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CA Intermediate · Corporate and Other Laws · The Limited Liability Partnership Act, 2008

Meera, Nikhil and Omkar are partners of Kaveri Advisory LLP. Omkar has been declared a person of unsound mind by a competent court. Meera and Nikhil say the LLP must be wound up because a partner has lost capacity. What is the correct legal position under the LLP Act, 2008?

The LLP continues. An LLP is a body corporate with perpetual succession, so a partner becoming of unsound mind does not dissolve it or require winding up. His continuing status is dealt with under the LLP agreement, and the LLP's existence is unaffected.

  1. AThe LLP must be wound up since all partners must be of sound mind at all times
  2. BOmkar automatically ceases to be a partner and the LLP is dissolved
  3. CThe LLP continues; unsoundness of mind of a partner does not by itself dissolve the LLP, and the LLP agreement governs his statusCorrect
  4. DThe LLP continues only if the Registrar gives written permission

Explanation

An LLP is a body corporate with perpetual succession. A change in partners, including incapacity of a partner, does not affect its existence, rights or liabilities. Winding up is not triggered by this. The option requiring dissolution ignores perpetual succession.

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