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Know about change in Partners of LLP
A Limited Liability Partnership is run by its partners. From its management to the operation, the partners direct the LLP towards its goals and vision. New partners are added or existing leave; it does not affect the status of the LLP, but surely impacts the growth of the business and responsibilities of other partners. The change in partners and their details can be affected only after the approval from the Ministry of Corporate Affairs. To add or remove a partner from LLP, the consent of other partners must be obtained, which is followed by a change in the LLP Agreement and application to MCA to approve the changes. The application to MCA must be filed within 30 days of effective date of the change.
Why is the change of partners required?
Expertise with additional capital
Normally, a partner is appointed either for need of capital or the expertise. With increase in capital, the borrowing power of the firm increases with loan opportunities. Admission of a partner not only benefits in form of capital but also leverages the skills and knowledge. The diversity of knowledge and goodwill base helps the business to grow far.
Inability of the existing Partner
The existing partner of the LLP may not be able to contribute his full time after a certain period, whether due to retirement or other reasons. Although the exit of one partner may not affect the existence LLP, it must be dealt with by intimation to MCA and also the appointment of a new partner, if required.
Change in terms of Partnership
It is an agreement between the partners, the terms can be changed mutually at any time. The change might impact the willingness of one or other partner. According to requirements and terms, need both, the addition or removal of a partner may arise. And consequently, the due process must be followed.
Number of Designated Partners is below the statutory limit
Every LLP requires maintaining minimum 2 Designated Partners all time. If due to the resignation of a designated partner from LLP, the total designated partners reduce below 2, the LLP must appoint a new designated Partner or change the position (status) of the existing another partner.
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