CORPORATE LAW

CIA 3 – COMPONENT 2

POSITION OF DESIGNATED PARTNERS AND THEIR

RESPONSIBILITIES

SUBMITTED TO – DR. LEENA JAMES

KUSHAGRA THAKUR 1720218

AYESHA KHAN 1720244

YUKTA BHATIA 1720260

VAIBHAV GOYAL 1720472

KIRAN POPTANI 1720476

LIMITED LIABILITY PARTNERSHIP

Limited Liability Partnerships are a form of alternate corporate structuring that combines the
flexibility of a partnership firm and the advantages of limited liability of a company at lower
compliance costs. As a hybrid corporate business vehicle, LLPs provide the limited liability of a
company while at the same time allowing its members the flexibility of organising their internal
management on the basis of a mutually arrived agreement, such as in the case of a partnership
firm.

The Limited Liability Partnership Act came into India after the formation of two committees
called the J.J. Irani and Naresh Chandra – II which recommended the formation of the LLP Act
to the Ministry of Corporate Affairs. The LLP Act was enacted in January 2009 and the primary
reason for the coming up of the Limited Liability Partnership is the fact that in normal
partnerships (the Partnership Act is not applicable to the LLP Act) the personal liability of all
partners is unlimited, which makes this a deterrent for entrepreneurs. However, LLPs allow for
the partners to have limited liability to the extent of their shares in the firm. It is a mix of a
company and a general partnership, to the extent that the partners have a liability they
would have in a company but not the same level of rigidness or compliance. It manages to do
this by making the LLP the body corporate formed and incorporated under the Act as a legal
entity separate from that of the partner. It is also unlike a Limited Liability Corporation where
there is at least one partner known as the ‘general partner’ who takes care of both the
management of the firm and has unlimited personal liability. In the LLP, there is absolutely no
personal liability beyond the shares vested in any of the partners, therefore, it is different from all
the aforementioned business vehicles.

DESIGNATED PARTNER

What is different about designated partners is that unlike other partners whose liability is limited
solely to the LLP agreement and their acts/ omissions as per sections 27 to 29 of the LLP Act,
designated partners gain increased liability for all the penalties imposed on an LLP for
contravention of the provisions needed to be complied with. A designated partner becomes
responsible for compliances under the LLP Act, including the filing of documents, returns,
statements, etc. and in a case of contravention/ non-compliance, a designated partner may
become liable to punishments/ penalties under the LLP Act personally and severally.

The management of the LLP is done by both managing partners and designated partners, they
need not be the same, as the managing partner is present to ensure legal compliance. The
Designated Partner just has to ensure that the documents that need to be filled for the LLP Act
have been filled. This has been given under Section 8 of the Act, also under Section 10 of the
Act penalties for not complying with these laws have been given, and the designated partner will
have to bear the consequences. Only for the view of legal compliance may the designated
partners be considered the managing partners. These designated partners need not indulge in the
day to day activities of the firm. They are almost like the Board of Directors of a company.

There are certain requisites before someone becomes a designated partner, and these are
provided under Section 7 of the LLP Act. Section 7 of the LLP Act which states that there must
be two or more designated partners out of which at least one should be residing in India. For the
purpose of the section residing in India will constitute one hundred and eighty-two days in the
immediately preceding one year. The designated partner will be decided by the partnership deed
itself. If in case any of the body corporates are partners to the LLP then any person nominated by
them would constitute as a designated partner. The act will decide for how long a person shall be
a designated partner (termination and designation are therefore both done by the deed itself). If
the deed mandates that all the partners be designated partners at some point or another then that
will have to be the position for that firm. The designated partner has to give prior consent
through a form before getting the post.

Rule 9(1) of the Limited Liability Partnership Rules, gives conditions supplementing Section 7
of the LLP Act. The person shall not be allowed to be a designated partner if he/she has been
adjudged insolvent in the preceding 5 years; suspended payment to his creditors in the preceding
5 years made (or made a composition with them); convicted by a Court for any offence involving
moral turpitude and sentenced in respect thereof to imprisonment for not less than six months or
convicted by a Court for an offence involving section 30 of the Act (liability in case of a fraud).
The Central government has the power to remove any disqualification incurred by a person
generally through the Act or specifically by someone in relation to a specific LLP.

