41 limited liability partnership bill 2008

8/14/2019 41 Limited Liability Partnership Bill 2008

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LIMITED LIABILITYLIMITED LIABILITYPARTNERSHIP [LLP] BILL, 2008PARTNERSHIP [LLP] BILL, 2008

Revised LLP Bill 2008 passed in Rajya Sabha on October 24,Revised LLP Bill 2008 passed in Rajya Sabha on October 24,2008.2008.


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LIMITED LIABILITY PARTNERSHIP [LLP] BILLLIMITED LIABILITY PARTNERSHIP [LLP] BILL

20082008SYNOPSISSYNOPSIS

I.I. LLP the ConceptLLP the ConceptII.II. Comparison between LLP, Partnership Act & Companies ActComparison between LLP, Partnership Act & Companies ActIII.III. Contents of LLP Bill :Contents of LLP Bill :

Key Definitions under LLPKey Definitions under LLP Nature of LLPNature of LLP Designated PartnersDesignated Partners Incorporation of LLPIncorporation of LLP

Partners & their RelationsPartners & their Relations

Extent and Limitation of Liability of Partners and ContributionExtent and Limitation of Liability of Partners and Contribution Financial disclosuresFinancial disclosures Assignment and Transfer of Partnership RightsAssignment and Transfer of Partnership Rights Conversion to LLP & Foreign LLPsConversion to LLP & Foreign LLPs Compromise, Arrangement or Reconstruction of LLPCompromise, Arrangement or Reconstruction of LLP InvestigationInvestigation Whistle Blowing & Compounding of OffencesWhistle Blowing & Compounding of Offences

Winding Up and DissolutionWinding Up and Dissolution MiscellaneousMiscellaneous

IV.IV. Advantages of LLP A Hybrid VehicleAdvantages of LLP A Hybrid VehicleV.V. New Areas of operations for Company SecretariesNew Areas of operations for Company SecretariesVI.VI. Grey AreasGrey Areas


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LLP the ConceptLLP the Concept

Defined in the LLP Bill as Defined in the LLP Bill as A partnership formed and registered under this Act. [Clause 2(n)]A partnership formed and registered under this Act. [Clause 2(n)]

LLP ALLP A hybrid business entityhybrid business entity combining the features of both a Partnership and a Company:combining the features of both a Partnership and a Company:

Organizational flexibility of PartnershipOrganizational flexibility of Partnership

: No dependence on any statute for the internal: No dependence on any statute for the internal

management of affairs.management of affairs.

Incorporates theIncorporates the limited liabilitylimited liability attribute of a Company.attribute of a Company.

In simpler terms, LLP is aIn simpler terms, LLP is a partnershippartnership, having a, having a legal entity distinct from its partnerslegal entity distinct from its partners..


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COMPARISONCOMPARISONKEY AREASKEY AREAS LLP BillLLP Bill PARTNERSHIP ACTPARTNERSHIP ACT COMPANIES ACTCOMPANIES ACT

RegistrationRegistration CompulsoryCompulsory OptionalOptional CompulsoryCompulsoryMinimum no. ofMinimum no. ofPartners/Partners/

MembersMembers

22

DesignatedDesignatedPartners At leastPartners At least2, out of which one2, out of which oneof them to beof them to beresident in Indiaresident in India

22 2 in case of Pvt.2 in case of Pvt.Co.Co.

7 - in case of Public7 - in case of PublicLtd. co.Ltd. co.

Maximum no. ofMaximum no. ofPartners/Partners/

MembersMembers

No limitNo limit 10 in case of banking10 in case of bankingbusiness,business,

20 in case of other20 in case of otherbusinessbusiness

50 - in case of Pvt.50 - in case of Pvt.Co.Co.

No limit in case ofNo limit in case ofPublic Co.Public Co.

PerpetualPerpetualSuccessionSuccession

YesYes The Partnership FirmThe Partnership Firmwould be dissolved uponwould be dissolved uponthe death of athe death of a

partner/partnership atpartner/partnership atWill.Will.

YesYes

Separate LegalSeparate LegalEntity fromEntity fromPartners/Partners/

MembersMembers

YesYes NoNo YesYes

LiabilityLiability LimitedLimited UnlimitedUnlimited LimitedLimitedManagementManagement As per LLPAs per LLP All partners are entitledAll partners are entitled Management of theManagement of the


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COMPARISON - CONTD.COMPARISON - CONTD.

