In Limited Liability Partnership Act the liability of partner is limited upto the amount of contribution mentioned in LLP agreement. A partner is personally liable for his own wrongful act i.e. act which is not authorized by LLP or for fraud on his part. Now to determine what is authorized and what is unauthorized act one has to go through documentary evidence about authorization being made.
The Limited Liability Partnership Act is silent about the method of decision making and recording thereof in authorized format. This is potential area for raising disputes. The Companies Act has under series of sections defined what are the powers of Shareholders and what are the powers of Directors. The Companies Act has also specified two ways of taking and recording decisions (in case of Board Meeting) i. e. by way of meeting and circular resolution.
It also contains lot of sections to decide the validity of:
calling meeting e.g. Notice/ length of notice
holding meeting e.g. quorum, chairman etc.
decision making mechanism e.g. ordinary resolution/ special resolution / unanimous consent
recording of evidentiary value of those recordings e.g. section 193 minutes of proceedings of general meetings and of board meetings and other meetings, section 194 minutes to be evidence.
All these provisions are absent in Limited Liability Partnership Act and hence Limited Liability Partnership would depend upon on the stipulations mentioned in LLP agreement for these matters. Clause 9 of the First Schedule of Limited Liability Partnership Act, 2008 states that every Limited Liability Partnership shall ensure that decisions taken by it are recorded in the minutes within thirty days of taking such decisions and are kept and maintained at the registered office of the Limited Liability Partnership but applicability of Clause 9 to Limited Liability Partnership is not mandatory.
Hence, the Limited Liability Partnership Act should be amended and should contain wide provisions for conducting meetings, decision making mechanism, appointment of chairman, quorum, and documentation of decisions taken in a meeting as we have seen the importance of documentary evidences in case of Limited Liability Partnership.