Change of object clause of Limited Liability Partnership
Every LLP is incorporated to carry on a certain business activity with a motive to earn a profit. At the time of incorporation, partners decide the main objects of LLP and the same is mentioned in the LLP agreement also. Agreement of the Limited Liability Partnership (LLP) is its charter, which is similar to Memorandum of Association and Articles of Association of a company, which defines the nature of work the LLP is going to do. LLP cannot carry on any business activities which are not mentioned in the LLP agreement.
What are the scenarios when the business activities of an LLP are required to be changed?
- If the partners decide to change the business line completely.
- In the case of the new product line is to be added similar to the existing business of LLP. But if the new product line which is to be added is not related to an existing business then a new LLP has to be incorporated.
- If an LLP wants to take over a firm that is carrying on different business activities.
- In case the government authorities orders due to the change in existing law.
- Whenever the business activity is prohibited under any law.
- Conduct a board meeting of Designated Partners: A board meeting of all the partners is to be conducted for taking the consent of all the partners. Pass a resolution for changing the business activity of the LLP.
- Draft supplementary LLP agreement: When partners decide to amend anything in the existing LLP, then the amendment in the LLP agreement is a must. For altering the object clause, a supplementary deed is to be drafted. This deed must be on the duly notarized stamp paper, signed by all the designated partners and partners in the presence of a witness. While drafting the supplementary deed it is to be noticed that only the object clause needs to be alerted, all other clauses will remain the same.
- Filing an agreement with MCA: The Supplementary LLP agreement must be approved by MCA. For MCA approval, LLP supplementary agreement must be filed in FORM-3 within 30 days of execution of the LLP agreement.
- Approval from MCA: If the altered object clause is according to the law and all the documents are as per requirement then the MCA will approve the form. After approval, the LLP can start new business activities.
- Form filed for information with regard to changes in LLP Agreement is to be selected,
- Then Limited Liability Partnership Identification Number is to be filled
- After that details are to be filled in Part B- For filing information with regard to changes (addition, omission or alteration) in the LLP Agreement.
- Point 18 of the form:- Date of modification of the agreement is to be mentioned which should be the same as supplementary LLP agreement.
- Point 19 of the form:- Whether the change in agreement is on account of change in business activities option.
- Point 20(a) of the form:- Description of business activities, after the change, is to be mentioned
- Point 20(b) of the form:- Business activity code is to be mentioned according to the changes in the objects of LLP.
- Point 20(c) of the form is a description of the main division of industrial activity is an auto-filled option.
- Attach the LLP original agreement as well as the LLP supplementary deed and copy of the resolution passed in the attachments.
- Affix DSC of the authorized designated partner and also the DSC of a practicing professional.
Note: - The form is to be filed within 30days of amendment in the LLP agreement to MCA.
LLP is formed under a law. By following the previously mentioned process, object change of LLP can be a simple procedure. Object change of LLP is where an organization can include or expel it's primary objectives. Registrar of LLP will give the authentication, which will be the definitive proof that each requirement has been satisfied in as for the adjustment of object proviso in the LLP agreement.
Hence, any change in the construction of an LLP must be carried on by following the process specified by law. Such changes must be approved by the MCA. Any changes performed without the approval of MCA is invalid. Partners can change LLP’s business activities any time whenever required with the approval of MCA.
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