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CMA Intermediate · Financial Accounting · Accounting of Limited Liability Partnership

Ravi and Meera are partners in an LLP whose LLP agreement is silent on how profits are shared and on the rights of partners among themselves. Which statement follows from the LLP Act, 2008?

Where the LLP agreement is silent on a matter, the mutual rights and duties of the partners and the LLP are determined by the provisions of the First Schedule to the LLP Act, as stated in Section 23(4). The Registrar does not decide them.

  1. AThe LLP cannot function until the agreement is amended and filed with the Registrar
  2. BThe Registrar decides the mutual rights and duties of the partners
  3. CThe mutual rights and duties are determined by the provisions of the First ScheduleCorrect
  4. DThe rights and duties are determined by the Indian Partnership Act, 1932

Explanation

Section 23(1) makes the LLP agreement the governing document, and Section 23(4) provides that in the absence of agreement on any matter, the First Schedule provisions apply. Neither the Registrar nor the Partnership Act, 1932 fills the gap.

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