BUSINESS LAW

PRESENTATION
BY :-- VIKAS GOYAL 16/584
NAMAN GUPTA 16/643
RISHABH SHARMA 16/805
TARUN KAPOOR 16/622
SHREY KUMAR GUPTA 16/583
PARTNERS AND
THEIR
RELATIONS
IN LLP
 WHAT WE ARE GOING TO
COVER ?
 INTRODUCTION
 DEFINITION OF PARTNER
 ELIGIBILITY TO BE A PARTNER
 DESIGNATED PARTNERS
 PARTNERS AND THEIR RELATION
 CESSATION OF PARTNERS
 EXTENT & LIMITATION OF LIABILITY
OF LLP & PARTNERS
 WHAT IS WHISTLE BLOWING ?
 CONTRIBUTION
SECTIONS COVERED
AND REFERRED
22 25
05 26
06 27
06 (2) 28
07 29
08 30
09 31
23 32
24 33
I M P O R TA N T Q U E S T I O N S

1. Does cessation of a partner discharge the partner from

his obligations towards the LLP or other partners or
third party ?
2. Define the term ‘Designated Partners’. Explain the
various provisions in respect of designated partners.
3. Whistle Blower has not been provided any protection
under the LLP Act. Comment.
4. Discuss the provisions of LLP relating to
‘contribution’ as provided under the LLP Act,2008.
 PARTNER
According to Section 2(q), a partner in
relation to a limited liability partnership
means any person who becomes a partner in
it, in accordance with the limited liability
partnership agreement
 ELIGIBILITY TO BE
PARTNERS
SECTION 22
On the registration of an LLP, persons who
have subscribed their names to the
incorporation document are its partners.
They are the Initial partners of LLP. Any
other person may become a partner of the
LLP by and in accordance with the LLP
Agreement.
WHO CAN BE PARTNERS
OF LLP – SECTION 5
The following may be a partner in a limited
liability partnership

a) Any individual, or

b)A body corporate – It includes :

Indian company
Foreign company
Indian LLP
Foreign LLP
 WHO CAN NOT BE
PARTNERS OF LLP
a)Corporation sole

b)Co-operative society

c)Any other body corporate notified by

Central Government
 DISQUALIFICATIONS TO
BECOME A PARTNER – SECTION 5

An individual shall not be capable of becoming a

partner of limited liability partnership if

a)He has been found to be of unsound mind by a

competent court
b)He is an undischarged insolvent
c) He has applied to be adjudicated as insolvent and
his application is pending
 MINIMUM AND MAXIMUM
NO. OF PARTNERS –SECTION 6
There should be at least two partners but there
is no limit for maximum number of
partners…..The LLP is to have a minimum of
two partners who may be

a)2 individuals, or
b)One individual and a body corporate, or
c) Both the partners may be body corporate
 REDUCTION OF NO. OF
PARTNERS BELOW 2
– SECTION 6 (2)
If at any time, the no. of partners is reduced below 2, there
shall be personal liability of the sole partner, if all the
following conditions are present..

a) No. of partners is reduced below two

b) LLP carries business even after such reduction
c) Sole partner has knowledge of the above 2 facts
d) Business is carried on for more than 6 months with such
reduction
e) LLP incurs obligation in the period after the expiry of
six months
 DESIGNATED
PARTNERS
Definition
According to. Sec. (2)(j) of the Act, the
term “designated partner” means any
partner designated as such pursuant to
Sec.7 0f the Act.
Various provisions related to
designated partners
(1)Number of Designated partners (Secs. 7-10 and LLP Rules,
2009)
(i)Every LLP can have at least 2 designated partners who are
individuals and at least 1 of them must be a resident of india.
(2) Who will be a Designated partner?
 Subject to the provisions of sec.7(1):

(i) If the incorporate document:

(a) Specifies who are to be designated partners, such persons shall be
designated partners on incorporation; or
(b) States that each of the partners from tine to time of LLP is to be
designated partner, every partner shall be designated partner;
(ii) Any partner may become designated partners by and in accordance
with the, LLP agreement.
3.Prior Consent to Act as Designated
Partner[Sec.7(3)].Every designated partner
shall intimate his consent to become a
designated partner to the LLP in Form 9 and
manner as may be prescribed.

