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DESIGNATED PARTNERS IN LIMITED LIABILITY PARTNERSHIP

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DESIGNATED PARTNERS IN LIMITED LIABILITY PARTNERSHIP
By: Mr. M. GOVINDARAJAN
September 25, 2009

INTRODUCTION:

            The Limited Liability Partnership is much long awaited form business type. Many of the countries in the world adopted this type of business. Now it comes true in India. Limited Liability Partnership Act, 2008 ('Act' for short) was enacted with the objectives to make provisions for the formation and regulation of limited liability partnerships and for the matters connected therewith or incidental thereto.

            The Limited Liability Partnership ('LLP' for short) is the hybrid of the provisions of Partnership Act and the Companies Act, 1956. Section 4 of the Act provides that save as otherwise provided the provisions of the Indian Partnership Act, 1932 shall not apply to a LLP.

            The LLP is a body corporate formed and incorporated under the Act and is a legal entity separate from that of the partners. Most of the provisions of the Act resemble with the provisions of the Companies Act. The management of the company is run by the Board of Directors. In LLP there is no such directors and but in their place the partners called as 'Designated Partners' are placed.

DESIGNATED PARTNERS:

            Section 7 of the Act provides that every LLP shall have at least two designated partners who are individuals and at least one of them shall be a resident in India. In case of a LLP in which are the partners are body 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. The term 'resident in India' means a person who has stayed in India for a period of not less than one hundred and eight two days during the immediately preceding one year.

            The Act requires that the incorporation document of a LLP shall specify who are to be designed partners, such partners shall be designated partners on incorporation or the incorporation document shall state that each of the partners from time to time of LLP is to be designed partner, every partner shall be a designed partner.

CONDITIONS:

 The following are the conditions to be fulfilled for the appointment of a designated partner:

 - An individual shall not become a designated partner in any LLP unless he has given his prior consent to act as such to the LLP in Form

  - An individual eligible to be a designated partner shall satisfy such conditions and requirements as may be prescribed; Rule 9(1) of Limited Liability Partnership Rules, 2009 provides that a person shall not be capable of being appointed as a designated partner of a LLP, if he-

  - Has at any time within the preceding five years been adjudged insolvent; or

  - Suspends, or has at any time within the preceding five years suspended payment to his creditors and has not at any time within the preceding five years made, a composition with them; or

  - Has been convicted by a Court for any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months; or

  - Has been convicted by a Court for an offence involving section 30 of the Act.

The Central Government may, by notification, in the Official Gazette, remove the disqualification incurred by any person either generally or in relation to any LLP or LLPs specified in the notification.

  - Every designated partner of a LLP shall obtain a Designated Partner's Identification Number ('DPIN' for short) from the Central Government and the provisions of Sections 266A to 266G (both inclusive) of the Companies Act shall apply mutatis mutandis for the said purposes.

Section 266A deals with the application for allotment of Director Identification Number;

Section 266B deals with the allotment of Director Identification Number;

Section 266C deals with the prohibition to obtain more than one Director Identification Number;

Section 266D deals with obligation of Director to intimate Director Identification Number to concerned company or companies;

Section 266E deals with the obligation of company to inform Director Identification Number to Registrar;

Section 266F deals with obligation to indicate Director Identification number in such return, information or particulars;

Section 266G deals with penalty for contravention of provisions of Section 266A or Section 266C or Section 266D or Section 266E.

DESIGNATED PARTNER'S IDENTIFICATION NUMBER:

            'Designated Partner Identification Number' is defined by Rule 2(iv) as an identification number which the Central Government may allot to any individual or nominee of a body corporate, intending to be appointed as designated partner of a LLP, for the purpose of his identification as such.

