IAI Actuarial Core Principles · Business Management · Separate legal personality, directors' duties, shareholders and partnerships
Meera and Nikhil formed a limited liability partnership under the LLP Act, 2008 to provide actuarial consulting. Nikhil negligently gives a client wrong advice, causing a loss. Which statement best describes the position of Meera, who did not take part in or know of the advice?
Meera is not personally liable for Nikhil's wrongful act because an LLP is a separate legal entity and a partner is not answerable for another partner's independent wrongdoing. The LLP is liable, and Meera's capital contribution is at risk.
- AMeera is personally liable to the same extent as Nikhil because all partners are jointly liable
- BMeera is not personally liable for Nikhil's wrongful act, though the LLP is liable and her capital contribution is at riskCorrect
- CMeera is liable only if the LLP is registered outside India
- DMeera is liable because an LLP has no separate legal personality
- Meera's liability is unlimited but only for contractual debts
Explanation
An LLP is a body corporate with separate legal personality. A partner is not personally liable for the independent wrongful act of another partner, and her exposure is generally limited to her agreed contribution. Nikhil remains personally liable for his own wrongful act.
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