The Chartered Accountant
The Chartered Accountant
The Chartered Accountant
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If the partners do not execute the partnership<br />
agreement, the relationship between the partners<br />
will be governed by the First Schedule to the LLP<br />
Bill. This Schedule provides that mutual rights<br />
and duties of partners of LLP shall be determined<br />
as under in the absence of a written<br />
agreement. Even if there is a written agreement,<br />
but there is no specific mention about any of the<br />
following matters, such matters will be governed<br />
by the following provisions:<br />
(i) All the partners of LLP are entitled to<br />
share equally in the capital, profits and losses<br />
of the LLP.<br />
(ii) <strong>The</strong> LLP shall indemnify each partner in<br />
respect of payments made and liabilities<br />
incurred by him in relation to the business<br />
of LLP.<br />
(iii) Every partner shall indemnify the LLP<br />
for any loss caused to it by his fraud in the<br />
conduct of the business of LLP.<br />
(iv) Every partner may take part in the management<br />
of the LLP.<br />
(v) No partner shall be entitled to remuneration<br />
for acting in the business or management<br />
of the LLP.<br />
(vi) No person may be introduced as a partner<br />
without the consent of all the existing partners.<br />
(vii) Any matter or issue relating to the LLP<br />
shall be decided by resolution passed by a<br />
majority in number of the partners, and for<br />
this purpose, each partner shall have one<br />
vote. However, no change may be made in<br />
the nature of business of the LLP without<br />
the consent of all the partners.<br />
(viii) Every LLP shall record the decisions taken<br />
by it in a minute book within 30 days and<br />
keep the minute book at the registered office.<br />
It appears that this refers to the decisions<br />
as stated in (vii) above.<br />
(ix) Each partner shall render true accounts and<br />
full information of all things affecting the<br />
LLP to other partner or his legal represen-<br />
DECEMBER 2008 1018 THE CHARTERED ACCOUNTANT<br />
CORPORATE AND ALLIED LAWS<br />
LLP with more than 20 persons can be formed by <strong>Chartered</strong> <strong>Accountant</strong>s<br />
for carrying on profession as Management Consultants. Similarly, LLP with<br />
unlimited number of partners can be formed for carrying on any business<br />
or profession.<br />
tatives.<br />
(x) If a partner, without the consent of the<br />
LLP, carries on any business of the same<br />
nature as and competing with the LLP, he<br />
must account for and pay over to the LLP<br />
all profits made by him in that business.<br />
(xi) Every partner shall account to the LLP for<br />
any benefit derived by him without the consent<br />
of the LLP from any transaction<br />
concerning the LLP or from any use by<br />
him of the property, name or any business<br />
connection of the LLP.<br />
(xii) No Partner can expel any partner unless a<br />
power to do so has been conferred by express<br />
agreement between the partners.<br />
(xiii) All disputes between the partners which<br />
cannot be resolved in terms of the LLP<br />
agreement shall be referred to Arbitration<br />
under the provisions of Arbitration and<br />
Conciliation Act, 1996.<br />
Any person may join the LLP as a partner if all<br />
partners agree to admit him as a partner. Similarly,<br />
a partner will cease to be a partner on his death,<br />
retirement or on winding up of the company or<br />
LLP which is a partner. It is also provided that<br />
if a partner is declared to be of unsound mind<br />
or is declared to be insolvent, he will cease to be<br />
a partner of LLP. For this purpose, the partners<br />
will have to execute a fresh partnership agreement<br />
recording the terms and conditions of the partnership<br />
with revised constitution. Intimation about<br />
admission of new partners or retirement of a<br />
partner will have to be given to the ROC in the<br />
prescribed from within 30 days.<br />
<strong>The</strong> partnership agreement may provide for payment<br />
of interest on capital of partners or remuneration<br />
payable to the partners. Further, the<br />
agreement will have to provide the share of each<br />
partner in profits or losses of LLP. <strong>The</strong> conditions<br />
relating to payment of interest, remuneration<br />
or share in profits or losses can be changed by<br />
amendments in the partnership agreement.<br />
<strong>The</strong> rights of a partner to share profits or losses