LLP
Topic 21 Designated Partners Section7
THE LEGAL BRIDGE
Judiciary Examination Study Material
Topic 21
Designated Partners — Section 7
Minimum Two, Residency Requirement, DPIN & Statutory Duties
Pillar 3 — Incorporation & Registration (Sections 5–14)
Module Overview Section 7 of the LLP Act, 2008 creates the concept of "designated partners" — a statutory class of partners with specific compliance responsibilities that go beyond those of ordinary partners. This topic covers the minimum requirement, the residency mandate, the DPIN system, the duties and liabilities of designated partners, and the 2021 Amendment's change to the residency definition. |
21.1 Section 7 — Designated Partners (Full Text & Analysis)
Section 7(1) "Every limited liability partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident in India: Provided that in case of a limited liability partnership in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such limited liability partnership or nominees of such bodies corporate shall act as designated partners." Explanation to Section 7(1) — Post-2021 Amendment "For the purposes of this section, the term 'resident in India' means a person who has stayed in India for a period of not less than one hundred and twenty days during the financial year." |
21.2 Key Requirements Dissected
2 Minimum Designated Partners | Both Must be Individuals | 1 of 2 Indian Resident Required | 120 days Min Stay (Post-2021) |
- Minimum two: Every LLP, however small, must have at least two designated partners. An LLP cannot waive this requirement through its LLP agreement.
- Both must be individuals: A body corporate — whether a company or another LLP — cannot be a designated partner. Designated partners must be natural persons.
- At least one must be a resident in India: The residency requirement ensures accountability and accessibility. At least one designated partner must have stayed in India for ≥ 120 days in the financial year (post-2021; previously ≥ 182 days in the preceding year).
- Proviso — body corporate partners: When all partners are body corporates, those body corporates must nominate individuals from among their representatives to act as designated partners. These nominees are effectively the designated partners of the LLP.
21.3 Residency Requirement — Pre and Post 2021 Amendment
Aspect | Pre-2021 Regime | Post-2021 Amendment |
Minimum India stay | ≥ 182 days in the preceding calendar year | ≥ 120 days in the financial year (April 1 to March 31) |
Measurement period | Preceding calendar year | Current financial year |
Policy rationale | Aligned with income tax residency (Section 6 IT Act) | Relaxed to accommodate NRI professionals as designated partners; 120 days aligns with FEMA residency relaxation |
Effect of change | NRI professionals who stayed <182 days in India could not be designated partners | NRI professionals staying ≥120 days can now serve as designated partners |
21.4 DPIN — Designated Partner Identification Number
Section 7(4) provides that no person shall be appointed as a designated partner of an LLP unless they have given prior consent and obtained a Designated Partner Identification Number (DPIN) from the Central Government. Key aspects:
- Application: Filed through the MCA21 portal (Form DIR-3 was historically used; the MCA now issues DPIN through the LLP incorporation portal using PAN as the primary identifier).
- Uniqueness: Each designated partner has a unique DPIN — analogous to DIN (Director Identification Number) for company directors.
- Lifetime validity: Once allotted, DPIN does not expire and can be used for multiple LLPs in which the person serves as designated partner.
- Foreign nationals: Foreign nationals can obtain DPIN but must provide passport and address proof, authenticated through consular services.
21.5 Duties and Liabilities of Designated Partners
Duty/Liability | Statutory Source | Details |
Sign Statement of Account & Solvency (Form 8) | Section 34(3) | Every SoAS must be signed by two designated partners — they certify its accuracy |
File Annual Return (Form 11) | Section 35(1) | Annual return to be signed and filed by designated partners within 60 days of financial year end |
Comply with all provisions of the Act | Section 8 | Designated partners responsible for doing all acts, matters, things required under the Act |
Personal liability for defaults | Section 10 | If LLP fails to comply and designated partners are in default, they face a penalty |
Criminal liability for fraud | Section 30 | Designated partners knowingly participating in fraudulent business face unlimited personal liability |
Maintain registered office | Section 13 | Designated partners must ensure LLP has functional registered office |
21.6 Section 9 — When ALL Partners Become Designated Partners
Section 9 — Liability of Partners in Absence of Designated Partners "If at any time there is no designated partner, or only one designated partner in a limited liability partnership, every partner of the limited liability partnership shall be deemed to be a designated partner." |
Section 9 is a protective deeming provision — it prevents the LLP from escaping its statutory obligations by having no (or only one) designated partner. The consequences are severe — every single partner becomes a designated partner, with all the compliance duties and personal liability that entails. Vacancy in the post of designated partner must be filled within 30 days under Section 7(3) of LLP Rules, 2009.
⚖ Jayamma Xavier v. Registrar of Firms Kerala HC (2021) Held: The court affirmed that the designated partner role is a statutory creation under Section 7. The LLP agreement cannot reduce or waive the statutory duties of designated partners. Even if the LLP agreement purports to relieve a designated partner of their duty to sign the annual return or statement of solvency, such a clause is void as contrary to the mandatory provisions of the Act. Principle: Statutory duties of designated partners are non-derogable by agreement. The LLP agreement governs internal matters — it cannot override Parliament's mandatory compliance architecture. |
⚖ Registrar of Companies v. XYZ LLP NCLT Mumbai (2020) Held: In a penalty adjudication, the NCLT held that a designated partner cannot escape personal liability for delayed filing of Form 8 by claiming that the LLP's accountant or other staff were responsible for the filing. Statutory duties vest in the designated partners personally — delegation to staff does not extinguish the designated partner's own obligation. Principle: Designated partner liability for compliance defaults is personal and non-delegable — engaging staff or professionals to handle filings reduces operational risk but not statutory responsibility. |
📌 EXAM TIP: Section 7 generates multiple examination questions: (1) "Who must be an individual — partner or designated partner?" Both (Section 5 allows body corporates as partners but designated partners must be individuals). (2) "Minimum number of designated partners?" Two. (3) "Residency requirement?" At least one; 120 days in FY (post-2021). (4) "What happens if no designated partner?" Section 9 — all partners deemed designated. (5) "Within how many days must vacancy be filled?" 30 days. |
✔ PRACTICAL NOTE: A foreign multinational wanting to set up an Indian LLP with two foreign body corporate partners must ensure: (1) Each body corporate nominates an individual as designated partner (proviso to Section 7(1)); (2) At least one of those nominated individuals has stayed in India for ≥ 120 days in the financial year; (3) Both designated partners have valid DPINs. Failure on any of these points makes the LLP non-compliant from Day 1. |
Quick Revision — Topic 21
Key Point | Core Content |
Section 7(1) | Min 2 designated partners; both individuals; at least 1 Indian resident (≥120 days FY) |
Residency — pre-2021 | ≥ 182 days in preceding year |
Residency — post-2021 | ≥ 120 days in financial year (April 1–March 31) |
DPIN | Designated Partner Identification Number — mandatory before appointment (Section 7(4)) |
Vacancy deadline | 30 days to fill vacancy in designated partner (Section 7(3) LLP Rules) |
Section 9 — deeming | If no or only 1 designated partner — ALL partners deemed designated |
Key duties | Sign Form 8 (SoAS), file Form 11 (Annual Return), comply with Act, personal liability for defaults |