Limited Liability Partnership is a legal entity that is formed by two or more partners under the rules and regulations of the Limited Liability Partnership Act 2008. The LLP being the kind of body corporate along with the partnership firm possess the features of both the Body Corporate and Partnership firm. That is why it is also called the hybrid form of partnership and body corporate structure. The activities of the LLP and the rights, responsibilities of the partners along with other major information are present In the LLP agreement. LLP agreement is an legal documents that contains the various things related to the limited Liability Partnership. This agreement is one of the most essential elements of every LLP, that makes it essential for us to decode everything about it. Through this article we will be taking a basic understanding of the various aspects of the LLP agreement.
What is the LLP agreement?
LLP agreement is the charter of the company that consist of the rights and responsibilities of all the partners. The procedure of LLP incorporation is complete only when a proper LLP agreement is executed. It is mandatory for every LLP formed to execute the LLP agreement within 30 days of the incorporation of LLP as per the LLP incorporation document). Just like a country works on its constitution the LLP works on the LLP agreement formed by the partners. It contains the comprehensive provisions relating to the various aspects of the LLP.
Contents of LLP Agreement
It is of utmost importance to prepare the LLP agreement diligently so as to avoid any possible errors. This is because an LLP agreement decides the working of the LLP and all the major decisions are taken based on this agreement only. Here are major contents for the LLP agreement –
Name of the LLP – The name of the LLP should be clearly mentioned in the agreement consisting of the words LLP or Limited Liability Partnership as per the provisions of the LLP Act.
Name of the Parties and date of agreement – At the time of the incorporation of the LLP the present members name the date of executing the LLP agreement should be mentioned clearly in the agreement.
Contribution of the Partners – One other important aspect related to the LLP is the contribution made by the partners. Thus the capital contributed by them and the related aspects to that like the , interest on contribution, profit sharing ratio as well as the time period after which the capital can be withdrawn by any of the partners shall be mentioned.
Record maintenance –All the bank arrangement and the LLP record maintaining provisions should also be there. Record maintenance will include recording, maintenance, and storage of LLP books and other related documents.
Remuneration of partners– The methods of profit sharing among the partners shall be mentioned in the agreement including the regular and interim profits if any.
Disassociation of partner
In this clause the terms in which the partners can can disassociate or withdraw themselves from the LLP are stated. It briefly states the, the rights of existing partners, and rights on assets after disassociation, as well as notice to existing partner.
Redemption and cross purchase of rights
It includes rights of partners as well as how those rights can be redeemed from the LLP. It considers methods of readmission as well as cross purchase.
Issue of partnership rights
The rights regarding the admission of new partner are stated in this.
Sales, transfer of partnership rights
It provides procedural information about the selling, transferring of partnership right to existing partner and a new partner. Partners’ meetings and voting – It covers the mode, time period of the meeting, the method of the decision-making process and the voting rights of the partners concerned.
Partners’ rights to records
In this clause the exclusive rights of the partners to check the records of the LLP for any misappropriation or embezzlement are given.
Management and fiduciary duty
It takes into account the responsibility of the management of a company and the appointment of manager as well as the person liable for fiduciary duty i.e. taking care of legal matters as well as funds and assets of the company. Arbitration and general provisions: In the case of disagreement between parties, the parties may involve the third party known as an arbitrator who listens to both the parties and takes a decision, which is to abide by both the parties concerned.