A partner joined or left our LLP: how to file Form 4 and what the delay costs
A partner has joined or left your LLP. Form 4 goes to the Registrar within 30 days. Here is who signs, what it needs, and what a late filing costs.
CA Harun Raaj
pvtltd.co
A partner has joined your LLP. Or a partner has left. Now the question is what the Registrar needs to be told, by whom, and by when.
Short answer: the LLP files a notice called Form 4 with the Registrar. The clock is 30 days. This article covers partner admission and exit. A change in the LLP agreement itself (Form 3) is a different filing.
Your situation: the Registrar's record is now out of date
An LLP is a body registered with the Registrar. The public record shows who its partners are. When someone joins or leaves, that record is wrong until you correct it.
The law puts the duty on the LLP, not on the partner who came or went. A limited liability partnership must file a notice with the Registrar within thirty days from the date a person becomes or ceases to be a partner (s.25(2)(a), Limited Liability Partnership Act, 2008). The same 30 days apply to a change in the name or address of a partner (s.25(2)(b), LLP Act 2008).
The notice goes in Form 4 (rule 22(2), Limited Liability Partnership Rules, 2009).
What you can still do today
Three things are worth doing before you open the portal.
1. Fix the date. The 30 days run from the date the person becomes or ceases to be a partner (s.25(2)(a), LLP Act 2008). Get the real date. After incorporation, a person may become a partner by and in accordance with the LLP agreement (s.22, LLP Act 2008). For a leaver, the date depends on how the exit happened (next section).
2. Check the LLP agreement. Who can be admitted, and on what terms, is for the agreement to say (s.23(1), LLP Act 2008). If the admission or exit changes the agreement's own text, that is a separate Form 3 filing within thirty days (rule 21, LLP Rules 2009).
3. Count your designated partners. Every LLP must have at least two designated partners who are individuals, and at least one must be resident in India (s.7(1), LLP Act 2008). If the partner who left was a designated partner, you have a vacancy to fill (see below).
How a person joins or leaves
Any individual or body corporate may be a partner. An individual cannot be a partner if a court has found him of unsound mind, if he is an undischarged insolvent, or if his insolvency application is pending (s.5, LLP Act 2008).
A person may leave in two ways (s.24, LLP Act 2008):
- By agreement with the other partners.
- If there is no agreement on exit, by giving written notice of not less than thirty days to the other partners (s.24(1)).
A person also ceases to be a partner automatically in three cases: on death or dissolution of the LLP, if a competent court declares him of unsound mind, or if he has applied to be adjudged or has been declared insolvent (s.24(2), LLP Act 2008).
Note the two 30-day periods. The resigning partner's notice goes to the other partners. The Form 4 filing is the LLP's notice to the Registrar. They are separate clocks.
The deadline clock
Step by step: filing Form 4
The notice carries the points below. Form 4 was replaced in 2022 (LLP (Second Amendment) Rules, 2022), so open the current Form 4 on the MCA portal, check which attachments it asks for today, and match it against this list.
Step 1. Prepare the consent of the incoming partner. If the notice is about a person becoming a partner, Form 4 must include a statement signed by that person that he consents to becoming a partner (s.25(3)(c), LLP Act 2008; rule 22(3), LLP Rules 2009).
Step 2. If the incoming person will also be a designated partner. An individual cannot become a designated partner without first giving prior consent to act (s.7(3), LLP Act 2008). That consent is given to the LLP in Form 9 (rule 7, LLP Rules 2009). The LLP then reports the particulars to the Registrar in Form 4 within thirty days of the appointment (s.7(4), LLP Act 2008; rule 8, LLP Rules 2009). Every designated partner must also hold a Designated Partner Identification Number, or DPIN (s.7(6), LLP Act 2008). The fee schedule also covers intimation of a DPIN in Form 4 (Annexure A, para 4, LLP Rules 2009).
Step 3. Have a designated partner sign. The notice must be signed by a designated partner of the LLP and authenticated in the manner prescribed (s.25(3)(b), LLP Act 2008).
Step 4. Pay the fee. The fee for Form 4 is set by Annexure A to the LLP Rules 2009 (s.25(3)(a), LLP Act 2008; rule 22(5), LLP Rules 2009). Under the Annexure substituted by the Limited Liability Partnership (Amendment) Rules, 2022 (in force from 1 April 2022), the fee is ₹50 for a small LLP and ₹150 for an LLP that is not a small LLP. A small LLP is one whose contribution does not exceed ₹25 lakh and whose turnover for the preceding year does not exceed ₹40 lakh, or such higher prescribed amounts (s.2(1)(ta), LLP Act 2008). Check the fee shown on the MCA portal at the time you file.