4.Filling of Particular with the Registrar.

Every LLP shall file with the registrar the
particulars of every individual who has given his
consent to act as designated partners in form 4
and in the prescribed manner within 30 days of
his appointment.
5.Elegibility Conditions for the Appointment of
designated partners.
Rule 9 of LLP rules,2009 lays down that a person shall
not be capable of being appointed as a designated partner
of a LLP if he;

(a)Has at any time within the preceding 5 years been

adjudged insolvent ; or
(b)Suspends, or has at any time within the preceding 5 years
suspended payment to his creditors and has not any time
within the preceding 5 years made a compositions with
them; or
(c)Has been convicted by a court for any offence involving
moral turpitude and sentenced in respect thereof
imprisonment for not less than 6 months ; or
(d)Has been convicted by a court for an offence involving
Sec. 30 of the Act.
6. Obtaining DPIN Sec. 7(6).
Every individual or nominee of a body corporate,
who is intending to be appointed as designated
partner shall obtain designated partner identification
number (DPIN) from the Central Government.
7. Role of Designated Partner.
In case of LLP, the management lies with ordinary
partners and designated partners who are authorized by
LLP agreement. Thus LLP is run and managed by its
members as opposed to company directors and company
secretary.
8. Liabilities of Designated Partners (Sec. 8).
Unless expressly provided otherwise in the Act, a designated
partner shall be :
(a) Responsible for doing of all acts, matters and things are
required to be done by LLP in respect of compliance of the
provisions of this Act including filling of any document, return,
statement, report, etc. as may be specified in the Act or in the
LLP agreement.
(b) Liable to all penalties imposed on the LLP for non-compliance
of provisions of the Act or LLP agreement.

9. Changes in Designated Partners (Sec. 9).

This section provides for 30 days period for filling up of a
vacancy of a designated partner. If at any time there is only one
designated partner, each partner shall be deemed to be a
designated partner.
10. Penalty for contravention of
Secs. 7,8 and 9.

(i) Penalty of contravention of Sec. 7(1). The LLP

and its every partner shall be punishable by fine, which
shall not be less than RS.10,000 but which may extend to
RS. 5,00,000.

(ii) Penalty for Sec. 7(5), Sec. 8 or Sec 9. The LLP

and its every partner shall be punishable with fine, which
shall not less than Rs 10,000 but which may extend to
RS. 1,00,000
partners and their relations

Sec.23(1) OF THE LLP ACT 2008

provides that the mutual rights and duties
of the partners shall be governed by the
LLP agreement

Sec23(2) states that an agreement must be

filed with the registrar in Form 4
FIRST SCHEDULE TO THE
ACT

Sec23(4) of the act provides that in the

absence of agreement , the mutual
rights and duties of the partners shall be
determined by the provisions as
provided under First Schedule of the
Act
 Rights and duties of partners in the
absence of LLP agreement
1)The mutual rights and duties of the partners and the
mutual rights and duties of the limited liability partnership
and its partners shall be governed by the LLP agreement or
in the absence of such agreement shall be determined by
the provisions under first schedule of the act.

2) All the partners of LLP are entitled to share equally in

the capital, profits and losses of the LLP
3)The limited liability partnership shall indemnify
each partner in respect of payments made and personal
liabilities incurred by him ---

(a)In the ordinary and proper conduct of the business of

the LLP
(b) In or about anything necessarily done for the
preservation of the business or property of the LLP

4)Every partner shall indemnify the LLP for any loss

caused to it by his fraud in the conduct of the business of
the limited liability partnership
5)Every partner may take part in the management of the
LLP.

6)No partner shall be entitled to remuneration for acting

in the business.

7)No person may be introduced as a partner without the

consent of all the existing partner.

8) Any changes shall be made in LLP by a resolution

passed by a majority in number of partner . Each partner
have one vote . However no changes made in the nature
of the business of LLP without the consent of all the
partners
9) Every LLP shall ensure that decisions taken by it are
recorded in the minutes within 30 days of taking such
decisions and are kept and maintained at the registered office
of the LLP .

10) Each partner shall rendered true accounts and full

information to any partner or his legal representative

11) If a partner, without the consent of the LLP, carries on any

business of the same nature as and competing with the LLP, he
must account for and pay over to the LLP all profits made by
him in that business.

12)Every partner shall account to the LLP for any benefit

derived by him without the consent of the LLP.
12)No majority of the partner can expel any
partner unless a power to do so has been
conferred by express agreement between the
partners.

14) All disputes between the partners arising out of

the LLP agreement which can not be resolved
shall be referred for arbitration as per the
provisions of the arbitration and Conciliation
ACT 1996.
 CESSATION OF
PARTNERSHIP INTEREST
SECTION 24
A person may cease to be a partner of an LLP in
accordance with an agreement with other partners.
In absence of any such agreement he may cease by
service of a notice in writing of not less than 30
days to the other partners of his intention to resign
as a partner.
 RETIREMENT/REMOVAL/
EXPULSION OF A PARTNER
A partner of an LLP may retire upon happening of any event/
circumstances as mentioned in the LLP Agreement, which
generally may be upon reaching a particular age

A partner of an LLP may be removed/ expelled as per the

LLP Agreement. If the agreement is silent on this issue then
Schedule 1 would be applicable to the LLP and Schedule 1
says that majority of partners cannot expel a partner. In
other words, consent of all partners would be required to
expel a partner.
HOW A PARTNER CEASES TO
BE A PARTNER OF AN LLP
A person shall cease to be a partner of an LLP

a) On his death. Or
b) On dissolution of LLP, or
c) If he is declared to be a person of unsound mind by a
competent court, or
d) If he has applied to be adjudged as an insolvent, or
e) If he is declared as an insolvent
 OBLIGATIONS OF A
FORMER PARTNER
Where any person has ceased to be a partner of a
LLP, he is under no obligation from the date of his
cessation. However, the former partner is still
regarded as a continuing partner in relation to any
person dealing with the LLP as still being a partner
unless :
a) The third person has a notice that former partner
has ceased to be so, or
b)A notice of ceasing to be a partner has been
delivered to the ROC
 In the absence of (a) and (b) above the cessation does not
itself discharge him from any obligation to the LLP or to
the other partners or to any other third person while he
was a partner. He can be discharged in such a situation
only when

a) Either LLP or other partners agree to absolve him by ( LLP

Agreement or agreement with partners), or
b) Third party agrees to release him, or
c) LLP or other partners undertake to discharge the
obligation itself or themselves if third party refuses to
release him ( reimbursement to former partner by LLP or
partners)
RIGHTS OF THE FORMER
PARTNER AFTER
CESSATION
a) An amount equal to the capital contribution of the
former partner actually made to the LLP ; and
b) His right to share in the accumulated profits of the LLP,
after deduction of accumulated losses of the LLP
determined as at the date the former partner ceased to
be so.

But former partner or a person entitled to his share does

not have any right to interfere in the management of the
LLP
REGISTRATION OF CHANGES IN
PARTNERS
 Every partner shall inform the LLP of any
change in his name or address within a
period of 15 days of such change.
 LLP’S duty to inform registrar by filing a
notice :
When a person becomes OR ceases to be a partner

●
Within 30 days from the date he ceases to be a partner

When there is a change in name or address of a partner

●
Within 30 days of such change
PENALTY FOR DEFAULT:

LLP and it’s every designated shall be

punishable with fine which shall not be
less than Rs 2000 but which may be
extended Rs 25000, under section 25[2].
EXTENT AND LIMITATION OF
LIABILITY OF LLP [SEC 26 AND 27]

LLP being a seprate legal entity be liable to

full extent of its assets.
A LLP is not bound by anything done by a
partner if such a partner has no authority to act
for LLP.[27{1}]
Every partner is the agent of LLP, but not of
other partners. [26]
LLP is liable if the partner of LLP is liable to
any person for any wrongful act in the course
of buisiness or with its authority. [26{2}]
EXTENT OF LIABILITY OF PARTNER
: SEC 28-30
1.)PERSONAL
LIABILITY OF A
PARTNER SEC
[28]