KEY AREASKEY AREASLLPLLP PARTNERSHIP ACTPARTNERSHIP ACT COMPANIES ACTCOMPANIES ACT

CharterCharter LLP Agreement/ FirstLLP Agreement/ FirstSchedule in absence ofSchedule in absence ofLLP Agreement.LLP Agreement.

Partnership Deed.Partnership Deed. Memorandum &Memorandum &Articles of AssociationArticles of Association(MoA & AoA).(MoA & AoA).

IncorporationIncorporationDocumentsDocuments

Only two DocumentsOnly two Documentsrequired:required:

-Incorporation-IncorporationDocumentDocument

-Statement from aStatement from aprofessional.professional.

-LLP Agreement to filedLLP Agreement to filedwith RoC afterwith RoC afterincorporation.incorporation.

Partnership Deed.Partnership Deed. -MoA & AoAMoA & AoA

-Form 32Form 32

-Form 18Form 18-Form 1Form 1

-Power of AttorneyPower of Attorney

PrincipalPrincipalAgentAgentRelationshipRelationship

-A partner acts as an-A partner acts as anAgent of the LLP only,Agent of the LLP only,not other partners.not other partners.

Each partner has impliedEach partner has impliedauthority to bind his co-authority to bind his co-partners by acts donepartners by acts donewithin ordinary course ofwithin ordinary course ofbusiness.business.

No such relationshipNo such relationshipexists.exists.

Transfer ofTransfer of

interestinterestPartner can be ceasedPartner can be ceased

to act as such byto act as such byvirtue of an agreementvirtue of an agreement

No such provision exists.No such provision exists. Pvt. Co. Not FreelyPvt. Co. Not Freely

transferabletransferable

Public Co. - FreelyPublic Co. - Freely


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COMPARISON - CONTD.COMPARISON - CONTD.

KEY AREASKEY AREASLLPLLP PARTNERSHIP ACTPARTNERSHIP ACT COMPANIES ACTCOMPANIES ACT

RemunerationRemuneration/ Profit/ ProfitSharingSharing

As per First ScheduleAs per First Scheduleto the Act, noto the Act, noremuneration toremuneration topartners is to be paid.partners is to be paid.

No provision for paymentNo provision for paymentof remuneration toof remuneration topartners.partners.

Only profit/ Loss sharingOnly profit/ Loss sharingis there.is there.

Remuneration toRemuneration toDirectors governed byDirectors governed byprovisions of the Act.provisions of the Act.

AuditAudit To be mandatoryTo be mandatorycarried out on ancarried out on anannual basis.annual basis.

Tax Audit is requiredTax Audit is requiredonly in case ofonly in case ofpartnership whose totalpartnership whose totalturnover exceeds Rs. 40turnover exceeds Rs. 40lacs.lacs.

It is mandatory.It is mandatory.

TransactionsTransactionsby Partners/by Partners/

DirectorsDirectors

Partners are entitledPartners are entitledto freely transact withto freely transact with

the LLP.the LLP.

Permissible.Permissible. Restrictions areRestrictions areimposed on Directorsimposed on Directors

for transactions withfor transactions withthe Company.the Company.

Annual FilingAnnual Filing A Statement ofA Statement ofAccount and Solvency ,Account and Solvency ,to filed within the timeto filed within the timeas may be prescribed.as may be prescribed.

Annual Return to beAnnual Return to befiled wuithin 6o daysfiled wuithin 6o days

No such provisions exist.No such provisions exist. Balance Sheet andBalance Sheet andProfit & Loss AccountProfit & Loss Accountand Annual Return toand Annual Return tobe filed within 30be filed within 30

days & 60 days fromdays & 60 days fromthe date of AGM,the date of AGM,


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KEY DEFINITIONS UNDER LLP BILLKEY DEFINITIONS UNDER LLP BILLBody CorporateBody Corporate : Clause 2(d) - A Company as defined in sec. 3 of the Companies Act, 1956: Clause 2(d) - A Company as defined in sec. 3 of the Companies Act, 1956

