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Add a Designated partner to LLP

A Limited Liability Partnership (LLP) is governed according to the provisions of the Limited Liability Partnership Act, 2008. Due to its easy and simple process of incorporation and fewer compliances, an LLP has increasingly gained popularity over the years, compared to other forms of traditional partnership businesses. Because LLP firms include the best features of both a Partnership Firm and a Limited Company, they have now become a preferred choice of legal structure for entrepreneurs and startup owners in India.
Add A Designated Partner To Llp
An LLP is owned by its partners who are responsible for investing capital into it. However, unlike a Partnership firm where the management is controlled by the partners itself, the partners of an LLP do not participate in its management at all. Instead, they appoint designated partners for this purpose. The objective of this blog is to provide to its readers a complete overview of Designated Partners in a Limited Liability Partnership.

Table of Contents

Who is a Designated Partner?

Section 7 of the Limited Liability Partnership Act, 2008 contains provisions discussing Designated Partners of an LLP. The ownership of an LLP is shared among all its partners, who are either individuals or body corporates. Among these partners, any two individuals or nominal representatives of body corporates can be appointed as “Designated Partners” of the LLP, with the primary responsibility of controlling its management.
As provided by the LLP Act, an LLP must have at least two designated partners, extendable upto a maximum limit of 15. These designated partners must be individuals, either foreign or Indian. However, at least one, out of all the designated partners of an LLP, must be an Indian resident, that is, must have resided in India for more than 182 days in the immediately preceding calendar year. While provisions regarding the minimum number of designated partners, and the qualifications to be appointed as a designated partner, are mentioned in the LLP act, their terms, manner, and conditions of appointment and removal are decided mutually among the partners, and are mentioned in the LLP Agreement.

What are the qualifications to become a Designated Partner?

The qualifications to be appointed as a designated partner are mentioned in the LLP Act as well as in the LLP Agreement. In other words, the provisions regarding qualifications of a Designated Partner are both statutory and may be decided at the helm of the LLP. The conditions of eligibility of designated partners decided at the end of the LLP are applicable specifically to that particular LLP only, and are mentioned in its LLP Agreement. However, the conditions of eligibility provided in the LLP Act are applicable to all LLPs incorporated in India. All such eligibility conditions applicable to every LLP in India are mentioned below.
S.No Conditions of eligibility to become a Designated Partner of LLP
1.
Only individuals may be appointed as Designated Partners.
2.
He must not be an undischarged insolvent
3.
He must not have been adjudicated as an undischarged insolvent in the last 5 financial years
4.
He must not have defaulted on payments to creditors at any point in the last 5 financial years
5.
He must not be convicted for any legal offense where punishment extends beyond 6 months of imprisonment
6.
He must not be declared of unsound mind by a court of law
7.
He must possess a Designated Partner Identification Number or DPIN
8.
At least one of the designated partners must be a resident Indian

What are the responsibilities of a Designated Partner?

We have already discussed earlier that Designated Partners are incharge of controlling the internal management of an LLP. Besides, they also perform tasks on behalf of the LLP, like meeting statutory compliances, filing applications, obtaining licenses and certifications in the name of the LLP. Like a Company’s director, the designated partner also acts as the agent of an LLP. We have listed a few mandatory responsibilities of designated partners below.
  • A Designated Partner must sign the LLP’s statements of accounts and solvency.
  • The Designated Partner should assist and cooperate with the investigating authorities in cases of an investigation by providing the necessary official documents and papers pertaining to the LLP.
  • The Designated Partner is required to pay the inspector back for the conducted investigation.
  • Within 60 days of the end of the fiscal year, the Designated Partner must properly file the annual returns with the Registrar; otherwise, the firm will be fined more than 10,000.
  • The Designated Partner must both sign the e-forms that must be filed with the Registrar and notify the Registrar of any changes to the LLP, such as changes to the partners’ names or addresses.

Appointment of Designated Partners in an LLP

While the requirement of Designated Partners in an LLP is provided for in the LLP Act, 2008, the manner in which they can be appointed are mentioned in the LLP Agreement and are mutually decided by the partners of the LLP. In fact, any one among the individual partners of the LLP usually plays the role of the designated partner as well, after having been so appointed by the other partners.
The detailed procedure of selection and appointment of the designated partners, their terms of service, their duration of service, and their remuneration, are all mentioned in the LLP Agreement. However, before an individual can be appointed as a Designated Partner he must possess DPIN (Designated Partner Identification Number) and must provide his consent to act as the designated partner.
  • DPIN: 

    A Designated Partner Identification Number or DPIN is a distinct and unique identification number allotted to every individual looking forward to becoming a Designated Partner in an LLP. It is allotted by the Central Ministry of Corporate Affairs, and to obtain it, an application is to be filed by the individual that is to be appointed as the designated partner. 

    To obtain a DPIN, an e-application form, DIR 3, available on the official website of the Ministry of Corporate Affairs is required to be filled out and submitted with the following documents:
  1. The PAN card of the applicant
  2. The Identity Proof of the applicant
  3. The Registered Address Proof of the applicant

 

  • You can provide any one among the Aadhar Card, Driving License, Passport, or Voter ID, as the Identity proof of the applicant. However, if the applicant is a foreign national, submitting his passport becomes mandatory. As far as the registered address proof is concerned, the applicant can provide utility bills like the electricity bill, telephone bill, water bill, or gas bill, in his name, not older than 2 months from the date on which it is being submitted. After submission of the application, it is examined thoroughly by the MCA, and upon successful verification, the DPIN is issued to the applicant. Once issued the DPIN is valid for lifetime, subject to annual renewal. The government fee for filing DIR 3 is Rs.500 per application.
  • Consent of the Designated Partner: 

    No individual can act as the designated partner of an LLP, unless he provides his consent to do so. The consent of the designated partner is sought in the format of a written declaration. Within 30 days of the designated partner’s appointment, his consent must be intimated to the Registrar of Companies in form INC-3. Along with INC 3, another form INC 4 is also filed to the Registrar of Companies, mentioning the details of the designated partner. These two forms are required to be filed to the ROC, after the LLP appoints every single designated partner. A delay in filing these forms beyond the prescribed due date, can result in a fine of Rs.100 for each day of non-filing, with no maximum limit of the penalized amount.

Consequences of delayed appointment of Designated Partners

If an LLP fails to comply with the requirement of appointing at least two designated partners who are individuals, and at least one of them is an Indian resident, the LLP will be penalized with an amount of Rs.10,000 for each day of default, extending to a maximum limit of Rs.5 lakhs.

Conclusion

We hope that this blog has well attempted to provide a complete overview of designated partners appointed in an LLP, covering in detail the purpose of their appointment, their eligibility, ineligibility, manner, and terms of appointment. If you still have any queries regarding the statutory responsibilities of designated partners, or are looking forward to obtaining documents like DPIN, you can consult our startup advisors without hesitation.

About Setindiabiz

Setindiabiz is an organized team of experienced CA, CS, & Lawyers, duly supported by a pool of trained accountants & paralegal staff that provides quality & affordable compliance services to startups & small businesses in India. The views, statements and recommendations expressed in this article or post are only for the sole objective of providing information, and it does not constitute professional advice or recommendation of the company. Neither the author nor the company or its affiliates accepts any liability for any loss or damage arising from any information in this article or any actions taken in reliance thereon.

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