Resignation of Partner in LLP

Removal or Resignation of Partner from LLP

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Removal or Resignation of Partner from LLP

A Partner in a Limited Liability Partnership (LLP) in India may have to be removed or would like to resign for various reasons. The removal or resignation of a Partner must be properly recorded and the relevant filings must be filed with the Ministry of Corporate Affairs to effect the Partner removal or resignation. In this article, we look at the procedure for effecting a removal or resignation of Partner from LLP.

Resignation or Removal of Partner

A Partner in a LLP may cease to be a partner of a LLP in accordance with the LLP agreement between the Partners. If the LLP agreement doesn’t have any restrictions, then a Partner in a LLP can resign from a LLP by providing notice of resignation in writing not less than 30 days to the other Partners in the LLP.

In the following circumstances, a LLP Partner would automatically cease to be a Partner in the LLP:

  • On death of the Partner
  • On dissolution of the LLP
  • If the Partner is declared to be of unsound mind
  • If the Partner is adjusted as an insolvent or declared as insolvent.

A Partner in a LLP will be considered to be a Partner unless other Partners have received written notification about the intent of the partner to resign or a notice is given to the Registrar.

Rights and Liabilities of Partner on Removal or Resignation

Any Partner who ceases to be a Partner of the LLP due to death or insolvency is entitled to the following from the LLP:

  1. Any amount equal to the capital contribution of the former partner actually made;
  2. Rights to share in the accumulated profits after deducting accumulated losses (if any), determined as at the date the Partner ceases to be a Partner.

A Partner in a LLP can also transfer his right to share the profit and losses of the LLP and receive distribution in accordance with the LLP Agreement. In case of removal or resignation of a Partner from a LLP, then the LLP partnership agreement can have different provisions with respect to the rights of the outgoing Partner.

On removal or resignation or cessation of a Partner in a LLP, whatever liability incurred while the person was a Partner in the LLP shall not be discharged and will continue.

Removal of LLP Partner by Majority

A Partner in a LLP cannot be removed by a majority of the other Partner unless the LLP agreement expressly provides such powers. If the LLP Agreement provides such power, a Partner can be removed and Form 4 must be filed to effect the removal.

Filing of LLP Form 4

To effect a resignation or removal or cessation of Partner from LLP, LLP Form 4 must be filed within 30 days of removal or resignation or cessation of Partner. Form 4 must be signed by a Designated Partner of the LLP and must be filed along with a Certificate from a Chartered Accountant or Company Secretary or Cost Accountant in practice. The Chartered Accountant or Company Secretary or Cost Accountant must certify that the books and records of the LLP have been found to be true and correct.

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