Ministry of Corporate Affairs practically suspended right to be a Designated Partners (DP) for young promoters who want to promote a start-up limited liability partnership. Now, no outsider of corporate India may enter into dream life of corporate India through limited liability partnership route. He needs to promote a company to fulfil his dream.
In our recent discussion “Proposed to be a director – hardships”, we discussed hardships for an individual to be a director in an existing company, company to be incorporated or producer company to be incorporated. The recent amendment in the Companies (Incorporation) Rules, 2014 are also not very good for corporate democracy and reduced chances for a fresh face to be on the board of directors unless controlling directors propose him as directors.
In case of Limited Liability Partnerships, fresh faces are not allowed to promote an LLP or to be a designated partner in an existing LLP. It seems to be a blanket ban except a loophole find out by exploring professionals.
The requirement for DIN:
According to Section 7(6) of the Limited Liabilities Act, 2008, every designated partner of a limited liability partnership shall obtain a Designated Partner Identification Number (DPIN) from the Central Government and the provisions of sections 266A to 266G (both inclusive) of the Companies Act, 1956 (1 of 1956) shall apply mutatis mutandis for the said purpose. Corresponding provisions of Sections 266A to 266G of the Companies Act, 1956 are now in Sections 153 to 159 of the Companies Act, 2013.
Initially, there was a separate process to issue Designated Partner Identification Number (DPIN). General Circular 44/2011 dated 8 July 2011 issued by Ministry of Corporate Affairs merged it with Director Identification Number (DIN). Accordingly, a person, who desires to become a designated partner in a Limited Liability Partnership, has to obtain DIN by filing e-form DIN-1 (Now, Form DIR – 3). Earlier Form DIN-1 and present Form DIR-3 are governed by the Companies Rules, not by the LLP rules.
According to recently amended Rule 9(1) of the Companies (Appointment and Qualification of Directors) Rules, 2014, every applicant, who intends to be appointed as director of an existing company shall make an application electronically in Form DIR-3, to the Central Government for allotment of a Director Identification Number (DIN) along with such fees as provided under the Companies (Registration Offices and Fees) Rules, 2014. [Emphasis added]
Subclause (iiia) of clause (a) of sub-rule (3) of rule 9 mandate a board resolution proposing his appointment in an existing company.
This rule 9(3)(a)(iiia) create a problem discussed in the opening paragraph of this discussion.
{Update dated 17 June 2018: By way of the Limited Liability Partnership (Amendment) Rules, 2018 read with the Companies (Appointment and Qualification of Directors) Third Amendment Rules, 2018 (both dated 12th June 2018 notified on 14th June 2018) government seems to confirm that no fresher entrepreneur shall be allowed to be Designated Partner of an LLP to be incorporated. However, these amendment allows a fresher to be a designated partner of an existing LLP.}
Possible Solution
Subclause (iiia) of clause (a) of sub-rule (3) of rule 9 may be deleted to restore the previous position. The original position (as existing before present amendment) neither render rule 9(1) useless nor create hardship for the person intended to be a Designated Partners or directors without obtaining a proposal from the Board of Directors of any existing company.
AishMGhrana 