Designated partners: meaning, appointment and eligibility

Designated partners. A designated partner is a partner designated as such under section 7 of the Limited Liability Partnership Act, 2008 (s. 2(1)(j)); the designated partners are the partners who answer for the LLP's statutory compliance.

Eligibility (s. 7; rule 9):

1. Number and residence (s. 7(1)): an LLP needs a minimum of two designated partners who are natural persons, one or more 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.
2. Corporate partners (proviso to s. 7(1)): where some or all partners are bodies corporate, the individual designated partners may be individual partners or persons nominated by the corporate partners.
3. 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.
4. Prescribed conditions (s. 7(5)) and disqualifications (rule 9 of the LLP Rules, 2009): a person cannot be appointed if he (a) has been adjudged insolvent within the preceding five years; (b) suspends, or has within the preceding five years suspended, payment to his creditors without making a composition with them in that time; (c) has been convicted of an offence involving moral turpitude and sentenced to six months' imprisonment or more; or (d) has been convicted of an offence involving section 30 of the Act. Rule 9(2) lets the Central Government remove the disqualification under (a) or (b) by a notification in the Official Gazette, either generally or for the LLPs named in the notification.
5. DPIN (s. 7(6)): every designated partner must obtain a Designated Partner Identification Number from the Central Government, sections 266-A to 266-G of the Companies Act, 1956 applying to it mutatis mutandis. 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 for the DPIN in Form DIR-3, the form under the Companies (Appointment and Qualifications of Directors) Rules, 2014, and a Director Identification Number (DIN) is sufficient for the appointment.

Appointment (ss. 7 and 9):

1. How a person is designated (s. 7(2)): if the incorporation document names the designated partners, they are designated partners on incorporation; if it says that every partner for the time being is to be one, every partner is; and later, any partner may become (or cease to be) a designated partner in accordance with the LLP agreement.
2. Consent (s. 7(3)): no one becomes a designated partner without first giving the LLP his consent in the prescribed form and manner.
3. Filing (s. 7(4)): the LLP files the particulars of each consenting designated partner with the Registrar, in the prescribed form and manner, within thirty days of the appointment.
4. Vacancy (s. 9): the LLP may appoint a new designated partner within thirty days of a vacancy, and s. 7(4) (filing his particulars) and s. 7(5) (the prescribed conditions) apply to that person; if none is appointed, or only one designated partner is left, every partner is deemed to be a designated partner.

Liabilities (s. 8): unless the Act provides otherwise, a designated partner is responsible for doing everything the LLP must do to comply with the Act, including filing documents, returns and statements, and for anything the LLP agreement specifies, and is liable to every penalty imposed on the LLP for a contravention.