The need to change partners in a Limited Liability Partnership (LLP) can arise after its online registration and incorporation for various reasons.

Here are some primary reasons for changes in LLP partners or their designations after incorporation and LLP registration in India:

• Requirement to invest capital in the LLP.
• Change in responsibilities or engagements of the partner(s).
• Inability of a partner to perform according to the expectations outlined in the LLP Agreement or by the partners.
• Change in the terms of the agreement between the partners and the LLP.
• Resignation and retirement of a partner.
• Requirement to appoint expertise in a specific operational area of the LLP.

Besides these reasons, numerous other factors can necessitate the addition or removal of partners or a change in their designations after LLP registration.

This article provides a step-by-step guide on how to effect changes in partners or their designations within a Limited Liability Partnership.

Difference Between Change of Partners and Change in Designation:

The term “change in Partners” encompasses the addition, appointment, resignation, or removal of a partner in the LLP. In contrast, “change in designation” refers to a change in a partner’s official position or title within the LLP, without involving the addition or removal of any partners. The partners in an LLP are classified as Designated Partners and other regular partners. Therefore, the procedure to change a designation includes:

• Appointing a Partner as a Designated Partner.
• Changing a Designated Partner to a regular Partner.

Both changes in partners and changes in designation follow a similar procedure with minor variations. The procedure to effect these changes is outlined below.

When applying for the addition of a Designated Partner or a change of designation from Partner to Designated Partner, the individual concerned must also obtain a DIN (Director Identification Number). If the person has already applied for and been allotted a DIN, the same number should be provided and noted for their addition to the LLP. In the case of the resignation of a Partner or Designated Partner, the individual must provide the LLP with a notice period of at least 30 days.

The process to effect the change involves the following steps:

1. Pass a resolution to affect the change.
2. Execute a Supplement Agreement.
3. File an application for approval of the change.

1. Pass a resolution to affect the change:

To implement any changes in the Limited Liability Partnership, the partners must pass a resolution at a meeting of the partners, as required by the LLP Agreement of the concerned LLP. This resolution should authorize one of the existing Designated Partners to act on behalf of the LLP and its partners. Furthermore, the authorized partner(s) must possess a valid DSC (Digital Signature Certificate) to file the application with the Registrar.

2. Execute a Supplement Agreement:

A supplement deed to the LLP Agreement must be executed by all the partners of the LLP, including any partner being added or removed.

Care should be taken to ensure that the clauses, terms, and conditions related to the addition/removal of a partner, as outlined in the original LLP Agreement, are adhered to in the supplement.

Any additional requirements or clauses can also be inserted, altered, or removed through this Supplement Agreement.

Furthermore, the said supplement deed must be executed upon payment of the required Stamp Duty. The payable stamp duty will be determined based on the capital changed or introduced during the alteration.

If there is no addition of capital to the LLP during the change, the agreement is executed by paying a Stamp Duty of only Rs 100/-.

Please refer to another blog titled “When to change the LLP Agreement: Know reasons and procedure” for detailed information on the compliances and considerations during the execution of the Supplement Agreement.

3. File an Application for approval of change:

Once the Supplement Agreement for the change of partner or their respective designation is executed by the partners, an application must be filed with the Ministry of Corporate Affairs (MCA) to approve these changes. This application should be filed with the assistance of a practicing professional, such as a Company Secretary or a Chartered Accountant. The application is filed in the prescribed forms, which are LLP Form 3 and LLP Form 4.