Designated partners: meaning and eligibility for appointment

Designated partners: meaning. In an LLP the partners share the business, but the law needs particular people it can hold to account for the LLP's statutory duties. These are the designated partners: partners named as such under section 7 of the Limited Liability Partnership Act, 2008 (s. 2(1)(j)). Except where the Act expressly says otherwise (s. 8), they answer for every act the Act requires the LLP to do to comply with it, such as filing its documents, returns and statements, and for the acts specified in the LLP agreement, and they bear the penalties imposed on the LLP for a contravention.

Eligibility for appointment.

1. Who: only individuals can be designated partners. Where a body corporate is a partner, the individual it nominates may serve; an LLP with only corporate partners therefore needs at least two such nominees.
2. How many and where resident: there must be at least two, and one of them must be resident in India, which means having stayed in India for at least 120 days in the financial year. Example: an LLP of four partners, two of whom work abroad, satisfies the rule by designating one partner who has stayed in India for 120 days or more in the current financial year alongside one of the others, but not by designating two partners neither of whom has spent 120 days in India in that year. Where a partner lives makes no difference by itself; the count of days in India during the financial year decides.
3. Formalities: the person must first give the LLP his prior consent to act as designated partner, in the prescribed form and manner (s. 7(3)), and must hold a Designated Partner Identification Number (s. 7(6)); once he is appointed, the LLP files his particulars with the Registrar, in the prescribed form and manner, within thirty days of the appointment (s. 7(4)). 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.
4. Fit to be a partner at all (s. 5): someone a court of competent jurisdiction has found to be of unsound mind (while that finding is in force), an undischarged insolvent, or a person whose insolvency application is pending cannot be a partner, and so cannot be a designated partner who is himself a partner. (A body corporate's nominee under point 1 acts without becoming a partner, so this bar does not reach him; rule 9 below does.)
5. Rule 9 of the LLP Rules, 2009 adds four bars to appointment: a conviction under section 30 of the Act; a conviction for an offence involving moral turpitude with a sentence of six months' imprisonment or more; having been declared insolvent in the last five years; or suspending payment to creditors now, or having suspended it at any time in the last five years, without having made a composition with them within that period. Rule 9(2) lets the Central Government lift the insolvency and suspended-payment bars (clauses (a) and (b) of rule 9(1)) through a notification in the Official Gazette, either generally or for the LLPs it names.