Contents of an LLP agreement
A well structured and drafted LLP agreement is very much required for the successful functioning of an LLP. Since an LLP is not a company and provisions of the company law is not applicable to an LLP, the LLP agreement must address all corporate structure related issues in the LLP agreement.
CompaniesInn has developed customized LLP agreements after careful study of the LLP Act and Rules. Our standard LLP agreement contains the below mentioned provisions:
1. Name of the LLP
The name of the LLP shall end with LLP or Limited Liability Partnership as per the provisions of the LLP Act.
2. Date of the agreement and parties of agreement
Since the LLP agreement is executed after incorporation and as per incorporation, the same needs to be executed within 30 days of incorporation, the date of the LLP agreement must be a date within 30 days from the date of incorporation. As per the LLP Act, an LLP agreement is an agreement between partners of LLP or LLP and partners; hence, the parties of the LLP agreement can be all partners or LLP and all partners. For our agreement, the parties are the LLP and its partners.
3. Statement of background
This section describes incorporation details, state of registration, activities of LLP, etc.
3. Introductory provisions
Definition of terms used in the LLP agreement, name of the LLP and future name changes, initial partners, new partners admission, business activities, power of LLP, duration, management, accounting, auditing, etc.
4. Partners’ contribution and method of contribution
How each partners contribute, whether they can take back the contributed amount, interest on contribution, etc.
5. LLP record keeping and bank arrangement
Method of keeping LLP books and records
6. Allocation and distribution
How profit of the LLP allocated among the partners and how distribution including interim distribution or final distribution in the LLP
7. Capital and current account
What to be credited and debited in each account
8. Disassociation of partner
How a partner needs to be disassociated from the LLP, what are his rights, notice to existing partners, rights over assets of the LLP including termination of a partner from LLP
9. Redemption and cross purchase of rights
How partners’ rights can be redeemed from the LLP, method of readmission, cross purchase, etc.
10. Issue of partnership rights
Fresh issue of rights in the LLP including admission of new partner.
11. Sales, transfer of partnership rights
Procedures for sale of partner rights, transfer of rights, etc. to existing and new partners.
12. Partners’ meetings and voting
How the meeting needs to be conducted, decision-making process and voting rights are covered in this clause
13. Partners’ rights to records
Rights of each partner to inspect records of LLP and copies of the same.
14. Management and fiduciary duty
Who will manage the LLP, how day-to-day management function including fiduciary duty of partners in the LLP
15. Arbitration and general provisions
Method of appointing arbitrator, proceedings, etc.