When the LLP will not file: the leaving partner can
A partner who has gone often has no way to make the LLP file. The Act covers this. A person who ceases to be a partner may himself file the notice if he has reasonable cause to believe the LLP may not file it (s.25(6), LLP Act 2008). The Registrar then obtains a confirmation from the LLP. If the LLP gives no confirmation within fifteen days, the Registrar registers the notice made by the leaving partner (proviso to s.25(6), LLP Act 2008).
This matters because of s.24(3). Until the Registrar has been given notice, the former partner is regarded, in relation to anyone dealing with the LLP, as still being a partner. That holds unless the person dealing with the LLP already had notice of the exit (s.24(3), LLP Act 2008). So a leaving partner has a real reason not to wait.
Leaving does not wipe the slate. Cessation does not by itself discharge the former partner from obligations incurred while a partner (s.24(4), LLP Act 2008). Unless the agreement says otherwise, he or his heir gets back the capital he actually contributed plus his share of accumulated profits net of losses, as at the date he ceased (s.24(5), LLP Act 2008).
If you miss the 30 days
Two things can happen. Both are written in the law.
A late fee. A document filed late can still be filed, on payment of an additional fee, without prejudice to any other action or liability under the Act (s.69, LLP Act 2008). The table in Annexure A of the LLP Rules 2009 (as substituted in 2022) says the additional fee depends on the length of the delay and on whether the LLP is small:
(Annexure A, para 8, LLP Rules 2009, as substituted by the LLP (Amendment) Rules, 2022.)
A penalty. If the LLP contravenes s.25(2), the LLP and every designated partner are liable to a penalty of ten thousand rupees (s.25(4), LLP Act 2008). A partner who fails to inform the LLP of his own change of name or address within fifteen days is liable to a penalty of ten thousand rupees (s.25(5), LLP Act 2008).
The late fee and the penalty are separate: the filing is allowed "without prejudice to any other action or liability" (s.69, LLP Act 2008).
Two floors to watch before an exit
Every LLP must have at least two partners (s.6(1), LLP Act 2008). If the number falls below two and the LLP carries on business for more than six months, the sole remaining partner who knows this is personally liable for obligations incurred in that period (s.6(2), LLP Act 2008).
An LLP may appoint a designated partner within thirty days of a vacancy. If none is appointed, or only one remains, each partner is deemed a designated partner (s.9, LLP Act 2008). Breach of s.7(1) attracts a penalty of ten thousand rupees, plus one hundred rupees a day for each day after the first, up to one lakh rupees for the LLP and fifty thousand rupees for each partner (s.10(1), LLP Act 2008). A designated partner is responsible for the LLP's filings and liable for its penalties (s.8, LLP Act 2008).
What not to do
- Do not treat a handshake as the filing. Partners agreeing among themselves does not update the Registrar's record. Form 4 does.
- Do not wait for the leaving partner's papers. The 30 days run from the date of the event, not from receipt of documents (s.25(2)(a), LLP Act 2008).
- Do not forget the incoming partner's signed consent. The notice for an incoming partner must contain his signed statement (s.25(3)(c), LLP Act 2008).
- Do not leave a designated-partner vacancy open past thirty days (s.9, LLP Act 2008).
What to do now
- Next step: Fix the exact date of joining or leaving. Collect the incoming partner's signed consent. Confirm whether a designated partner changes (s.25(2) and (3), LLP Act 2008; s.7(3), LLP Act 2008).
- Deadline: File Form 4 within thirty days from the date the person becomes or ceases to be a partner (s.25(2)(a), LLP Act 2008).
- Consequence of delay: An additional fee that grows with the delay (s.69 and Annexure A, LLP Rules 2009), and a penalty of ten thousand rupees on the LLP and every designated partner (s.25(4), LLP Act 2008).
Have a CA review your facts before you act or file.
FAQs
Who files Form 4 when a partner leaves: the LLP or the partner?
The LLP files it, signed by a designated partner (s.25(2) and (3)(b), LLP Act 2008). If the LLP may not file, the leaving partner can file the notice himself (s.25(6), LLP Act 2008).
Does the new partner need to sign anything?
Yes. Form 4 for an incoming partner must contain his statement, signed by him, that he consents to becoming a partner (s.25(3)(c), LLP Act 2008; rule 22(3), LLP Rules 2009).
What is the Form 4 fee?
Under Annexure A as substituted in 2022, it is ₹50 for a small LLP and ₹150 for others, plus additional fee if late (Annexure A, paras 4 and 8, LLP Rules 2009). Check the figure on the MCA portal before you file.
The partner who left still shows on the Registrar's record. Is he still exposed?
Possibly. Until notice reaches the Registrar or the other person otherwise knows of the exit, he is treated as still a partner for anyone dealing with the LLP (s.24(3), LLP Act 2008).
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