& includes & includes

(i)(i) A LLP registered under this Act;A LLP registered under this Act;(ii)(ii) A LLP incorporated outside IndiaA LLP incorporated outside India

(iii)(iii) A Company incorporated outside IndiaA Company incorporated outside India

but excludesbut excludes

Corporation soleCorporation sole (Not defined in this Act)(Not defined in this Act) Co-operative society registered under any law for the time being in forceCo-operative society registered under any law for the time being in force

Any other body corporate (not being a company as defined in Section 3 of theAny other body corporate (not being a company as defined in Section 3 of theCompanies Act, 1956 or a LLP as defined in this Act), which the Central GovernmentCompanies Act, 1956 or a LLP as defined in this Act), which the Central Government

may, by Notification in the Official Gazette, specify in this behalf.may, by Notification in the Official Gazette, specify in this behalf.

Foreign Limited Liability PartnershipsForeign Limited Liability Partnerships : Clause 2(m) A LLP incorporated or registered outside: Clause 2(m) A LLP incorporated or registered outsideIndia which establishes a place of business within India.India which establishes a place of business within India.

Limited Liability Partnership AgreementLimited Liability Partnership Agreement : Clause 2(o) - Any written agreement between the: Clause 2(o) - Any written agreement between thepartners of the LLP or between the LLP and its partners which determines the mutualpartners of the LLP or between the LLP and its partners which determines the mutualrights and duties of the partners and their rights and duties in relation to that LLP.rights and duties of the partners and their rights and duties in relation to that LLP.

PartnerPartner : Clause 2(p) - Any person who becomes a partner in the LLP in accordance with the: Clause 2(p) - Any person who becomes a partner in the LLP in accordance with thelimited liability partnership agreement.limited liability partnership agreement.

TribunalTribunal : Clause 2(u) NCLT constituted under Section 10FB (1) of the Companies Act, 1956.: Clause 2(u) NCLT constituted under Section 10FB (1) of the Companies Act, 1956.


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NATURE OF LLPNATURE OF LLP

(CHAPTER II CL.3-6)(CHAPTER II CL.3-6) A Body corporate incorporated under this Act.A Body corporate incorporated under this Act.

Separate Legal Entity.Separate Legal Entity.

Perpetual Succession.Perpetual Succession.

Indian Partnership Act, 1932 shall not apply to LLP.Indian Partnership Act, 1932 shall not apply to LLP.

Any individual or body corporate may be a partner in LLPAnyindividual or body corporate may be a partner in LLP..

Minimum No. of Partners : 2Minimum No. of Partners : 2

- In case no. of partners reduced below 2, appointment of partners should be made within 6 months;- In case no. of partners reduced below 2, appointment of partners should be made within 6 months;

- In case no such appointment is made & business carried on for more than 6 months, then remaining partner- In case no such appointment is made & business carried on for more than 6 months, then remaining partnershall be personally liable for obligations incurred during this period.shall be personally liable for obligations incurred during this period.


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DESIGNATED PARTNERS (CHAPTER II DESIGNATED PARTNERS (CHAPTER II

CL.3-6)CL.3-6) At Least 2 Designated Partners who are individuals and at least one of them shall be Resident in India.At Least 2 Designated Partners who are individuals and at least one of them shall be Resident in India.

-In case of Bodies Corporate being partner, its nominees to act as Designated Partners.-In case of Bodies Corporate being partner, its nominees to act as Designated Partners.

A Partner shall act as Designated PartnerA Partner shall act as Designated Partner

- By virtue of the Incorporation Document- By virtue of the Incorporation Document

- In accordance with the LLP Agreement.- In accordance with the LLP Agreement.

Prior Consent of the Designated Partner necessarily required to act as such and his particulars should bePrior Consent of the Designated Partner necessarily required to act as such and his particulars should be

filed with Registrar of Companies (RoC) within 30 days of his appointment.filed with Registrar of Companies (RoC) within 30 days of his appointment.

Every Designated partner shall obtain a Designated Partner Identification Number (DPIN) from the RoC.Every Designated partner shall obtain a Designated Partner Identification Number (DPIN) from the RoC.

