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Know about LLP Agreement and change
LLP Agreement may be a fundamental document that governs the LLP and its operations as an entire. The partners need to abide by the clauses laid by it and to not act beyond the scope drawn. An LLP Agreement is often changed any time after incorporation with the mutual agreement of the partners. Among various reasons, change in activities or capital or rights and responsibilities are top to steer change.
To change any of the clauses, a supplementary agreement is executed as an addendum to the first agreement. it’ll be executed by payment of required stamp tax. Any change must be notified to the RoC (LLP) within 30 days of change or execution of the supplementary deed.
Reasons for change in LLP Agreement
- Change commercial activity: An LLP cannot undertake the activities that aren’t included within the agreement. Hence, if you would like to vary the activities modification of the agreement is must task. The activities are often changed by adding new activities or product lines or maybe eliminating the previous ones that are discontinued.
- Change capital and share ratio: Capital is that the most vital need of the business that needs to be increased with passing time and growth of a business. Capital sharing ratio and profit (loss) sharing ratio are interlinked from the partner’s perspectives. To affect both or any of them, executing supplementary deed would be required.
- Change rights and responsibilities of partners: Partners and their status being intact, the rights and responsibilities of the partners are often changed as per their roles and requirements. Administrating powers or restriction on few activities and similar changes are covered mostly while changing such terms.
- Change other clauses: Other important clauses, like jurisdiction of LLP, terms of resignation, notice period, conditions of appointment and removal, change within the duration of the partnership, etc. are often changed as per the need of the partners and business. Addition, alteration or deletion of clauses also can be covered.