When it comes to the formation and management of the business, the partnership has proven to be the best business structure among others. It has become the most preferred choice for small businesses, due to its minimal compliance requirements and simple dissolution rules. When two or more individuals come together intending to make a profit from common business activity that’s when it is known as partnership.
There are different kinds of business structures in India, such as LLP, sole proprietorship, one-person company, etc. But the most preferred form of business among the entrepreneurs is LLP, due to its limited liability on the partners. online LLP formation can be done online as well with internet connectivity along with required document copies. Apart from that registration for partnership firm can be done via online mode as well, it is governed under the partnership act, 1932. All you need is required documents copies and general information for online registration.
A partnership deed will govern the work and terms of the partnership firm, which is implemented at the time of the establishment itself. Nonetheless, during the course of the partnership, many times need arises to make a few amendments in the terms of the partnership deed. These modifications could be possible via appendage to the original partnership deed.
Now, let’s look into some of the instances where change needs to be brought in the partnership agreement;
– Change in business activities – this may contain an alteration, addition, or removal of business activities carried on by the partnership firm.
– Change in the name or the business place – partners can mutually determine to change the name of the partnership and business place as and when needed. While doing so, a change in the partnership deed along with the PAN card and other such documents has to be changed beneath the new name of the firm.
– Change in capital contribution – capital works as a blood of the business system and that’s why sometimes a need arises to make changes in that as well to keep running regular work of the firm. Though working capital can be infused frequently, fixed capital also waxes and wanes once in a while.
- These changes could happen due to;
- Adding capital to the partnership.
- Deducting capital in the partnership.
- Alteration in the capital ratio introduced by the partners.
– Change in T&C – any kind of change in the terms of partnership is included here. It contains the change in the form of;
- Adding a partner.
- Partner’s appointment.
- Partner’s expulsion.
- Partner’s retirement.
- Partner’s resignation.
– Change in P&L sharing ratio – The P&L ratio is an interest matter for the partners and solely relies on the mutual assent of the partners. As and when they feel to make changes, it has to be proceeded by partnership deed change.
– Changes in rights and responsibilities – the rights and responsibilities of the partners are included in the partnership deed. Any changes in that need to be brought in the partnership deed first.
– Variegated changes – any other modification whether an alteration, addition, or deletion of a clause in the partnership agreement.
– Change in duration of partnership – partners can mutually determine whether to extend or revise the dissolution date even after the online partnership firm registration which requires them to serve specific purpose on which partnership was incorporated.
– Change in management structure – sometimes need arises in the business to make certain changes in the management of the partnership, related to designations. To do so one should make amendments in the partnership deed.
It is binding on the partners to make proposed changes as mentioned above before modifying anything on the partnership deed effectively. These changes could be made with an agreement called a supplementary agreement to the original partnership deed. Here is the guide which partners need to follow to do so.
First step – mutual assent of the partners.
Here, the first step in modifying is to ponder over the proposed changes and their repercussions to seek the assent of the partners. Without such assent from the partners, changes will not be possible in the partnership deed. Before proceeding to counsel or prepping the deed change, partners should make sure that everyone is on the same table and are interested in modifying.
Second step – composition of the supplementary deed.
Partners will have to prepare a supplementary deed or hire an expert who can assist in this matter, based on the requirements of change. Experts will help you to draft the deed concerning other provisions and consequences. As the draft is prepped and partners’ assent is taken after review, then one can only proceed with the implementation of the agreement.
Third step – implementation of supplementary partnership deed.
The implementation of the deed would involve several formalities to be completed by the partners. The deed may be implemented for change in the capital or another domain. When it is about bringing change in the capital of the firm, the stamp duty payable for implementation of the deed will be calculated based on additional capital or the change. The rates of attracted duty are ordered by the concerned state stamp act. If there’s no modification in the capital, then the deed is implemented by payment of the appropriate stamp duty.
In the supplementary deed, partners will have to put their signatures at the respective place along with that they have to put their initials on the rest of the pages. The deed is also needed to be attested by at least two witnesses. Such witnesses on the agreement can be any individual other than the parties to the agreement. The signed deed then needed to be notarized by the competent person.
Fourth step – submission with RoF.
When the partnership firm is already registered with the RoF (registrar of firm) of the concerned state, then partners will have to submit the supplementary deed along with the applicable form to the RoF. The process will be different from state to state, here you can look at some of the general pointers. A whole application of modification is submitted in the prescribed form to RoF, along with the application, the copies of the following documents are needed to be attached.
– Supplementary agreement and original partnership deed, if any implemented earlier.
– Supplementary deed as implemented by the partners.
– If it contains the change of partners, the ID proof and address proof of the partners.
– When the place of business has been altered, the address proof of the new place is given along with the rent agreement (if applicable) and NOC from the owner.
A partnership deed performs the work as a spine of the partnership firm. As we have discussed above, it can be altered or modified at any time as per the business requirements or partners’ willingness. The crucial thing here is, to get the assent from the partners in form of their signature on the deed. The supplementary deed will continue to work in force till the validity of the original partnership deed or validity as expressed in it. The partnership deed and appendage hence at any time should not overrule the provisions of the partnership act, 1932, and any other act concerned with partnership from time to time.