Designated partners and their disqualifications

Designated partners (ss. 2(1)(j) and 7, Limited Liability Partnership Act, 2008). A designated partner is any partner designated as such under section 7. The provisions are:

1. Every LLP must have two or more designated partners who are individuals, at least one of them must be resident in India.
2. Where all the partners are bodies corporate, or some are individuals and some bodies corporate, at least two individuals who are partners or nominees of the bodies corporate act as designated partners.
3. "Resident in India" means someone who has stayed in India for not less than 120 days during the financial year.
4. Example: in an LLP with five partners, two of them non-resident, designating only the two non-residents would not do; at least one designated partner must be one of the residents.
5. DPIN. An individual who is to be appointed a designated partner of an existing LLP applies electronically in Form DIR-3 for a Designated Partner Identification Number; a Director Identification Number is sufficient for the appointment (rule 10(1), LLP Rules, 2009).
6. Consent and filing. No individual becomes a designated partner unless he has first given the LLP his prior consent to act as such, in the prescribed form and manner (s. 7(3)); 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)).

Disqualifications. A designated partner who is himself a partner must first be capable of being one (a body corporate's nominee under point 2 acts without becoming a partner, so this bar does not reach him; rule 9 below does): under section 5 an individual is not capable of becoming a partner if he has been found of unsound mind by a competent court and the finding is in force, is an undischarged insolvent, or has applied to be adjudicated insolvent and the application is pending.

Rule 9(1) of the LLP Rules, 2009 adds that a person cannot be appointed a designated partner if he:

1. has been adjudged insolvent at any time in the last five years;
2. has suspended payment to his creditors, now or at any time in the last five years, and has not within the preceding five years made a composition with them;
3. has been convicted by a court of an offence involving moral turpitude and sentenced to imprisonment for not less than six months; or
4. has been convicted by a court of an offence involving section 30 of the Act.

Under rule 9(2) “the Central Government may, by notification in the Official Gazette, remove” a disqualification under grounds 1 or 2, generally or for the LLPs named in the notification.