Change in LLP Agreement in India

Changing an LLP (Limited Liability Partnership) agreement involves updating the rules and terms that govern the partnership's operations. This is important when there are changes in the business, ownership, or management. The process involves identifying the necessary amendments, drafting the new clauses, securing partner approval, and filing the updated agreement with the Registrar of Companies (ROC).

The Most Common Changes that Occur in an LLP

Here are a few common changes that usually take place in an LLP:

• Changes in the rights and duties of partners.
• Change in the name of the LLP.
• Change in the business goals or activities of the LLP.
• Shifting the LLP’s registered office within the same ROC area.
• A partner leaving the LLP or being removed.
• Transfer of a partner’s rights if the partner passes away.
• Moving the registered office from one state to another.
• Change in how profits and losses are shared among the partners.
• Selling the LLP to a completely new group of people.

Changes to an LLP agreement are made to keep it current with the evolving needs of the business and its partners. Some common reasons include:

• Updating business rules: The LLP must work as per the rules written in the agreement. Any change in business needs to be reflected by updating the agreement.
• Adding or removing clauses: New clauses can be added, and old ones can be removed or changed as per the current needs of the business.
• Increasing capital: As the business grows, the need for more capital increases. The LLP agreement may be changed to show the updated capital amount.
• To change capital sharing or profit-loss ratio: When partners change how much they invest or earn from the LLP, the agreement needs to be updated with a new capital or profit-sharing ratio.
• To revise the roles and duties of partners: Partners’ responsibilities can change over time. The agreement should reflect any updates in their roles, rights, or duties.
• Changing control or restrictions: The powers given to partners or any limits on their actions may need to be changed based on business needs.
• To update other important terms: Things like jurisdiction, resignation process, notice period, partner appointment/removal, or partnership duration can also be changed in the agreement.
• Matching current needs: Any change—whether adding, removing, or updating a clause—is made to keep the LLP agreement aligned with how the business is running.

Before shifting the registered office of a Limited Liability Partnership (LLP), certain legal and procedural aspects must be carefully reviewed to ensure compliance and avoid disruptions in operations.

• Check the LLP Agreement: Before taking consent from the partners, make sure to review the LLP Agreement to see if there are any rules or conditions for changing the registered office.
• Partner Resolution: A resolution must be passed by the partners to approve the new registered office address.
• File Form LLP-15: After passing the resolution, the LLP must file Form LLP-15 with the ROC within 30 days.
• File Form LLP-3: Submit Form LLP-3 with the ROC to update the LLP Agreement with the new registered office address.
• Inform All Stakeholders: Let all related parties know about the new address—such as clients, vendors, banks, and government departments—to ensure smooth business operations.
• Check for Legal Disputes: Make sure there are no ongoing legal cases or disputes related to the current registered office.
• Update Statutory Documents: After the address change, update the new address on all legal and official documents of the LLP.
• File Form LLP-23 (if changing state): If the registered office is being shifted to another state, then Form LLP-23 must be filed. In this case, the LLP will come under a new ROC jurisdiction, and additional procedures may apply.

An LLP agreement is made up of several important clauses that define how the partnership operates, manages responsibilities, and handles financial and legal matters between partners.

1. Basic Information

This section contains the main details about the LLP and its partners.

• LLP Name and Registered Office: The official name of the LLP and the address of its registered office.
• Partner Details: Full names, addresses, and contact details of all partners involved in the LLP.
• Business Activities: A short description of what the LLP does or plans to do as its main business.

2. Financial Matters

Here, the agreement defines how finances will be managed, right from capital contributions to profit-sharing arrangements.

• Capital Contribution: How much money or assets each partner brings into the LLP.
• Profit and Loss Sharing: How the profits and losses of the LLP will be divided among the partners.
• Interest on Capital: Whether interest will be given on the capital invested by partners, and at what rate.

3. Partner Roles and Responsibilities

This section talks about what each partner can and cannot do, and how the LLP will be managed.

• Rights and Duties: Lists the roles, rights, and responsibilities of all partners, including designated partners.
• Management Structure: Describes how the LLP will be run—who makes decisions and how.
• Voting Rights: Explains how voting works and how many votes each partner gets for key decisions.

4. Changes and Dissolution

Every business changes over time—this part provides guidelines for partner changes, dispute handling, and closure.

• Admission and Retirement of Partners: The process to add new partners or allow current ones to leave.
• Dispute Resolution: Ways to solve disagreements between partners, such as through mediation or arbitration.
• LLP Dissolution: Conditions under which the LLP can be closed down and how assets will be settled.

