Designated partner resigns without notice to the Registrar

Provisions relating to designated partners. The incorporation document names the designated partners or states that every partner from time to time is one; later, a partner becomes or ceases to be a designated partner in accordance with the LLP agreement (s. 7(2)). Every LLP must have at least two designated partners who are individuals, at least one of them resident in India (s. 7(1)). No one becomes a designated partner without first giving the LLP his prior consent, in the prescribed form and manner; the LLP files the particulars of every individual who consents with the Registrar, in the prescribed form and manner, within thirty days of his appointment; and every designated partner obtains a Designated Partner Identification Number (s. 7(3)-(6)). "Unless expressly provided otherwise in this Act" (s. 8), a designated partner is responsible for everything the LLP must do to comply with the Act, including filings, and for whatever the LLP agreement specifies, and is liable to the penalties imposed on the LLP for contravening it (s. 8).

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, by notification in the Official Gazette, remove a disqualification under clause (a) or (b), either generally or for the LLP or LLPs named in the notification (rule 9(2)).

Vacancies (s. 9). The LLP “may appoint a designated partner within thirty days of a vacancy arising for any reason”; if no designated partner is appointed, or at any time there is only one, each partner is deemed to be a designated partner.

Application: implications for the LLP and the partners:

1. Filling the vacancy. The LLP may appoint a replacement designated partner within thirty days of the vacancy, filing the new designated partner's particulars, and the new designated partner must meet the prescribed conditions (ss. 7(4), 7(5), 9). Under rule 10(1) of the LLP Rules, 2009, 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. A resignation need not leave fewer than two designated partners; but if it does, the LLP must restore the minimum required by section 7(1), and if it is left with no designated partner, or only one, every partner is deemed a designated partner and carries a designated partner's responsibilities and penalties.
2. Penalties. As amended by the LLP (Amendment) Act, 2021, if the LLP contravenes section 7(1) (fewer than two designated partners), the LLP and its every partner are liable to a penalty of ₹10,000, with ₹100 for each day after the first during which the contravention continues, up to ₹1 lakh for the LLP and ₹50,000 for every partner; a failure to file a designated partner's particulars under section 7(4) makes the LLP and its every designated partner liable to ₹5,000, with ₹100 for each day after the first during which the contravention continues, up to ₹50,000 and ₹25,000; and a contravention of section 7(5) or section 9 makes the LLP and its every partner liable to ₹10,000, with ₹100 for each day after the first during which the contravention continues, up to ₹1 lakh for the LLP and ₹50,000 for every partner.

Change of designated partner. When a replacement designated partner is appointed, the LLP files his particulars with the Registrar within thirty days of the appointment (ss. 7(4), 9).

Ceasing to be a partner as well. Resigning as a designated partner is not the same as leaving the LLP. The resignation leaves a vacancy in the designated-partner role, which the LLP fills under section 9; a person ceases to be a partner only as section 24 provides. So, unless he also resigns as a partner, he remains one, and the want of notice to the Registrar concerns only his position as designated partner; the notice rules for a partner's cessation (ss. 24(3), 25(2)) apply only if he leaves the partnership as well. A person ceases to be a partner in accordance with an agreement with the other partners or, failing one, by giving them at least thirty days' written notice of his intention to resign (s. 24(1)). Where the person also ceases to be a partner, the LLP must file a notice with the Registrar within thirty days (s. 25(2)). Until the Registrar has been notified, or the outsider has notice that he has ceased to be a partner, a person dealing with the LLP may continue to regard him as a partner (s. 24(3)). His own obligations incurred while he was a partner are not discharged by his ceasing to act (s. 24(4)).

Conclusion. The LLP may fill the vacancy within thirty days and must keep two qualifying designated partners; if it is left with none or only one, every partner is deemed a designated partner, and the LLP and its partners face the penalties above.