Provisions relating to designated partners

Who must be a designated partner (s. 7). Every LLP must have at least two designated partners who are individuals, at least one of them resident in India ("resident" meant, when this paper was set, a person who had stayed in India for at least 182 days during the immediately preceding one year (Explanation to s. 7); the requirement is now 120 days during the financial year); where some or all partners are bodies corporate, at least two individuals who are partners or nominees of the bodies corporate act as designated partners. Under s. 7(2), the designated partners are those the incorporation document names (or every partner, if it says that each partner from time to time is to be one), and later any partner may become, or cease to be, a designated partner in accordance with the LLP agreement. An individual becomes a designated partner only with his prior consent given in the prescribed form and manner (s. 7(3)), the LLP files his particulars with the Registrar, in the prescribed form and manner, within thirty days of his appointment (s. 7(4)), he must satisfy the prescribed conditions (s. 7(5)), and he must obtain a Designated Partner Identification Number. Under rule 10(1) of the LLP Rules, 2009, as it now stands (substituted in 2018), an individual who is to be appointed designated partner of an existing LLP applies electronically in Form DIR-3 to obtain the DPIN, and a Director Identification Number (DIN) is sufficient for the appointment.

Partner disqualifications (proviso to s. 5): an individual partner who is to be a designated partner must first be capable of being a partner, and an individual cannot become one if a competent court has found him to be of unsound mind and that finding stands, if he is an undischarged insolvent, or if his own application to be adjudicated insolvent is pending.

Disqualifications (LLP Rules, 2009, rule 9(1)): no one may be appointed a designated partner who, within the preceding five years, has been adjudged insolvent; who suspends, or has within the preceding five years suspended, payment to his creditors without having made a composition with them within that period; or who has been convicted of an offence involving moral turpitude and sentenced to at least six months' imprisonment, or of an offence involving section 30 of the Act. The Central Government may remove the first two disqualifications by notification (rule 9(2)).

Liabilities (s. 8). Unless the Act expressly provides otherwise, a designated partner is responsible for doing all acts, matters and things required to be done by the LLP to comply with the Act, including filing any document, return, statement and report under the Act and as specified in the LLP agreement, and is liable to all penalties imposed on the LLP for any contravention of those provisions.

Changes and vacancies (s. 9). An LLP “may appoint a designated partner within thirty days of a vacancy arising for any reason”, and s. 7(4) and (5) apply to the new designated partner; under the proviso to s. 9, “if no designated partner is appointed, or if at any time there is only one”, each partner is deemed to be a designated partner. If an LLP contravenes s. 7(1), the LLP and every partner are punishable with a fine of not less than ₹10,000, which may extend to ₹5 lakh (s. 10(1)); if it contravenes s. 7(4) or (5), s. 8 or s. 9, the LLP and every partner are punishable with a fine of not less than ₹10,000, which may extend to ₹1 lakh (s. 10(2)).