5. Other Important Clauses

This section includes extra rules to cover other essential business areas.

• Change of Registered Office: The steps to change the LLP’s registered office address.
• Borrowing Powers: Whether the LLP can borrow money and under what conditions.
• Indemnification: Rules about protecting partners from certain legal and financial liabilities.
• Annual Reports: Guidelines on creating and sharing the LLP’s annual financial statements.
• Amendment Clause: How any changes to the agreement can be made in the future.
• Notary and Witness: Requirements for getting the agreement notarized and signed by witnesses.

If you want to make changes to an existing LLP agreement, you will need to prepare and submit the following documents:

Documents to Submit with Form 3

These documents are required to update the LLP agreement officially:

• Original LLP Agreement: The existing agreement that was filed earlier.
• Revised LLP Agreement: The updated version of the agreement shows the proposed changes.
• Supplementary Deed: A separate document that highlights the specific changes made to the original agreement.
• Partner Resolution: A copy of the resolution passed by the partners during a meeting, approving the changes.

Documents to Submit with Form 4

These documents are needed if there are changes related to the partners:

• Partner Consent Letters: Signed consent from all the partners involved in the change.
• Authorization/Resolution Copy: A document showing the name and address of the authorized person, along with proof.
• Proof of Name Change (if applicable): Any official document supporting the name change of a partner or the LLP.
• Company Resolution (for corporate partners): If a company is a partner in the LLP, a copy of its board resolution approving the change must be submitted.

A Limited Liability Partnership (LLP) Agreement is a crucial legal document that outlines the framework of how an LLP will function. It includes essential details such as business objectives, partner roles, responsibilities, profit-sharing ratios, and other operational terms. As the business grows or circumstances change, it may become necessary to update this agreement.

Step 1: Hold a Partner Meeting & Pass a Resolution

The first step in modifying an LLP Agreement is to hold a formal meeting with all existing partners. During this meeting, the proposed changes should be discussed and reviewed. Once all partners agree to the modifications, a resolution must be passed to approve the changes. It is important to record this resolution in the meeting minutes and ensure unanimous consent or majority approval as specified in the original LLP Agreement.

Step 2: Draft a Supplementary LLP Agreement

After passing the resolution, the next step involves drafting a Supplementary LLP Agreement. This document should clearly outline all the changes being made to the original agreement, such as alterations in business structure, responsibilities, or capital contributions. The supplementary agreement acts as an addendum, legally binding once executed, and should reflect the updated terms in a precise and unambiguous manner.

Step 3: Pay Stamp Duty & Execute the Agreement

Once the supplementary agreement is ready, it must be signed and executed by all the partners to give it legal validity. Additionally, the document must be stamped as per the applicable stamp duty regulations in your respective state. Proper execution also includes having the agreement witnessed by at least two individuals. This step ensures that the document is legally enforceable and acceptable to regulatory authorities.

Step 4: File Form LLP-3 with the RoC

Within 30 days of passing the resolution, the LLP is required to file Form LLP-3 with the Registrar of Companies (RoC) through the Ministry of Corporate Affairs (MCA) portal. This form must include the signed resolution and the supplementary LLP agreement as attachments. Filing Form LLP-3 officially informs the RoC about the changes and ensures that the modifications are legally recognized.

Step 5: File Form LLP-4 (If Applicable for Partner Changes)

If the changes involve the appointment, removal, or modification of details related to a partner or designated partner, then Form LLP-4 must also be filed in conjunction with Form LLP-3. This form captures key information about the individual or corporate entity being added or removed, including their name, address, and role within the LLP. It is mandatory to file Form LLP-4 whenever there is any alteration in partner-related details to ensure the official records are updated accurately.

Step 6: Receive RoC Approval

Once all required forms are submitted, the Registrar of Companies will review the documentation. If everything is found in order, the RoC will approve the changes and update the LLP records accordingly. An acknowledgment receipt will be generated, and the revised LLP Agreement will now be legally valid. It is advisable to store a copy of the updated agreement and the approval acknowledgment for future compliance or legal reference.

A Supplementary LLP Agreement is a legal document used to record any changes or modifications made to the original LLP Agreement. This could include changes such as the addition/removal of partners, changes in capital contribution, profit-sharing ratio, business activities, or any other key clauses. It must be drafted carefully and filed with the MCA by submitting Form 3 within 30 days of such a change.

Below is a standard format for a Supplementary LLP Agreement: