Features of Llp Agreement
It is not necessary to enter into an LLP Agreement as per the LLP Act 2008. In absence of LLP Agreement, the mutual rights of Partners and in relation to LLP will be determined as per Schedule I of the LLP Act 2008.
Features of Standard clauses of Schedule I
- All partners entitled to share equally in the Capital and Profits/losses.
- Indemnity Clause.
- Every Partner shall take part in management.
- No partner shall be entitled to remuneration.
- No partner introduced without consent of all partners.
- All decisions with majority of partners consent.
- Minutes of decisions to be recorded within 30 days.
- Rendering of true accounts & information by all partners.
- All Disputes will be referred to Arbitration Act.
Generally, every business and owners have their own way to manage and to run the Business and therefore, the standard clauses given in first schedule to LLP Act will not be practically acceptable in majority of the cases. Therefore to be on the secure side, it is always advisable to have a legally drafted agreement from qualified professionals.
Features can be inserted in agreement are:
- Form and Manner of Contribution between parties.
- Profit and loss sharing ratio
- Business to be carried on
- Rights and Liabilities of Partner
- Admission and cessation of partners.
- Duties of partners
- Partners accountable/authorized for banking process.
- Specific decisions like Investment, taking/giving loan, disposition of property of LLP etc to be made by majority partners.
- Requirement of disclosure of substantial interest of Partner in transactions to be entered by the LLP.
- Manner of dispute resolution
In case of joint ventures and collaborations, it is always recommended to have clearly drafted LLP Agreement, which defines the rights and duties of all the parties to the Agreement, in order to avoid any dispute in future and smooth running of the business.