CA Intermediate · Corporate and Other Laws · The Limited Liability Partnership Act, 2008
Tanvi, a partner of Orion Designs LLP, acted with intent to defraud a creditor in carrying on the LLP's business. The LLP incurred a liability to that creditor. Which statement is correct under the LLP Act, 2008?
The LLP is liable for the wrongful act of its partner in the course of business, but Tanvi is also personally liable for her own fraudulent conduct, with unlimited liability for the loss. Partners who did not know of or take part in the fraud are not made liable for her independent act.
- AThe LLP alone is liable, and Tanvi has no personal liability at all
- BTanvi alone is liable, and the LLP is never liable for fraud
- CEvery partner of the LLP is personally liable for the fraud, whether or not they knew of it
- DThe LLP is liable, and Tanvi is also personally liable for the fraudulent act with unlimited liability for the lossCorrect
Explanation
The LLP is liable for wrongful acts of a partner in the course of business, but the partner remains personally liable for his own wrongful act. Where the LLP's business is carried on with intent to defraud creditors, those knowingly party to it face unlimited liability. The innocent partners are not liable for Tanvi's independent act, so the option imposing liability on every partner is wrong.
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