At the time of Limited Liability Partnership (LLP) incorporation, the partners have to provide the details of the main objects that shall be carried on by the LLP. The same has to be descriptively mentioned in the agreement as well. The LLP cannot carry on any business activities which are not mentioned in the agreement.
When an LLP wants to change its principal business activity, or in the case where LLP want to add more business activities to its current activity, it must record these changes in a supplemental agreement and the same agreement shall be approved with the respective Registrar of Companies (ROC) through the procedure mentioned below. Accordingly, in this article, we shall study about the procedure for change or addition of objects/business activities to an already existing LLP.
REGULATORY FRAMEWORK:
Section 11(2)(c) of the LLP Act, 2008 talks about the LLP activity, which is, in fact matter covered in the LLP incorporation document i.e., LLP Agreement.
PROCEDURE FOR ALTERATION OR ADDITION IN OBJECT CLAUSE OF LLP
1. Check on the already executed LLP Agreement
Before deciding on anything, we need to check whether any restriction with respect to change or alteration or addition of object clause of the LLP is mentioned in any of the earlier executed agreement and the procedure for the same. In case nothing in this regard is mentioned, the general following procedure can be followed.
2. Hold the Partners Meeting
The next step to make changes in object clause is to hold a Meeting with the designated partners, including partners as may be mentioned in the LLP Agreement, to take partner’s approval or consent for change/alteration/addition in business of the LLP.
The resolution shall be passed by all the partners or as per the terms & condition of existing LLP Agreement.
3. Execution of Supplementary Agreement
Draft and execute a supplementary agreement to change the object clause of LLP. In the agreement, only the object clause will be changed and all other clauses will remain in force.
The supplementary agreement must be executed on the stamp paper, notarized and witnessed by at least two individuals.
4. Filing Agreement with the Registrar
The LLP Supplementary Agreement must be filed within 30 days of execution through Form 3 (Information with regard to Limited Liability Partnership Agreement and changes, if any, made therein) along with the prescribed fees.
5. Approval or Rejection
The ROC will approve the form if all the attachments and business activities are as per the law and after receiving an approval, the LLP can start new business activities.
However, in case the business activity is not as per the law, the ROC has the power to reject the form or can raise query for additional information or document.
BUSINESS ACTIVITES RESTRICTED BY LLP
The LLP can be incorporated for doing any legal business activities, be it manufacturing, legal or service industry. However, LLP is restricted from doing NBFC business activities as per the RBI guidelines.
Also, the LLP name guidelines mandates that if the name of the LLP is indicative of activity, LLP activities must relate to the activity indicated in the name.
BUSINESS ACTIVITES WHICH NEED APPRROVAL
Business activities consisting of banking, insurance, venture capital, mutual fund, stock exchange and asset management are allowed provided that in-principal approval from regulatory authorities is ob1tained.
FREQUENTLY ASKED QUESTIONS (FAQ’s)
1. In how many days the Form 3 LLP should be filed with MCA?
Reply: The Form 3 of LLP must be filed within 30 days of execution of Supplementary LLP Agreement.
2. Is additional stamp duty is required to be paid with on Supplementary Agreement?
Reply: The stamp duty has to be paid on supplementary agreement and the amount of stamp duty will differ from state to state.
3. When LLP can start working over their amended business activities?
Reply: The amended activities can be commenced only after getting an approval form ROC.
4. What are the attachments with the Form 3 LLP?
Reply: The attachments with Form 3 LLP shall be as following: –
- Certified copy of the resolution/ consent of partners
- Supplementary agreement.
*****
(The author i.e., Kajal Goyal is a Company Secretary in Practice at M/s. Kajal Goyal and Associates and can be reached at (M) +91-9999952595 and (E) cskajalgoyal@gmail.com)
Author Bio
