The advantages of a partnership and a private limited company are combined in a relatively new type of business organization in India called a limited liability partnership. It was introduced in 2008 through the Limited Liability Partnership Act, 2008, and has gained popularity due to its flexibility, easy maintenance, and limited liability protection for its partners.
In an LLP, partners are designated as either “designated partners” or “ordinary partners.” In this blog, we will focus on the definition of a designated partner as per the LLP Act.
As per the LLP Act, a designated partner is an individual who is designated as such in the LLP agreement and is responsible for the management of the LLP. Designated partners are similar to directors in a company, but they have additional responsibilities and obligations as per the LLP Act.
A minimum of two selected partners are required for an LLP, and at least one of them must be an Indian resident.
The designated partner who is a resident of India must have a valid DIN (Director Identification Number) issued by the Ministry of Corporate Affairs.
Responsibilities of a Designated Partner:
Designated partners have various responsibilities and obligations under the LLP Act, including:
Filing of LLP Agreement: The LLP agreement is a legal document that defines the rights, duties, and obligations of the partners and the LLP. The designated partners are responsible for ensuring that the LLP agreement is filed with the Registrar of Companies within 30 days of the formation of the LLP.
Maintenance of Books of Accounts: Designated partners are responsible for maintaining proper books of accounts of the LLP. The books of accounts must be kept at the registered office of the LLP and must be updated regularly.
Filing of Annual Returns: The LLP Act requires LLPs to file annual returns with the Registrar of Companies. The designated partners are responsible for ensuring that the annual returns are filed within the due date.
Compliance with Legal Requirements: Designated partners are responsible for ensuring that the LLP complies with all the legal requirements under the LLP Act and other applicable laws.
Obligations towards the LLP: Designated partners have a fiduciary duty towards the LLP and must act in the best interests of the LLP. They must not use their position for personal gain and must disclose any conflicts of interest.
Liabilities of a Designated Partner:
Designated partners have certain liabilities under the LLP Act, including:
Liability for the LLP’s Debt: Designated partners are personally liable for the LLP’s debts and obligations to the extent of their contribution to the LLP.
Liability for Non-Compliance: If the LLP fails to comply with any legal requirement under the LLP Act, the designated partners may be held liable.
Liability for Acts of Other Designated Partners: Designated partners may be held liable for the acts of other designated partners if they were aware of such acts or could have prevented them.
In conclusion, designated partners play a crucial role in the management and functioning of an LLP. They have various responsibilities and obligations under the LLP Act and must ensure compliance with all legal requirements. They also have certain liabilities, and therefore, it is essential to choose the designated partners carefully. If you are planning to form an LLP, it is advisable to consult a legal professional who can guide you through the process and help you understand the responsibilities and obligations of designated partners.