Test - Limited Liability Partnership Act,2008

Marks-35
Time- 1.5 Hours
Question-1 (4 marks)
Analyzing the role and liabilities of Designated Partners in a Limited Liability Partnership (LLP) under
the LLP Act, 2008, answer the following questions:
(i) In a LLP where all partners are corporate entities, can a corporate body be appointed as a
designated partner?
(ii) If an LLP agreement does not specify the designated partners, whether LLP can be validly formed
without designated partners under the LLP Act, 2008?
(iii) A designated partner of an LLP in India is planning to relocate permanently to another country.
(iv) XYZ LLP was penalized for non-compliance, but one of the designated partners claims he was
unaware of the regulatory requirements. Can he avoid liability?
Question-2 (4 marks)
A, B, C, and D are the partners of Alpha LLP and have equal share in the profits and losses of the LLP.
A has made an agreement to transfer 70% of his share in the profits of Alpha LLP to his daughter X.
X wanted to access information about the trading transactions of Alpha LLP claiming that she is
entitled to the information as she receives a percentage of profits from the LLP. The partners
refused to grant her access. Does X have any remedy against the denial according to the provisions
of the Limited Liability Partnership Act, 2008? Are the partners correct in denying access to X?
Question-3 (4 marks)
NS & Associates LLP was formed in the year 2020 and it was engaged in the business of manufacturing
of plastic parts for automobiles. It constituted of Mr. Naveen and Mr. Suresh as designated partners
who were responsible for obtaining contracts from various automobile manufacturers across the
country for supply of spare parts for vehicles.

In the year 2021, an investigation was ordered by the Tribunal against the LLP in connection with a
financial fraud worth ₹ 50,25,000. Mr. J, one of the Accounts Managers and an employee of the LLP,
was accused by the complainant as one of the perpetrators of the fraud.

The Tribunal levied a penalty of ₹ 1,25,000 to be paid by Mr. J on his conviction. Mr. J approached the
Tribunal and provided vital information about the other black sheep involved in the fraud, thus aiding
in the investigation process. The Tribunal is considering providing some relief in the penal action taken
against him, while the LLP is planning to suspend Mr. J from service for this act.

Considering the provisions of the Limited Liability Partnership Act, 2008:

(i) Decide whether the Tribunal can waive off or reduce the penalty imposed by it on Mr. J?
(ii) Can the LLP suspend Mr. J from service for commission of the act of revealing the name of the
other accused involved in the fraud?
Question-4 (4 marks)
“LLP is an alternative corporate business form that gives the benefits of limited liability of a
company and the flexibility of a partnership”. Explain.
Question-5 (4 marks)
XYZ LLP was registered under the Limited Liability Partnership Act, 2008 (LLP Act) with a name that
was later found to be identical to an existing company's name, XYZ OPC Pvt Ltd. This similarity was not
noticed at the time of registration.
Explain the provisions of the Limited Liability Partnership Act, 2008, in respect of the following:
(i) When the name of LLP is identical.
(ii) Formalities with the Registrar of Companies after name change of LLP.
Question-6 (5 marks)
A dispute among the partners of Limited Liability Partnership (the LLP) jeopardized the stability of
the business. Out of two partners, one due to quarrel, left the LLP. The other partner alone continued
the business of the LLP. You are being expert in law is requested to explain the provisions governing
the LLP being operated by a single partner and its winding up by the Tribunal as per the provisions of
the Limited Liability Partnership Act,2008.

MCQS (2 Marks Each)

DEF LLP is a well-established limited liability partnership engaged in providing consulting services. It
has four partners: A, B, C, and D, each contributing equally to the capital and holding an equal share of
the profits and losses, as detailed in the LLP agreement. The partnership operates smoothly until
Partner A encounters significant financial difficulties due to personal business losses and decides to
transfer his entire share of profits and losses in the LLP to Mr. X, an external investor, in exchange
for financial assistance. The decision, although legal as per the LLP agreement, creates a ripple of
concerns among the other partners.