(Provisions of Section 266A to 266G of Companies Act, 1956 shall apply)(Provisions of Section 266A to 266G of Companies Act, 1956 shall apply)

Designated partner shall be responsible for compliance w.r.t. provisions of this Act including filing ofDesignated partner shall be responsible for compliance w.r.t. provisions of this Act including filing of

document, return, statement and also liable for penalties imposed on LLP for any contravention of thosedocument, return, statement and also liable for penalties imposed on LLP for any contravention of thoseprovisions.provisions.

Any vacancy created in the office of Designated Partner shall be filled within 30 days.Any vacancy created in the office of Designated Partner shall be filled within 30 days.

If no designated partner appointed or at any time, only one designated partner is there, each partnerIf no designated partner appointed or at any time, only one designated partner is there, each partner

deemed to be a designated partner.deemed to be a designated partner.


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INCORPORATION OF LLPINCORPORATION OF LLP

[CHAPTER III (Cl. 11 to 21)][CHAPTER III (Cl. 11 to 21)] Two or more persons shall be the subscribers to Incorporation Document. Subscribers to the Incorporation Document shall be itsTwo or more persons shall be the subscribers to Incorporation Document. Subscribers to the Incorporation Document shall be its

partners. Any other person may also become a partner of LLP in accordance with LLP Agreement.partners. Any other person may also become a partner of LLP in accordance with LLP Agreement.

An Application for name availability at the time of incorporation/ change of name, to be made to RoC in the form and manner as mayAn Application for name availability at the time of incorporation/ change of name, to be made to RoC in the form and manner as maybe prescribed. Reservation of name for 3 months from the date of intimation by RoC.be prescribed. Reservation of name for 3 months from the date of intimation by RoC.

Incorporation Document to be filed with the RoC in which Registered Office of LLP is to be situated.Incorporation Document to be filed with the RoC in which Registered Office of LLP is to be situated.

A Statement in the prescribed form made either by CS/CA/CWA/Advocate engaged in formation of LLP along with any one of theA Statement in the prescribed form made either by CS/CA/CWA/Advocate engaged in formation of LLP along with any one of the

subscriber.subscriber.

Within 14 days, RoC shall register the Incorporation Document and issue a Certificate of Incorporation.Within 14 days, RoC shall register the Incorporation Document and issue a Certificate of Incorporation.

LLP to have a Registered Office (RO) at which all notices would be addressed.LLP to have a Registered Office (RO) at which all notices would be addressed.

RO can be changed by LLP and notice of such change shall be filed with the RoC.RO can be changed by LLP and notice of such change shall be filed with the RoC.

LLP shall be incorporated with the words Limited Liability Partnership or the acronym LLP as the last words of its name.LLP shall be incorporated with the words Limited Liability Partnership or the acronym LLP as the last words of its name.


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PARTNERS AND THEIR RELATIONSPARTNERS AND THEIR RELATIONS

[CHAPTER IV (Clause 22 to 25)][CHAPTER IV (Clause 22 to 25)] Mutual Rights and Duties of a partner of LLP and those of its Partners and LLP shall be governed by LLP Agreement whichMutual Rights and Duties of a partner of LLP and those of its Partners and LLP shall be governed by LLP Agreement which

has to be filed with RoC in the prescribed manner.has to be filed with RoC in the prescribed manner.

In absence of LLP Agreement, provisions of First Schedule of the Act will apply.In absence of LLP Agreement, provisions of First Schedule of the Act will apply. Main provisions of First Schedule:Main provisions of First Schedule:

Equal sharing of capital, profits/ lossesEqual sharing of capital, profits/ losses Indemnification by LLP to Partners in the ordinary course of business.Indemnification by LLP to Partners in the ordinary course of business. Indemnification by Partners to LLP in the case loss caused to LLP by his fraudulent action.Indemnification by Partners to LLP in the case loss caused to LLP by his fraudulent action. Each partner shall take part in Management of LLP, with no entitlement to remuneration.Each partner shall take part in Management of LLP, with no entitlement to remuneration. Appointment of new partner with the consent of the existing partners.Appointment of new partner with the consent of the existing partners. Decisions to be taken on the basis of majority voting by the partners, which shall be recorded in the minutes withinDecisions to be taken on the basis of majority voting by the partners, which shall be recorded in the minutes within

30 days and kept at the Registered Office.30 days and kept at the Registered Office. Disputes between Partners arising out of LLP Agreement shall be referred for Arbitration under the Arbitration &Disputes between Partners arising out of LLP Agreement shall be referred for Arbitration under the Arbitration &

Conciliation Act, 1996.Conciliation Act, 1996.

