Change in LLP Agreement

Introduction

A Limited Liability Partnership (LLP) is a hybrid form of business entity that incorporates the advantages of both a partnership and a company. It is governed in India by the Limited Liability Partnership Act, 2008.

The LLP Agreement is a crucial document that defines the mutual rights, duties, responsibilities, and obligations of partners. Over time, there may arise a need to change or amend this agreement to reflect new decisions, business growth, restructuring, or changes in partnerships.

Reasons for Change in LLP Agreement

Some common reasons for amending the LLP agreement include:

• Change in business activities

• Change in the contribution of partners

• Change in profit-sharing ratio

• Admission or resignation of a partner

• Change in registered office address

• Change in the rights and duties of partners

• Change in management structure or decision-making process

• Change in duration or objectives of the LLP

• Compliance with legal or regulatory updates

Legal Provisions under the LLP Act, 2008

As per Section 23 of the LLP Act, 2008, any change in the LLP Agreement must be:

• Approved by all the partners (or as per terms of the existing agreement).

• Filed with the Registrar of Companies (ROC) in Form 3 within 30 days of such change.

Procedure for Change in LLP Agreement

• Step 1: Convene Meeting of Partners

1. Conduct a meeting of partners to discuss and approve the proposed changes.

2. Pass a resolution for the amendment of the LLP Agreement.

• Step 2: Draft Supplementary Agreement

1. Prepare a Supplementary LLP Agreement (if not replacing the original).

2. Include the amended clauses clearly.

• Step 3: File Form 3 with MCA

1. Log in to the MCA portal.

2. Fill and submit Form 3 (Information about LLP Agreement and changes, if any).

3. Attach the following documents:

• Supplementary/amended LLP Agreement

• Resolution passed by partners

• Any other supporting document

• Step 4: Pay the Government Fees

1. The fee is based on the contribution of the LLP (as per the LLP Rules, 2009).

• Step 5: Approval by RoC

1. Upon verification, the Registrar approves the form.

2. The change becomes legally effective upon approval.

Documents Required

• Original LLP Agreement

• Supplementary/Amended LLP Agreement

• Consent of partners (Resolution)

• Updated details (e.g., revised contribution, name of new partner, etc.)

• Identity and address proof (in case of new partner)

Points to Remember

• Any changes have to be in accordance with the LLP Act and the initial LLP Agreement.

• Penalties may be imposed forthe  delay in the filing of Form 3.

• Any significant amendments (such as business name change or nature change) might be subject to further filing, such as Form 4 or approvals.

• The stamp duty can be charged in case of a change in contribution (according to the state legislations).

Penalties for Non-Compliance

If the LLP does not file modifications in the agreement with the Registrar:

• A fine of ₹100 a day for every day of default (no maximum limit under the Act).

• It can also result in complicating future filings or legal cases.

Conclusion

Changes in the LLP Agreement are a normal part of business evolution. However, all changes must be documented, agreed upon by partners, and legally filed with the authorities to ensure transparency and compliance. Adhering to the proper procedure protects the LLP and its partners from future disputes or legal consequences.

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