Eligibility to be Partner

The eligibility to be a partner in a Limited Liability Partnership (LLP) under the LLP Act, 2008, encompasses several criteria. These criteria ensure that the partners are capable of fulfilling their roles and responsibilities within the LLP.

Eligibility Criteria:

1. Individual Persons
2. Body Corporate
3. Designated Partners
4. Resident Designated Partner
5. Minors

1. Individual Persons

Any individual can become a partner in an LLP if they meet the following conditions:

• Legal Capacity: The individual must be capable of entering into a contract as per the Indian Contract Act, 1872. This means the person must be of sound mind, not disqualified by law, and of the age of majority (i.e., at least 18 years old).
• Solvent: The individual must not be an undischarged insolvent or should not have applied for insolvency.
• Not Convicted: The individual must not have been convicted by a court of any offense involving moral turpitude within the preceding five years.

2. Body Corporate

A body corporate can become a partner in an LLP. This includes:

• Companies: Indian companies incorporated under the Companies Act, 2013, or any previous company law.
• Foreign Companies: Companies incorporated outside India, provided they are authorized to invest in India under the Foreign Exchange Management Act (FEMA) regulations.
• LLPs: Other LLPs can also become partners in an LLP.
• Statutory Corporations: Entities established under an Act of Parliament or State Legislature.

3. Designated Partners

An LLP must have at least two designated partners. Designated partners are responsible for regulatory and legal compliance, maintaining statutory records, and filing documents with the Registrar. The eligibility criteria for designated partners include:

• Individuals: At least one designated partner must be an individual. If all partners are body corporates, then they must nominate individuals as designated partners.
• DIN: Designated partners must obtain a Designated Partner Identification Number (DPIN) or Director Identification Number (DIN).
• Resident Designated Partner: At least one designated partner must be a resident of India, which means they must have stayed in India for a period not less than 182 days during the immediately preceding one year.

4. Resident Designated Partner

As mentioned, an LLP must have at least one designated partner who is a resident of India. This requirement ensures that the LLP has at least one individual within the country who can handle legal and regulatory matters and can be held accountable for compliance with Indian laws.

5. Minors

Minors (individuals under the age of 18) are not eligible to be partners in an LLP. This is because they lack the legal capacity to enter into binding contracts as per the Indian Contract Act, 1872.

Additional Considerations:

1. Disqualification Criteria

Certain conditions can disqualify individuals or entities from becoming partners or designated partners in an LLP:

• Insolvency: An individual who is an undischarged insolvent or has applied to be adjudicated as an insolvent cannot become a partner.
• Conviction: An individual who has been convicted of an offense involving moral turpitude within the last five years is disqualified.
• Court Order: Individuals who are disqualified by a court order from becoming a partner or designated partner in an LLP or any other business entity.

2. Documentation

To become a partner or designated partner in an LLP, certain documentation is required:

• Incorporation Document: Details of partners and designated partners must be included in the incorporation document filed with the Registrar.
• LLP Agreement: The LLP agreement must specify the roles, rights, and duties of the partners.
• DIN/DPIN: Designated partners must have a valid DIN or DPIN.

3. Role of Designated Partners

Designated partners play a crucial role in the functioning of an LLP. They are responsible for:

• Compliance: Ensuring compliance with the provisions of the LLP Act, 2008, and other applicable laws.
• Filings: Filing annual returns, statements of accounts, and other required documents with the Registrar.
• Record Keeping: Maintaining statutory books and records.

Case Laws and Judicial Interpretations:

1. Re Nandlal Jaiswal (1987)

In this case, the Supreme Court of India held that individuals who are undischarged insolvents cannot enter into any business contracts, including becoming partners in an LLP.

2. Vijay Kumar Sharma vs. State of Karnataka (1997)

This case highlighted that individuals convicted of offenses involving moral turpitude within the last five years are ineligible to become partners or designated partners in an LLP.