Removal of partner from LLP

Overview

Any partner in a Limited Liability Partnership (LLP) may discontinue to be a partner in the company. The resignation or removal of the partner is done according to any agreement of LLP among the partners. If there is absence of any such clause in agreement among the partners, the discontinuing partner may resign from the LLP upon his/her will. To do so, he/she have to provide the others partners with a written notice regarding the resignation 30 days (1 month) prior to the actual removal.

A partner would be automatically removed out of the LLP if any of the following circumstances may occur:

• If the partner dies
• If the LLP may dissolve
• If the partner is proved to be of unsound mind
• If the declares himself as insolvent

Note: The resigning partner will be considered as a partner of the Limited Liability Partnership until he/she provides a notice of his/her discontinuation from LLP to the other partner or to the Registrar.

Rights and liabilities of removing partner

Following are the Rights and liabilities of a removing partner being removed due to any of the reason:

• 1. Any sum of amount of capital contribution contributed by him/her.
• 2. His/her share in the accumulated profit or loss calculated at the date of his/her removal.

Note: in case of removal of any partner, the LLP agreement can provide some different provisions in regard to the rights of the outgoing partner.

Removal of Partner by Majority

Any of the partner in Limited Liability Partnership (LLP) cannot be removed by the majority of the other partners. It cannot be done unless the agreement between the partners provide any provision or such powers to be practiced by the partners of the LLP. If in case any of such powers or provisions are provided by the agreement then, the partner can be removed. Form-4 should also be filed to execute the removal of the partner by majority.

Filing of LLP Form-4

To remove any partner from the LLP by the majority of other partners, Form-4 must be filed by the partners. Form-4 must be filed within the 30 days of the removal of the partner. Form-4 must be filed along with the certificate provided by the Chartered Accountant (CA), Company Secretary (CS), or any Cost Accountant in practice with the LLP. This certificate provided by the Chartered Accountant (CA), Company Secretary (CS), or any Cost Accountant should mention that the books and records of the LLP are true and correct.

Process of removing an existing partner

A partner in LLP may be removed because of many of the reasons. Some of these reasons may include Fraud in business, negligence in partner's roles and responsibilities, violation of Law, lack of funding, Bankruptcy or insolvency of partner, etc. To remove the partner, there is a three step process:

• 1. Resolution for removal of partner: Partners should pass a resolution after conducting a meeting with all the partners of the LLP. By this resolution, all the partners select one partner to act on legal proceedings on behalf of the firm. This selected partner carry out the legal formalities and hold the correct Digital Signature Certificate (DSC) and Director Identification Number (DIN).
• 2. Execute amendment to LLP agreement: This document provides various provisions to carry on business activities of the LLP. It also provides for the removal of any of the partner from the firm. The removal of the partner should be executed according to the provisions provided by the agreement.
• 3. File Form-4 for removal of the partner from LLP: Ministry of Corporate Affairs (MCA) has provided with the Form-4 for any change in the LLP firm. This require certification by a Chartered Accountant (CA) or Company Secretary (CS). After execution, the agreement needs to be submitted by the firm to the MCA within 30 days (1 month).

Documents Required for removal partner from LLP

• Existing LLP Agreement
• Consent letter
• Resolution for Authorizing partner
• Resignation letter
• DIN & DSC of Authorized Partner