The management of the LLP is done by both managing partners and designated partners, they need not be the same, as the managing partner is present to ensure legal compliance. The Designated Partner just has to ensure that the documents that need to be filled for the LLP Act have been filled. This has been given under Section 8 of the Act, also under Section 10 of the Act penalties for not complying with these laws have been given, and the designated partner will have to bear the consequences. Only for the view of legal compliance may the designated partners be considered the managing partners. These designated partners need not indulge in the day to day activities of the firm. They are almost like the Board of Directors of a company.
There are certain requisites before someone becomes a designated partner, and these are provided under Section 7 of the LLP Act. Section 7 of the LLP Act which states that there must be two or more designated partners out of which at least one should be residing in India. For the purpose of the section residing in India will constitute one hundred and eighty-two days in the immediately preceding one year. The designated partner will be decided by the partnership deed itself. If in case any of the body corporates are partners to the LLP then any person nominated by them would constitute as a designated partner. The act will decide for how long a person shall be a designated partner (termination and designation are therefore both done by the deed itself). If the deed mandates that all the partners be designated partners at some point or another then that will have to be the position for that firm. The designated partner has to give prior consent through a form before getting the post.
Rule 9(1) of the Limited Liability Partnership Rules, gives conditions supplementing Section 7 of the LLP Act. The person shall not be allowed to be a designated partner if he/she has been adjudged insolvent in the preceding 5 years; suspended payment to his creditors in the preceding 5 years made (or made a composition with them); convicted by a Court for any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months or convicted by a Court for an offence involving section 30 of the Act (liability in case of a fraud). The Central government has the power to remove any disqualification incurred by a person generally through the Act or specifically by someone in relation to a specific LLP.
A Designated Partner is provided with an Identification Number - ‘DPIN’ from the Central Government. The provisions of Sections 266A to 266G (both inclusive) of the Companies Act apply mutatis mutandis for the said purposes. In brief, these sections stipulate that:
- Section 266A - Application for allotment of Director Identification Number; (applies to Designated Partner Identification Number)
- Section 266B - Allotment of Director Identification Number;
- Section 266C - prohibition to obtain more than one Director Identification Number;
- Section 266D - Obligation of Director to intimate Director Identification Number to concerned company or companies;
- Section 266E - Obligation of company to inform Director Identification Number to Registrar;
- Section 266F - Obligation to indicate Director Identification number in such return, information or particulars;
- Section 266G - Penalty for contravention of provisions of Section 266A or Section 266C or Section 266D or Section 266E.
The DPIN as per Rule 2(iv) is allotted by the Central Government to any individual or nominee of a body corporate. The procedure for obtaining DPIN is given in Chapter III of the Rules such as making an electronic application under Form 7, and this can be done on the website of the Ministry of Corporate Affairs. This DPIN is allotted for the lifetime of the applicant and shall not be given to any other person in the meantime. Within thirty days of the appointment of the Designated Partner, relevant documents must be submitted to the Registrar. Rule 9 and 10 deal with the procedure that needs to be followed in the event of there being a change in the particulars of the designated partner.
If there arises a vacancy in the post section, 9 of the Act applies and a newly designated partner must come within 30 days since the vacancy arose.
Section 8 is the section that elaborates on the role or liability of a designated partner and states that they will be responsible for the filing of any document, return, statement or report according to the provisions of the act and be punished in case such sections are not complied with. The punishment is given under section 10 of the Act.
Duties of designated partner
Major duties of a designated partner include:-
- Notify any changes in the LLP’s to Registrar of Companies.
- Notify any changes in the Partners names & residential addresses to Registrar of Companies.
- Notify any change in Registered Office Address to Registrar of Companies.
- Filing of any Annual return, Statement of Accounts and other documents specified under the provisions of LLP Act with the Registrar of Companies.
- Statement of Accounts & Solvency to be signed by the Designated Partners of the Company.
- to preserve and to produce before an inspector or any person authorised by him in this behalf with the previous approval of the Central Government, all books and papers of, or relating to, the limited liability partnership or, as the case may be, the other entity, which are in their custody or power
- Responsible for signing all the e-forms filed with the Registrar of Companies.
Rights of designated Partner
- All the partners hereto shall have the rights, title, and interest in all the assets and properties in the firm in the proportion of their Contribution.
- Every partner has a right to have access to and to inspect the books of accounts of the LLP.
- Each of the parties hereto shall be entitled to carry on their own, separate and independent business as they might be doing, or they may hereafter do as they deem fit and proper, and other partners and the LLP shall have no objection thereto provided that the said partner has intimated the said fact to the LLP before the start of the independent business. Provided the business is not in competition to the existing business being carried on by the LLP.
- On the retirement of a partner, the retiring partner shall be entitled to full payment in respect of all his rights, title and interest in the partner as herein provided.
- Upon the death of any of the partners herein anyone of his or her heirs will be admitted as a partner of the LLP in place of such deceased partner.
- On the death of any partner, if his or her heir legal heirs opt not to become the partner, the surviving partners shall have the option to purchase the contribution of the deceased partner in the firm.