Section 28 of LLP Act, 2008 : Section 28: Extent Of Liability Of Partner

Explanation using Example

Imagine Sarah and John are partners in an LLP called 'Tech Innovations LLP', which provides IT consulting services. The LLP borrows a large sum of money from a bank for business expansion. Unfortunately, the business does not do well, and the LLP is unable to repay the loan. According to Section 28(1) of The Limited Liability Partnership Act, 2008, neither Sarah nor John is personally liable for the debt incurred by the LLP solely because they are partners. Their personal assets are protected from being claimed by the bank to settle the LLP's debt.

However, if it is discovered that John independently engaged in fraudulent activities that led to financial loss for a client, John can be held personally liable for his wrongful actions under Section 28(2) of the Act. Sarah, on the other hand, would not be personally liable for John's misconduct.