FOR THE WRONGFUL

ACT OF ANY OTHER
PARTNER
Not personally liable

FOR ANY OTHER

FOR HIS OWN
ACT
WRONGFUL ACT
Not personally
Personally liable liable
 2.) AGENCY
RELATIONSHIP
Every partner for the
It exists between purpose of The
the LLP and its business ,the agent of
the LLP but not of other
partners. partners.
 5.) NO
4.) LIABILITY
LIABILITY
6.) NO
TO PAY
COMPENSATI
AFTER DEATH LIABILIT
OF PARTNER
ON [SEC 30(3)] [SEC 29] Y OF LLP
When a LLP or its
●
After a partner’s
●

partners has LLP shall not be

●

conducted
death the LLP liable if any
proceedings in shall not make
partner has acted
fraudulent manner his legal
then they are liable to in fraudulent
representative or
compensate the his estate liable
manner without
person who has
for any of acts the knowledge
suffered any loss or
damage. done by the LLP. of LLP.
7.) LIABILITY IN CASE OF HOLDING
OUT [SEC 29]
MEANIN Any person who by words , action
●

represents himself to be a partner in a

G LLP is a partner by holding out.

LIABILITY OF Such a partner shall be held responsible

●

PARTNER BY who has on such faith given credit to the

HOLDING OUT LLP.

LIABILIT The LLP shall be LIABLE to the extent

●

of credit received by it or any financial

Y OF LLP benefit derived thereon.
WHISTLE BLOWING
(SEC. 31)
WHISTLE BLOWING may be defined as
the disclosure by organization members of
illegal , immoral or illegitimate practices
under the control of their employees, to a
person/organizations that may be able to
effect action.
Who is a whistle blower?
 Whistle blower is the person who tells the public
or someone in authority about dishonest or
illegal activities occurring in a public/private
organization.

 The alleged misconduct may be :

i} A violation of a law/rule/regulations, or
ii} A direct threat to public interest such as
frauds, health/safety violation and corruption.

 Whistle blower may be internal or external.

 Protection to the Partners/Employees
Under LLP Act.
W h i s t l e
blowers often face retaliation from
employees against whom they blow the whistle.
T h e LLP Act,2008 stipulates specific provisions
for protection of whistle blowers as :
1. Th e co urt of Trib un al may red uce an y p enalty
l e v i a b l e a g a i n s t a n y p a r t n e r o f a L L P, i f i t i s
satisfied some conditions.
2. No partner or employee of any LLP may be
discharged, demoted, suspended, threatened,
harassed or in any manner discriminated
a g a i n s t t h e T & C o f t h a t L L P.
CONTRIBUTION
(SECS. 32 AND 33)

Meaning. In reference to LLP, Contribution can

be termed as , What a partner intends to
contribute towards the LLP for running of his
business.
>NO REQUIREMENT OF MINIMUM CONTRIBUTION .
HOWEVER, THE REGISTRATION COST OF A LLP IS DETERMINED ON
THE BASIS OF AMT. OF CONTRIBUTION.

>FORM OF CONTRIBUTION.
ACC. TO SEC 32(1) OF THE ACT, A CONTRIBUTION OF A PARTNER TO
THE CAPITAL OF LLP MAY CONSIST ANY OF THE FOLLOWING:
> TANGIBLE PROPERTY
> INTANGIBLE PROPERTY
> MONEY/PROMISSORY NOTES
> CONTRACTS OF SERVICES PERFORMED OR TO BE PERFORMED.

SECTION 32(2) OF THE ACT SPECIFIES THAT THE MONETARY VALUE

OF EACH PARTNER SHALL BE ACCOUNTED FOR AND DISCLOSED IN
THE ACCOUNTS OF THE LLP.
> Obligation to Contribute (Sec. 33)
 It should be in accordance with the LLP agreement.
 In the absence of any provision to contrary, all
partners are entitled to share equally in the capital ,
profits and losses of LLP.
 CONTRIBUTION can be INCREASED by
amendment in the LLP agreement.
 Withdrawal can be done like drawing in case of
partnership. But T&C for such withdrawal shall be
provided in LLP agreement.
 A Creditor of a LLP may enforce the original
obligation against any partner of LLP without notice
of any subsequent compromise between partners.
Thank
you!