BASIC QUESTIONS REGARDING DESIGNATED PARTNERS

1. What are the requirements in respect of ‘designated partners’?

Appointment of at least two “Designated Partners” shall be mandatory for all LLPs. “Designated
Partners” shall also be accountable for regulatory and legal compliances, besides their liability as
‘partners, per-se”.

2. Who can be a designated partner?

Every LLP shall be required to have atleast two Designated Partners who shall be individuals
and at least one of the Designated Partner shall be a resident of India. In case of a LLP in which
all the partners are bodies corporate or in which one or more partners are individuals and bodies
corporate, at least two individuals who are partners of such LLP or nominees of such bodies
corporate shall act as designated partners.

3. Should the number of designated partners resident in india not be more than partners
from outside india?

LLPs, particularly those as may be engaged in the services or technology-based sectors, may
provide services globally. This may require any number of its partners to locate them abroad. In
view of liability structure of partners, designated partners and LLP, clearly provided for in the
Act, there does not appear to be any necessity and justification for restriction relating to
designated partners to out-number partners located abroad. In fact it may pose unnecessary
restriction.

4. Would there be any requirement of identification number for designated partners?

Would designated partners be subject to any conditions before appointment as such?

Every Designated Partner would be required to obtain a “Designated Partner’s Identification

Number” (DPIN) on the lines similar to “Director’s Identification Number” (DIN) required in
case of directors of companies. Enabling provisions have been made to prescribe under rules
conditions, which would have to be fulfilled by an individual who is eligible to be appointed as a
‘designated-partner’.

A Designated Partner is provided with an Identification Number – ‘DPIN’ from the Central
Government. The provisions of Sections 266A to 266G (both inclusive) of the Companies Act
apply mutatis mutandis for the said purposes.

Section 266A – Application for allotment of Director Identification Number; (applies to

Designated Partner Identification Number)

Section 266B – Allotment of Director Identification Number;

Section 266C – prohibition to obtain more than one Director Identification Number;

Section 266D – Obligation of Director to intimate Director Identification Number to concerned

company or companies;

Section 266E – Obligation of company to inform Director Identification Number to Registrar;

Section 266F – Obligation to indicate Director Identification number in such return, information
or particulars;

Section 266G – Penalty for contravention of provisions of Section 266A or Section 266C or
Section 266D or Section 266E.

DUTIES OF DESIGNATED PARTNERS

Devote their whole time and attention to the said partnership business diligently and faithfully by
employing themselves in it, and carry on the business for the greatest advantage of the
partnership.

The Designated Partners shall be responsible for the doing of all acts, matters and things as are
required to be done by the LLP in respect of compliance with the provisions of this Act including
the filing of any document, return, statement and the like report pursuant to the provisions of
Limited Liability Partnership Act, 2008.44. Protect the property and assets of the LLP.

Upon every reasonable request, inform the other partners of all letters, writings and other things
which shall come to their hands or knowledge concerning the business of the LLP.

Punctually paY their separate debts to the LLP.

The Designated Partners shall be responsible for the doing of all such other acts arising out of
this agreement.

Major duties of a designated partner include –

 Notify any changes in the LLP’s to Registrar of Companies.

 Notify any changes in the Partners names & residential addresses to Registrar of
Companies.
 Notify any change in Registered Office Address to Registrar of Companies.
 Filing of any Annual return, Statement of Accounts and other documents specified under
the provisions of LLP Act with the Registrar of Companies.
 Statement of Accounts & Solvency to be signed by the Designated Partners of the
Company.
 to preserve and to produce before an inspector or any person authorised by him in this
behalf with the previous approval of the Central Government, all books and papers of, or
relating to, the limited liability partnership or, as the case may be, the other entity, which
are in their custody or power
 Responsible for signing all the e-forms filed with the Registrar of Companies.