CA Intermediate · Corporate and Other Laws · The Limited Liability Partnership Act, 2008
Zenith Logistics LLP carried on business with intent to defraud its creditors. A creditor, Mr. Iyer, seeks to recover dues. Which statement is correct under the LLP Act, 2008?
Only those who knowingly took part in carrying on the business with intent to defraud creditors are personally liable, without limit, for the LLP's liabilities. Innocent partners retain limited liability. Neither designated-partner status nor the LLP's separate existence alone determines this liability.
- ALiability stays limited to the LLP's assets because of limited liability, whatever the intent
- BOnly partners who knowingly carried on the business with intent to defraud are personally liable without limit for the LLP's liabilitiesCorrect
- CAll partners including innocent ones are liable without limit
- DOnly the designated partners are liable, even if they were unaware
Explanation
If any business is carried on with intent to defraud creditors or for a fraudulent purpose, those persons who knowingly were parties to it are personally liable without limit for the LLP's liabilities. Innocent partners keep limited liability. Designated status alone does not decide this liability.
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