BUSINESS ACTIVITY CHANGE IN LLP

Every Limited Liability Partnership is formed with the purpose of carrying on some specific business object with the motive of earning profits. The LLP formed is regulated under the LLP Act. At the time of LLP incorporation, partners have to provide the main object and the same shall be mentioned in the LLP agreement. The LLP cannot carry on any business activities which are not mentioned in the agreement.    In the LLP Act no specific provision is mentioned with regards to the alteration whereas it has been said that if the LLP wants to make any alteration then it must be recorded in the LLP agreement.

The LLP agreement contains the clauses regarding the LLP activity and other clauses for carrying on the business and the procedures to be followed for changing the activity.

Why to change the Business Activity

1. If the partners want to change the business completely. 

2. If partners want to add a new product line in an LLP. Kindly note an LLP can carry on only similar business activities and should be related with the exiting. 

3. If LLP wants to take over a firm which is carrying on different business activities. 

4. In case the government authorities orders as a result of change in prevailing law. 

5. Whenever such business activity is prohibited under any law.

Documents required

Following are the documents required for making changing in the business activity:

1. A certified copy of partner’s consent  

2. Original LLP agreement 

3. Supplementary agreement 

4. Any other documents as required 

Procedure to change main objects of the LLP

1. Check the LLP agreement to verify whether the proposed business is allowable to be carried out by the LLP

2. Partner’s consent must be accorded to make the changes in the LLP agreement.

3. To make the changes in the object clause the supplementary agreement must be drafted. All the partners should duly sign the supplementary agreement in front of witness. The supplementary agreement must be executed on the stamp paper and must be notarized. It is to be considered that in the supplementary agreement only the object clause will be amended and all other clauses will remain in full force therefore, both original and supplementary agreement are important in the LLP.

4. After the execution of the LLP supplementary agreement it must be filed with the MCA in Form 3 within 30 days from the date of execution for the department approval. The form must be certified by the professional i.e. Chartered accountant, company Secretaries or advocates

5. If the supplementary agreement is in order and the objects are permitted as per the provisions of the LLP Act, the department will approve the form and upon the approval the LLP can start carrying on new business activity. 

Conclusion:

LLP is registered with the MCA and has to abide by the provisions of the LLP Act. To make the changes the procedure has to be followed and the same has to be approved by the department. If department approval is not accorded and the carrying the work without taking approval the same shall be declared invalid.

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