Every LLP is formed to carry on a specific business activity with a motive to earn profit. At the time of incorporation of an LLP, partners have to provide the main object of an LLP. Such object must be mentioned in brief in the LLP agreement. An LLP cannot carry on any business activities which are not mentioned in the agreement.
There is no specific provision in the LLP act regarding alteration of objects of LLP. In the rules, if any changes in the LLP agreement, a copy of changed LLP agreement and particulars of change shall me filed with Registrar. The only provision regarding LLP activity is section 11(2) (c) which is in fact matters covered in the LLP incorporation document.
Usually, LLP agreement contain a clause regarding LLP activity and procedures to be followed for changing the activity. Based on the partners understanding, LLP agreement set out procedures to be followed for altering LLP agreement.
After completing the procedures set out in LLP, LLP shall file a copy of revised LLP agreement with respective Registrar of Companies.
What do you mean by Object Change?
The objects of an Object Change of LLP: Complete Overview LLP define the scope and purpose of its operations. These objects are outlined in the LLP Agreement, which is a crucial document that outlines the rights, duties, and responsibilities of partners, as well as the internal functioning of the LLP. Over time, business dynamics, market conditions, and strategic goals may evolve, necessitating a change in the objects of the LLP.
An object change involves altering the activities that the LLP is authorized to undertake as per its initial LLP Agreement. This change can be significant, such as diversifying into new business sectors, or relatively minor, such as modifying the scope of existing activities
Why business activities of an LLP require changes?
- If the partners want to change the business completely.
- In case of partners want to add a new product line in an LLP. Kindly note an LLP can carry on only similar business activities. Hence, if the new product line is not related to an existing business then a new LLP has to be incorporated.
- If an LLP take over a firm which is carrying on different business activities.
- In case the government authorities orders as a result of change in prevailing law.
- Whenever such business activity is prohibited under any law.
How to Change the Object Clause of LLP?
- Board Resolution: The process begins with a board resolution. The partners of the LLP should convene a meeting to pass a resolution proposing the object change. This resolution should detail the reasons behind the proposed change, the new activities to be added, and the modifications required in the LLP Agreement.
- Amendment of LLP Agreement: After passing the board resolution, an amendment to the LLP Agreement is necessary. This amendment should clearly outline the revised objects of the LLP. Partners should review and approve the changes before proceeding.
- Consent of Partners: All partners of the LLP should provide their written consent to the proposed object change. This ensures that all partners are in agreement with the modifications and understand their implications.
- Filing with the Registrar: The LLP must file Form 3 with the Registrar of Companies (RoC) within 30 days from the date of passing the board resolution. This form includes the details of the object change, along with the revised LLP Agreement as an attachment.
- RoC Approval: The RoC examines the filed documents and, if satisfied, approves the object change. The RoC will then issue a Certificate of Incorporation with the updated objects.
Implications of Object Change
- Legal Standing: Once the object change is approved, the LLP can engage in the new activities outlined in the revised LLP Agreement without any legal hurdles.
- Third-Party Agreements: The LLP must review and amend any existing contracts, agreements, or licenses that were based on its previous objects. This ensures that the LLP remains compliant and doesn’t breach any contractual obligations.
- Tax and Regulatory Compliance: The LLP should evaluate if the new activities result in changes to its tax liabilities or regulatory obligations. Registration with relevant regulatory authorities might be necessary for certain sectors.
- Liability and Risk: While LLPs offer limited liability protection, partners should be aware that the new activities might introduce different risks. A comprehensive risk assessment should be conducted before finalizing the object change.
FAQs
What is meant by an Object Change in LLP?
An Object Change in an LLP refers to altering the purpose or business activities for which the LLP was originally formed. This change requires an amendment to the LLP agreement and must be communicated to the Registrar of Companies (RoC) for updating the records.
Why would an LLP change its object?
- Expansion of business activities: If the business wants to enter new sectors or start new services.
- Diversification: When the LLP wishes to diversify into a different industry or area.
- Rebranding or restructuring: To align with the LLP’s long-term strategy or goals.