            Chapter III of the Limited Liability Rules, 2009 deals with the Designated Partner's identification Number (DPIN). The procedure for obtaining DPIN is stated as follows:

  - Every individual or nominee of a body corporate, who is intending to be appointed as designated partner of a LLP shall make an application electronically in Form 7 to the Central Government for obtaining DPIN;

  - The Central Government shall provide an electronic system to facilitate submission of application for the allotment of DPIN through a portal on the website of the Ministry of Corporate Affairs;

  - The provisional DPIN generated on line by the applicant will remain valid for a period of sixty days from the date on which it was generated;

  - The applicant after the allotment of provisional DPIN submit an application to the Central Government along with a fee of Rs.100/- for the allotment of regular DPIN within sixty days from the date on which provision DPIN was generated on line failing which the provisional DPIN will lapse;

  - General guidelines for DPIN application are as follows:

  - The applicant should first fill in the application on line, generate a provisional DPIN and then take a print out for dispatch to the DPIN processing cell. All application without a provisional DPIN cannot be accepted for further process and would merit straight rejection;

  - The photograph, proof identify and proof of residence shall be attested/certified by a Public Notary or a Gazetted Officer of a Government or a practicing Chartered Accountant/Company Secretary/Cost Accountant or a Company Secretary in full time employment of the Company;

  - The attesting authority must indicate the following while attesting the documents - signatures, name in full in capitals, Registration No. and seal/stamp;

  - In case the proof of identity and proof of resident is in a language other than Hindi or English, a certified copy of transaction of the same in Hindi or English should be enclosed and the translation be also certified by the professional who has otherwise certified the said proofs;

  - The proof of identify enclosed with DPIN form should also contain the date of birth of the applicant and the same should match with the date of birth filled in the application form.  In case the proof of identify does not indicate the date of birth then additional proof of date of birth, duly certified/attested should be attached;

  - The Central Government shall process the applications decide on such application and communicate approval along with the DPIN allotted or rejection thereof to the applicant by way of a letter by post or electronically or in any other mode, within a period of one month from the receipt of such application;

  - The DPIN so allotted is valid for the life time of such applicant and shall not be allotted to any other person in any case;

  - The Designated partner shall intimate such DPIN to Registrar in Form 4.

Section 7(3) provides that an individual shall not become a designed partner in any LLP unless he has given his prior consent to act as such to the LLP in Form 9. Every LLP shall file with the Registrar the particulars of every individual who has given his consent to act as designated partner in such form and manner as may be prescribed within thirty days of his appointment.

CHANGES IN PARTICULARS OF DESIGNATED PARTNERS:

            Rule 9 and 10 of the LLP Rules deals with the changes in particulars of designated partners. Rule 9 provides that every designated partner, who has been allotted a DPIN, in the event of any change in his particulars as stated in Form 7 intimate such changes to the Central Government within a period of thirty days of such change(s) in Form 10. The designated partner shall also intimate such changes to the LLP on which he is a designated partner within thirty days of such changes in Form 6. The designated partners shall fill in the relevant change(s) in Form 10, enclose a copy of the proof of the changed particulars duly certified affix signature at the place specified and the file the same to the Central Government.  There shall be no fee for intimating the changes in particulars in Form 10. The Central Government, after being satisfied, through verification of such changed particulars from the enclosed copy of proof, shall incorporate the said change and inform the designated partner by way of a letter issued by post or electronically or in any other mode confirming the effect of such change in the electronic database maintained by the Ministry of Corporate Affairs.

CHANGES IN DESIGNATED PARTNERS:

            Section 9 of the Act provides that a LLP may appoint a designated partner within thirty days of a vacancy arising for any reason and provisions of Section 7 shall apply in respect of such new designated partner.  If no designated partner is appointed, or if at any time there is only designated partner, each partner shall be deemed to be a designated partner.

LIABILITIES OF DESIGNATED PARTNERS:

            Section 8 provides that unless expressly provided in this Act, a designated partner 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 of the provisions of this Act including filing of nay document, return, statement and the like report pursuant to the provisions of this Act and as may be specified in the LLP agreement; and

  - Liable to all penalties imposed on the LLP for any contravention of those provisions.

PUNISHMENT:

            Section 10 provides that if the LLP contravenes the provisions of Section 7(1) which provides that every LLP shall have at least two designated partners who are individuals and at least one of them shall be a resident in India, the LLP and its every partner shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to five lakh rupees.

            If the LLP contravenes the provisions of Section 7(4) (every LLP shall file with the Registrar the particulars of every individual who has given his consent to act as designed partner in such form and manner as may be prescribed within thirty days of his appointment, Section. 7(5) (An individual eligible to be a designated partner shall satisfy such conditions and requirements as may be prescribed), Section 8 (liabilities of designated partners), Section 9 (changes in designated partners), the LLP and every partner shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

                       

 

 
By: Mr. M. GOVINDARAJAN - September 25, 2009
 
 
 

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