Change In Capital Contribution of LLP

There are many instances wherein the Designated Partners/Partners might want to increase or decrease the capital contribution of the LLP. Accordingly, in this article, we shall study about the procedure and legal requirements for change in capital contribution of the LLP.

Relevant Provision: Section 23(2) of the LLP Act, 2008 read with proviso of Rule 21(1) of the Limited Liability Rules, 2009

PROCEDURE:

Step 1: Preliminary, for amendment, we need to check what it is written in the LLP agreement with respect to the change in capital contribution of the LLP. In case there is something explicitly mentioned like for example, the requirement of approval of maximum no of partners for increasing the capital, then we have to act accordingly. However, if nothing is mentioned in the LLP Agreement, then it is preferable to take consent of all the partners.

Step 2: Obtain consent of the partners in accordance with the LLP Agreement or unanimous consent, whatsoever and execute the supplemental LLP agreement with the revised capital contribution and the ratio with which it shall be brought.

Step 3: File the supplementary LLP agreement in Form 3 along with the fees. Further, it is required to attach the supplementary LLP agreement in the Form 3 along with the signed copy of consent of all the partners.

Step 4: Track the Form for any resubmission and on approval, the mail from the noreply@mca.gov.in shall come.

FREQUENTLY ASKED QUESTIONS;

Q.1 What will be the stamp duty on which the supplemental agreement shall be executed?

Reply: In case of decrease of capital contribution, no additional stamp duty needs to be paid to the State Government and the LLP agreement can be executed on stamp paper as low as of Rs. 100/- as well.

However, in case of increase in capital, it is very important to pay the difference amount of stamp duty in accordance with the respective state law, if any.

 Q.2 Is it necessary to get the agreement signed by all the partners?

Reply: We need to follow the instructions of the previously executed LLP agreement in this regard. However, if there is nothing mentioned in the previously executed agreements or even otherwise as well, it is always recommended to get the agreement signed by all the partners since all the partners will be effected by such change.

 Q.3 Is it mandatory to get the agreement witnessed and notarized?

 Reply: In order to execute the agreement legally, it is always recommended to get the agreement witnessed and notarized.

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{The author i.e., Mrs. Kajal Goyal is a Company Secretary in Practice and can be reached at (M) +91-9999952595 and (E) cskajalgoyal@gmail.com}