorporated in and outside India
b) LLP incorporated in & outside India
c) Individuals resident in & outside India
The Government of India has not yet notified the policy for Foreign Direct Investment by Individuals resident in & outside India in LLP form of business and therefore, till the date policy is announced, such persons cannot form a LLP in India.
Role of Partner
Section 26 defines the role of partner and states that, every partner of a Limited Liability Partnership is, for the purpose of the business of the Limited Liability Partnership, the agent of the Limited Liability Partnership, but not of other partners. It means that the relation of principal and agent is only between the LLP & its partners and not between the partners per se.
Rights of Partners
Partners regarding the rights are alike the Partners in the traditional Partnership Firm. Partners have the right to participate in the management of the LLP though they are not entitled to any remuneration for participating in the management of LLP unless otherwise provided in the LLP Agreement. The partners would be entitled to share equal profits in the LLP or as may be provided by LLP agreement.
The rights of a partner to a share of the profits and losses of the limited liability partnership and to receive distributions in accordance with the Limited Liability Partnership agreement are transferable either wholly or in part provided that the :
- The transfer of any right by any partner does not by itself cause the disassociation of the partner or a dissolution and winding up of the limited liability partnership.
- Entitle the transferee or assignee to participate in the management or conduct of the activities of the limited liability partnership, or access information concerning the transactions of the limited liability partnership.
Duties of Partners
Partners under ethical conduct are required to comply with all the provisions of LLP Act and LLP agreement and not to indulge in any fraudulent transaction with the creditors or outsiders. Further Partners for being transparent with the LLP are obligatory to provide some information to LLP like in case if there is any change in name and address of Partner he shall inform the same to LLP with 15 days of such change. In case of admission of partner the incoming partner shall give his prior consent to act as such partner. If any partner desires to resign from the partnership he shall inform the same by giving a 30 day notice to other partners.
Liability of Partners
- The Liability of Partners in LLP unlike partnership Firm is limited to the extent of their contribution.
- Any partner of the LLP would not be liable for the wrongful act or omission of any other partner of the limited liability partnership.
- Partners are not personally liable for any obligation of LLP arising out of a contract or otherwise solely by reason of being a partner of the limited liability partnership.
- .Partners shall be solely liable for all acts done without the authority of the LLP
- For protecting the public interest, section 30 provides for unlimited liability of the partners in case any fraudulent transaction has been carried with the intention to defraud with the creditors or any other person dealing with Limited Liability Partnership.
Admission & cessation of Partner
A new partner can join the LLP or an existing partner can cease to be partner of the LLP subject to the compliance of the terms and conditions of the LLP Agreement.