What is an LLP Agreement?

An LLP Agreement is a contractual document executed between all the partners of an LLP. The Constitution of the LLP governs the mutual rights, duties, responsibilities, and obligations of the partners and the LLP.

Section 23(1) of the LLP Act, 2008 mandates that an agreement between the partners shall govern the mutual rights and duties of partners and the LLP. In the absence of such an agreement, Schedule I of the LLP Act applies as a default set of provisions.

The LLP agreement includes:

• Name of the LLP and its business objectives
• Details of partners and designated partners
• Capital contributions by each partner
• Profit-sharing ratios
• Governance and decision-making rules
• Provisions for admission, resignation, retirement, or expulsion of a partner
• Dispute resolution mechanism
• Rights, duties, and liabilities of the partners
• Indemnity, confidentiality, non-compete, and force majeure clauses

What is an Amendment in the LLP Agreement?

An amendment in the LLP Agreement refers to any change, addition, deletion, or revision made to the terms of the original LLP agreement.

Legal Framework Governing the Amendment of the LLP

To implement any amendment in the LLP agreement, specific forms must be filed with the MCA.

• Form 3: To report the content of the LLP agreement and any changes made to it.
• Form 4: To notify the appointment, cessation, or change of details of designated or other partners.
• Form 5: To report a change in the name of the LLP.
• Form 15: To report a change in the registered office address of the LLP

Reasons for Amendment in LLP Agreement

LLP agreement can be amended due to several reasons, such as:

1. Admission of a New Partner

When a new individual or a company is added as a partner in the LLP, the LLP agreement must be revised to incorporate:

• The name and details of the incoming partner
• The capital contributed by them
• Their share in profits and losses
• Their role and responsibilities in the LLP
• Any special rights or restrictions applicable to them

2. Resignation, Retirement, or Death of a Partner

When an existing partner leaves the LLP either voluntarily or due to death or incapacity, the LLP Agreement must be amended to reflect the changes in the composition of the partnership. Indemnity and liability clauses are amended to protect the LLP and remaining partners while defining the new responsibilities.

3. Changes in capital contribution

There may be an increase or decrease in the financial contribution by the partners in the LLP. Any change in the capital contribution directly impacts the voting rights, profit or loss sharing ratios, and liability of the partners. Thus, an amendment records:

• Revised contribution by each partner
• Updated total capital of the LLP
• Pro-rata changes in other rights and obligations

NOTE: Capital increment attracts stamp duty under applicable State Stamp Acts, which must be paid before filing Form 3.

4. Reallocation of profit-sharing ratios

Profit and loss sharing ratios are not necessarily linked to capital contributions and may be mutually decided by the partners, and they can be amended due to:

• Change in partners’ roles or responsibilities
• Reward for business development efforts
• Internal restructuring or exit of a partner
• Agreement to reflect sweat equity contributions

The LLP Agreement needs to be amended to incorporate all the changes

5. Changes in the business activities of the firm

The original LLP Agreement outlines the primary and ancillary business activities conducted by the LLP. There may be diversification or a shift in the core business operations of the LLP, for example:

• A consultancy LLP may expand into IT services
• A real estate LLP may include interior design or home financing

In such cases, the agreement must be amended to:

• Include or modify the object clause
• Reflect industry-specific regulation, if it exists
• Clarify the roles of partners in the new business arrangement

6. Change of registered office address

If the original address of the LLP changes, whether within the same city, to another state, or to a new premise, the agreement must be amended to incorporate the latest changes.

NOTE: When there is a change in the registered office address of the LLP, Form 15 needs to be filed with the RoC within 30 days of the change.

7. Change in the LLP’s name

If the LLP undergoes rebranding or changes its legal name, the LLP agreement must be amended to reflect the change.

8, Alteration in the rights and duties of partners

In an LLP, the rights and duties of each partner may evolve. These rights and obligations, whether related to signing authority, operational control, or strategic decision-making, are clearly defined in the LLP agreement to prevent misunderstandings or power imbalances.

Changes in the following responsibilities often lead to such amendments:

• Right to manage specific functions (finance, legal, HR, etc.)
• Access to books of accounts and internal reports
• Obligations towards third-party contracts or compliance
• Allocation of authority to bind the LLP legally
• Limitations on liability or indemnity protections

Without a properly updated agreement, the LLP may expose itself to legal disputes, operational delays, or even regulatory risks, especially if decisions are later challenged by creditors, auditors, or other partners. Hence, any change in the functional role of a partner or redistribution of control should always be documented through a supplementary deed and reported to the ROC.

9. Any modification in clauses relating to governance, decision-making, or dispute resolution

There may be a change in the voting thresholds, introduction of structured escalation mechanisms, adoption of electronic or hybrid meetings of partners, a change in jurisdiction for resolving legal disputes, or introduction of deadlock resolution clauses in the LLP.

It is pertinent to note that these changes are not merely administrative; instead, they directly affect how decisions are made and how internal disagreements are settled. The LLP agreement must be amended to reflect these changes.