• Partnership Dispute (LLP)

I started a a new business with two friends a few years ago. Initially it was all well till we were building the business. At the time of incorporation, the two cleverly avoided me taking up a Designated Partner position in the LLP (reason stated that there can't be more than 2 such positions in the LLP at the time of registration). As a result, I was not given the access to the LLP bank account. I managed to get my status converted to a Designated Partner a little later with a lot of difficulty. However, I soon realized that the two had ganged up against me with an intention of swindling the LLP revenues to their personal accounts. They started transferring money to their respective personal bank accounts & using the account for various other day to day expenses, without my knowledge.

On subsequent discussions, when i asked for financial transparency & an access to LLP bank account, they blocked my access to all business emails/activities and stopped responding to all my requests. Till date I have not been paid a single rupee as Director remuneration, neither any share of profits. Over and above, the two tried to force me into resigning & exiting from the LLP, without any compensation for the work I did for setting it up during initial days. Also, I am not sure if tax fillings etc are being done in time for the LLP as all my accesses have been blocked and a new LLP has recently been formed by the two, to re-divert business revenues to the newly registered entity. 

Q1: How do I safeguard myself from any tax liability/ penalty arising out of lack of compliance by these two
Q2: In what manner the laws can help in this matter. Is it even worth pursuing?
Asked 2 years ago in Business Law

Ask a question and receive multiple answers in one hour.

Lawyers are available now to answer your questions.

5 Answers

You can issue other partners legal notice and seek access to bank statements 

 

2) you can also write to bank to freeze the account t of LLP on account of misappropriation of funds ,refusal to furnish you access to bank statements 

 

3) if there is an arbitration clause invoke the arbitration clause for resolution of all disputes 

Ajay Sethi
Advocate, Mumbai
96960 Answers
7824 Consultations

As the other partners have kept you in dark and this is done with an intention to throw you out of the firm, you can demand your rights in the firm.

You can issue a legal notice to the company demanding the details of business transactions and rendition of accounts.

 

You can also the bank concerned and issue a notice to bank seeking freezing of firm's accounts owing to the dispute and misappropriation etc.

After that you can demand your rights over the share in the profits on the basis of balance sheet of the company.

T Kalaiselvan
Advocate, Vellore
87160 Answers
2340 Consultations

- As per law, no partner can use the fund of the firm without taking the consent of other partners and further cannot transfer the fund in other account . 

- Since, the said partners has transferred the fund of the partnership firm in their personal accounts, then it amounts to cheating and breach of trust , and hence you can lodge a compliant against them under section 420/406/425 and other relevant provisions of law of IPC.

1. You can issue a legal notice for the same.

2. All the partners are bound to comply the clauses mentioned in the partnership deed. 

Mohammed Shahzad
Advocate, Delhi
14523 Answers
221 Consultations

Dear client,  

I started a a new business with two friends a few years ago. Initially it was all well till we were building the business. At the time of incorporation, the two cleverly avoided me taking up a Designated Partner position in the LLP (reason stated that there can't be more than 2 such positions in the LLP at the time of registration). As a result, I was not given the access to the LLP bank account. I managed to get my status converted to a Designated Partner a little later with a lot of difficulty. However, I soon realized that the two had ganged up against me with an intention of swindling the LLP revenues to their personal accounts. They started transferring money to their respective personal bank accounts & using the account for various other day to day expenses, without my knowledge.

On subsequent discussions, when i asked for financial transparency & an access to LLP bank account, they blocked my access to all business emails/activities and stopped responding to all my requests. Till date I have not been paid a single rupee as Director remuneration, neither any share of profits. Over and above, the two tried to force me into resigning & exiting from the LLP, without any compensation for the work I did for setting it up during initial days. Also, I am not sure if tax fillings etc are being done in time for the LLP as all my accesses have been blocked and a new LLP has recently been formed by the two, to re-divert business revenues to the newly registered entity.

Q1: How do I safeguard myself from any tax liability/ penalty arising out of lack of compliance by these two
Q2: In what manner the laws can help in this matter. Is it even worth pursuing?

Anik Miu
Advocate, Bangalore
10178 Answers
120 Consultations

You need to deal with it in accordance of law.you can seek damage control from others to the extent of  damage done by the them

Prashant Nayak
Advocate, Mumbai
32486 Answers
201 Consultations

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer