A Brief Introduction About the Supplementary Agreement
LLP –Limited Liability Partnership is a relatively new form of business entity in the corporate scenario. This business setup is known to combine the benefits of both the individual company as well as the partnership into a single organization. In this type of business organization, a single partner is not responsible for the negligence or misconduct of the other partner. This is the reason why every partner in this setup has limited liability for the protection of each individual within the given partnership. As it is a business setup, the partners are expected to abide by specific terms & conditions of the supplementary LLP contract or agreement.
The supplementary LLP agreement format is known to contain vital information about the involved business organizations and the respective terms & conditions that each partner is expected to follow. To analyze the level of mutual understanding between the involved partners of an LLP, the supplementary agreement format is required.
Who Takes the Supplementary Agreement?
A typical supplementary agreement is signed between the partners of an LLP –Limited Liability Partnership organization to agree to common grounds of settlement in case of any negligence or misconduct. A supplementary contract is a type of agreement that is agreed upon the parties entering into the contract. The contract is known to provide a means of settling various issues or concerns that might arise out of the series of operations occurring in a partnership.
Purpose of the Supplementary Agreement
As far as this contract is concerned, it is known to establish the right kind of relationship between the partners while protecting their rights. The main purpose of such an agreement is to determine the respective duties, rights, and obligations of the concerned members or partners while governing the working of the LLP. Once the LLP has been formed, the members or partners can execute this agreement in its written form.
The written document is known to contain vital information about the involved partners, the respective capital contribution, working patterns, profit sharing ratio, winding up rules, grievance redressal procedure, and so more.
Contents of the Supplementary Agreement
As far as the contents of the supplementary partnership deed are concerned, this written document is typically known to contain vital information concerning the given Limited Liability Partnership (LLP) organization and its partners. The agreement also specifies the respective rights as well as duties of each partner in the given business setup. Some of the important information to be contained in the contract are:
- Details about the addition of new partners (if any)
- Capital contribution of the new partner
- Mode of the capital contribution made –either through cash, asset, or another form
- Details regarding loss sharing ratio, profits, and others
- Roles as well as the responsibilities of the new partner
- Duties of the new partner
How to Draft the Supplementary Agreement ?
While drafting the supplementary contract for an LLP, it is important to note that you are required to make as well as execute the specific terms & conditions of the contract within 30 days of the formation of the LLP. A well-drafted agreement is a foundation for ensuring the smooth functioning of the given LLP. This is because every business is known to feature a unique characteristic along with the contribution of individual partners in the LLP –right from time, amount of investment, type of investment, and so more. Whenever a new partner is required to be added to the LLP, this agreement format should be drafted by consulting every partner in the LLP.
Negotiation strategies in a typical supplementary contract might be required in some specific cases –especially when some major changes are required to be made to the contract. Making any desired change to the contract is a straightforward process. All you are required to do is to pass a specific resolution that approves the revision of the given agreement. The second step is to file Form 3 with the particular registrar within 30 days of the contract’s amendment. There are several reasons to go for the amendment of the contract –right from addition of some capital in LLP to addition of a new partner, removal of a partner, and so more.
Benefits & Drawbacks of the Supplementary Agreement
One of the major benefits of the agreement is that the existence of a well-written document is known to provide the partners an opportunity to vary as well as exclude the default position that has been imposed by law. Using the same, the partners of an LLP can exercise the contract in subsequent areas, as well. To evade the drawbacks of the agreement like any dispute or misunderstanding, it is recommended to take help from an expert who can help you with understanding the in-depth clauses of the given contract. It should be understood that the LLP agreement, as well as the supplementary contract, are required to be stamped, notarized, and signed properly. This implies that there could be the involvement of a series of complicated legal procedures.
What Happens in Case of a Violation?
There are several grounds for the violation of the supplementary contract. Whether there is an existing dispute amongst the LLP partners or some partner has breached some of the terms & conditions of the contract, the other partner(s) can exercise legal actions against the other partner. There could also be grounds for termination of the contract.
As an LLP contract is legal, it is recommended to hire services from a professional attorney for the best outcomes. A qualified attorney will help you in understanding the specific clauses of the agreement while abiding by the same.