After the transfer:

• Partner B argues that the LLP must be dissolved because Partner A’s transfer of rights effectively
amounts to exiting the partnership, thus impacting the continuity of the LLP.
• Mr. X, being the transferee, demands active participation in DEF LLP’s decision-making processes and
insists on accessing financial records to monitor his investment, citing the substantial stake he now
holds in the LLP.
• Partner C voices concerns about the potential disruption in the LLP's management structure and
operations, questioning whether Mr. X’s involvement aligns with the LLP’s existing framework and the
provisions of the Limited Liability Partnership Act, 2008.
• Partner D, on the other hand, adopts a neutral stance but raises the issue of whether the LLP
agreement sufficiently addresses such transfers to avoid future disputes.

The situation creates a complex dynamic within DEF LLP, raising questions about the rights of the
transferee, the implications for the partnership's operations, and the legal provisions governing such
transfers under the Limited Liability Partnership (LLP) Act, 2008.

On the basis of above facts and by applying applicable provisions of the Limited Liability Partnership
Act, 2008 and the applicable Rules therein, choose the correct answer of the following Multiple Choice
Questions (MCQs 1-3, of 2 marks each) given herein under:

1. Can Partner A legally transfer their share of profits and losses to Mr. X?
(a) No, Partner A cannot transfer their share without the consent of all other partners.
(b) Yes, Partner A can transfer their share entirely in accordance with the LLP agreement.
(c) No, such transfers are not allowed under the LLP Act.
(d) Yes, but only if Mr. X becomes a partner in the LLP.

2. Does the transfer of Partner A’s share to Mr. X result in the dissolution of DEF LLP?
(a) Yes, because transferring all rights indicates Partner A’s disassociation.
(b) No, because the LLP Act, 2008 does not consider such transfers as grounds for dissolution.
(c) Yes, because all partners must agree to such transfers to avoid dissolution.
(d) No, unless it is explicitly stated in the LLP agreement.
3. Does Mr. X gain any right to participate in DEF LLP’s management or access its financial
records?
(a) Yes, as he now holds Partner A’s share in the LLP.
(b) No, unless expressly allowed by the LLP agreement.
(c) Yes, because it is essential to safeguard his investment.
(d) Yes, as external transferees are automatically included in LLP management.

4. XYZ LLP, a well-established limited liability partnership, had two designated partners, Aditi
and Rajiv. On 15th January, 2025, Rajiv resigned due to personal reasons, leaving Aditi as the
only designated partner in the LLP. The remaining partners were aware of their responsibility
to appoint a new designated partner as per the requirement of the Limited Liability Partnership
(LLP) Act, 2008. However, due to internal disagreements, they failed to appoint a new
designated partner within the prescribed time frame.
On 20th February 20, 2025, the Registrar of Companies (ROC) issued a notice to XYZ LLP,
seeking clarification on its compliance status regarding the appointment of the designated
partner. As per the LLP Act, 2008, choose the correct option if XYZ LLP fails to appoint a
second designated partner within the prescribed time period.
(a) The LLP will automatically be dissolved by the ROC, if one more designated partner is not
appointed by 30th January 2025.
(b) Aditi will be removed as the designated partner, and the LLP will be treated as a normal
partnership firm.
(c) If one more designated partner is not appointed within 30 days of a vacancy, each partner
of XYZ LLP will be deemed a designated partner and will be held responsible for compliance
requirements.
(d) XYZ LLP will be fined ` 10,00,000 immediately for non-compliance, and the ROC will appoint
all new designated partners.

5. Bhavesh, Yash and Chirag incorporated a Limited Liability Partnership for doing the business
of trading of timber under the name Solid Lakkad LLP. Chirag has shifted his residence from
12, Block C, Kamla Nagar, Agra to 808, Sector 1, Bodla, Agra on 16th November, 2023. Chirag
informed the firm about change of his address on 20th November, 2023 sending a written
notice. Now, by which date Solid Lakkad LLP is required to file a notice with the registrar?
(a) 01st December, 2023
(b) 05th December, 2023
(c) 16th December, 2023
(d) 20th December, 2023

BEST OF LUCK!!