LLP agreement is a legal contract that controls the LLPs and their operations. All the partners in a limited liability partnership must obey the clauses of the Agreement. However, LLP agreement can be changed at any time during a year, but you have to seek approval from all the partners. There are various reasons for modification in an LLP agreement. Change in capital, rights, and responsibilities are the top reasons for LLP agreement modification.
If any LLP wants to modify the Agreement's clauses, they have to execute a supplementary agreement as an appendix to the traditional Agreement. This Agreement would be executed by payment of prescribed stamp duty. If you are making any kind of change, then you must notify the registrar of certificate of LLPs. It has to be done within 30 days of the change of the supplementary deed.
Reasons for modification in LLP agreement
There are various reasons for modifying an LLP agreement. However, some of the major reasons for LLP agreement modifications are:
Change in business operation
A Limited liability partnership in India can perform any activity that is not mentioned in the LLP agreement. Thus, as per companies Act, if any LLP wants to change its operations, it has to modify its Agreement and mention its activity. You can change the activity by adding the new activities in the Agreement.
Modification in capital and profit sharing ratio
Money is one of the most crucial needs of any business. It is required to be changed in the next time. Both the capital and profit sharing ratio interconnects from the partner's point of view. Thus, it should be mentioned in the LLP agreement. Any LLP that is increasing its capital must mention the same in a Modified contract. Further, the capital changes are of three types:
1) Addition of funds in LLP
2) Reduction of funds in LLP
3) Change in the ratio of funds introduced by the partners
Modification in the partners' rights and liabilities
The partners and the status of a Limited liability partnership are intact. The functions and liabilities can also be modified. But before changing the liabilities, it must be mentioned in the LLP agreement. The LLP agreement includes the administrative powers and retractions of the partners in a few activities. Thus, any changes in the Agreement must be intimidated in the Agreement.
Modification in the management structure
All the LLPs makes changes in the management structure with the growth in business. Any such changes must mention in the LLP agreement.