Cessation of Partner either by virtue of an agreement with other partners or by giving a notice of minimum 30 days to otherCessation of Partner either by virtue of an agreement with other partners or by giving a notice of minimum 30 days to otherpartners.partners.

Partner to inform the LLP about changes in his names/address within 15 days of change.Partner to inform the LLP about changes in his names/address within 15 days of change.

LLP shall inform RoC about changes in names/address of partner or in the event of becoming/ceasing of the partners withinLLP shall inform RoC about changes in names/address of partner or in the event of becoming/ceasing of the partners within30 days.30 days.

Any partner who ceases to be partner may file with the RoC the notice of his cessation if he has reasons to believe that LLPAny partner who ceases to be partner may file with the RoC the notice of his cessation if he has reasons to believe that LLPmay not file the notice and in such case the Registrar shall obtain a confirmation to this effect from LLP.may not file the notice and in such case the Registrar shall obtain a confirmation to this effect from LLP.


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EXTENT AND LIMITATION OF LIABILITYEXTENT AND LIMITATION OF LIABILITY

OF LLP & PARTNERS (CHAPTER V)OF LLP & PARTNERS (CHAPTER V)

AND CONTRIBUTIONS (CHAPTER VI)AND CONTRIBUTIONS (CHAPTER VI) Every Partner is an agent of LLPEvery Partner is an agent of LLP but not of its partnersbut not of its partners..

Liabilities of the LLP shall be met out of the property of LLP.Liabilities of the LLP shall be met out of the property of LLP.

LLP shall not be liableLLP shall not be liableforfor ultra-vires actultra-vires actof the partners.of the partners.

Partner is not personally liable except in case of wrongful acts or omission committed by him.Partner is not personally liable except in case of wrongful acts or omission committed by him.

In case any act is carried out by LLP or its partners with an intention to defraud its creditors or for any fraudulent purpose,In case any act is carried out by LLP or its partners with an intention to defraud its creditors or for any fraudulent purpose,

the liability of LLP and its partners who acted in such manner, shall be unlimited for all its debts and liabilities of LLP.the liability of LLP and its partners who acted in such manner, shall be unlimited for all its debts and liabilities of LLP.

The obligation of a partner to contribute money or other property or other benefit or to perform services for a LLP shall beThe obligation of a partner to contribute money or other property or other benefit or to perform services for a LLP shall be

as per the LLP Agreement.as per the LLP Agreement.


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FINANCIAL DISCLOSURESFINANCIAL DISCLOSURES

[CHAPTER VII (Clause 34 to 41)][CHAPTER VII (Clause 34 to 41)]

Books of accounts to be maintained at Registered Office.Books of accounts to be maintained at Registered Office.

A Statement of Account and Solvency as at the last day of financial year shall be prepared within 6 months from the endA Statement of Account and Solvency as at the last day of financial year shall be prepared within 6 months from the end

of financial year and such statement shall be signed by the designated partners of LLP and filed with RoC withinof financial year and such statement shall be signed by the designated partners of LLP and filed with RoC within

prescribed time. (No format & filing time of these documents have been prescribed )prescribed time. (No format & filing time of these documents have been prescribed )

Accounts to be audited in accordance with prescribed rules. (Rules are yet to be prescribed )Accounts to be audited in accordance with prescribed rules. (Rules are yet to be prescribed )

Annual Return to be filed within 60 days from the end of the financial yearAnnual Return to be filed within 60 days from the end of the financial year. (This provision seems to be contrary to the earlier. (This provision seems to be contrary to the earlier

provision of preparing Statement of Account and Solvencyprovision of preparing Statement of Account and Solvency within 6 months)within 6 months)

Inspection with RoC - Incorporation Document, Names of Partners and changes, Statement of Account & Solvency &Inspection with RoC - Incorporation Document, Names of Partners and changes, Statement of Account & Solvency &

Annual Return filed with the RoC shall be available for inspection on payment of fees.Annual Return filed with the RoC shall be available for inspection on payment of fees.


