Addition of a Partner in LLP | Form No. 4
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Introduction
Form No. 4 of an LLP is used to record the admission of a new partner or designated partner. Unlike traditional partnership firms, LLPs distinguish designated partners as specific individuals responsible for managing and overseeing the overall operations of the business, while partners collectively share management responsibilities. In this article, we will explore the key requirements and essential qualities involved in adding a new partner or designated partner to an LLP.
Who is a Partner?
An LLP can have partners who are either individuals or body corporates. As per Sections 5 and 6 of the LLP Act, 2008, an LLP must have a minimum of two partners, and there is no maximum limit on the number of partners it can have.
Who is a Designated Partner?
Only an individual is eligible to be appointed as a designated partner in an LLP. As per MCA Circular No. 13/2013 dated 29 July 2013, a Hindu Undivided Family (HUF) or its Karta cannot be appointed as a designated partner. Appointment as a designated partner requires the consent of all existing partners. Further, under Section 7(4) of the LLP Act, the LLP must file the particulars of every individual who has consented to act as a designated partner with the Registrar.
An LLP must have a minimum of two designated partners, and at least one of them must be a resident in India, as prescribed under Section 7(1) of the LLP Act. Nominees may act as designated partners only when all partners of the LLP are body corporates. Their appointment is governed by the LLP Agreement, and they must provide their consent along with required particulars to the Registrar of Companies within 30 days of appointment. Additionally, before being appointed, a designated partner must obtain a Designated Partner Identification Number (DPIN) from the Central Government.
Foreign Company or Company as Member
A foreign LLP or a foreign company can be admitted as a partner in an LLP incorporated in India. However, repatriation of profits or capital may be subject to restrictions unless the applicable provisions of FEMA are duly complied with.
Similarly, a company can become a partner in an LLP, provided the investment remains within the limits prescribed under the Companies Act, 2013. In addition, the business activities of the LLP must fall within the scope of the objects stated in the company’s Memorandum of Association.
Who can become a Designated Partner?
The LLP Act and the LLP Agreement prescribe specific qualifications for appointing a designated partner. The eligibility criteria for selecting a designated partner in an LLP are as follows:
The individual must not be a minor.
The individual must not be an undischarged insolvent.
The individual must not have been adjudicated as an undischarged insolvent during the last five financial years.
The individual must not have defaulted on payments to creditors at any time in the last five financial years.
The individual must not have been convicted of any offence where the punishment involves imprisonment for more than six months.
The individual must not have been declared to be of unsound mind by a court of law.
The individual must possess a valid Designated Partner Identification Number (DPIN).
At least one of the designated partners of the LLP must be a resident in India.
Documents Required to add a Designated Partner
For the appointment of a new designated partner, specific documents must be obtained from the incoming designated partner, and certain statutory forms must be filed. The requirements are outlined below:
Documents Required
From the New Designated Partner
Designated Partner Identification Number (DPIN)
Identity and address proof (including PAN)
Written consent to act as a designated partner
Details of existing partnerships or directorships, if any
Where the appointed partner is a body corporate:
A copy of the resolution on the letterhead of the body corporate approving its admission as a partner in the LLP
A copy of the resolution/authorization on the letterhead of the body corporate specifying the name and address of the individual nominated to act as its nominee/designated partner
From Existing Partners
Consent to act as a designated partner (Form 9)
Supplementary LLP Agreement
Mandatory Form Filings
Form 4 – Filing details of the newly appointed partner/designated partner
Form 3 – Filing the Supplementary LLP Agreement
Procedure to add a Designated Partner
The LLP Agreement clearly lays down the procedure for appointing a designated partner, and such an appointment must be approved by all existing partners of the LLP. The process for adding a designated partner in an LLP is as follows:
Step 1: Review the LLP Agreement
Before initiating the appointment, it is essential to carefully review the LLP Agreement. This helps in understanding the rights, duties, and obligations of the partners and identifying any specific clauses governing the admission of a new designated partner.
Step 2: Obtain Consent of Existing Partners
After reviewing the LLP Agreement, written consent must be obtained from all existing partners. The unanimous consent of the partners is mandatory for appointing a new designated partner.
Step 3: Obtain DPIN
A Designated Partner Identification Number (DPIN) is a unique identification number required for any individual intending to act as a designated partner. The DPIN is obtained by filing the e-form DIR-3 and is issued by the Central Government.
Step 4: File Form 3 and Form 4 with the ROC
Once the DPIN is allotted, Form 3 and Form 4 must be filed with the Registrar of Companies (ROC). These forms contain details of the newly appointed designated partner and the related changes in the LLP.
Step 5: Update the LLP Agreement
After filing the required forms, the LLP Agreement should be updated to formally record the appointment of the designated partner. This ensures proper documentation, transparency, and accountability within the LLP’s governance framework.