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ASSIGNMENT & TRANSFER OFASSIGNMENT & TRANSFER OF

PARTNERSHIP RIGHTSPARTNERSHIP RIGHTS

[CHAPTER VIII (Clause 42)][CHAPTER VIII (Clause 42)]

Right of a partner to share the profits and losses of the LLP are transferable either wholly or in part in favour of anyRight of a partner to share the profits and losses of the LLP are transferable either wholly or in part in favour of anypartner or other persons.partner or other persons.

Transfer of any right by any partner does not itself cause his disassociation or dissolution and winding up of LLP.Transfer of any right by any partner does not itself cause his disassociation or dissolution and winding up of LLP.

Transferee shall not have a right to participate in the management or access information w.r.t transactions of LLP.Transferee shall not have a right to participate in the management or access information w.r.t transactions of LLP.

CONVERSION TO LLP (Ch t X)CONVERSION TO LLP (Ch t X)


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CONVERSION TO LLP (Chapter X)CONVERSION TO LLP (Chapter X)

& FOREIGN LLP (Chapter XI)& FOREIGN LLP (Chapter XI)

(Cl.55 to 59)(Cl.55 to 59) A Firm, Private Company and an Unlisted Company may be converted into a LLP after complying with the provisions of this ActA Firm, Private Company and an Unlisted Company may be converted into a LLP after complying with the provisions of this Act

read with Schedules II, III & IV to the Act respectively.read with Schedules II, III & IV to the Act respectively.

In order to convert itself into a LLP, all the existing partners of a firm/ shareholders of a Company, as the case maybe, must beIn order to convert itself into a LLP, all the existing partners of a firm/ shareholders of a Company, as the case maybe, must bethe partners in the resulting LLP.the partners in the resulting LLP.

In addition to the documents required at the time of incorporation of a LLP, a Statement by all partners/ shareholders,In addition to the documents required at the time of incorporation of a LLP, a Statement by all partners/ shareholders,containing name and registration no. of the firm/ Company, as the case maybe, and the date on which the firm/ Company wascontaining name and registration no. of the firm/ Company, as the case maybe, and the date on which the firm/ Company wasregistered.registered.

RoC, on being satisfied, shall issue a Certificate of Registration.RoC, on being satisfied, shall issue a Certificate of Registration.

LLP shall inform the concerned Registrar of Firms/ RoC, as the case may be,LLP shall inform the concerned Registrar of Firms/ RoC, as the case may be, within 15 days of registrationwithin 15 days of registration, about such, about such

conversion in such form and manner as may be prescribed.conversion in such form and manner as may be prescribed.

Upon such conversion,Upon such conversion, the Partners of Firm or Shareholders of Pvt. Co./ Unlisted Co., the LLP and the partners of the LLP, shall be bound by thethe Partners of Firm or Shareholders of Pvt. Co./ Unlisted Co., the LLP and the partners of the LLP, shall be bound by the

provisions of the Schedules as applicable to them.provisions of the Schedules as applicable to them. All assets and liabilities of such Firm or Company, shall be transferred and vest in the name of LLP from the date ofAll assets and liabilities of such Firm or Company, shall be transferred and vest in the name of LLP from the date of

registration specified in the Certificate.registration specified in the Certificate.

FOREIGN LLPFOREIGN LLP

Foreign LLP has been defined in the Act as a LLP incorporated or registered outside India which establishes a place ofForeign LLP has been defined in the Act as a LLP incorporated or registered outside India which establishes a place ofbusiness within India The Central Government may make rules regarding establishment of place of business by Foreign LLP andbusiness within India The Central Government may make rules regarding establishment of place of business by Foreign LLP andcarrying on business within India.carrying on business within India.

COMPROMISE ARRANGEMENT ORCOMPROMISE ARRANGEMENT OR


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COMPROMISE, ARRANGEMENT ORCOMPROMISE, ARRANGEMENT OR

RECONSTRUCTION [Chapter XII (Clause 60 toRECONSTRUCTION [Chapter XII (Clause 60 to

62)]62)] Compromise/ Arrangement can be made between a LLP and its Creditors or LLP and its Partners. (The purpose and matters ofCompromise/ Arrangement can be made between a LLP and its Creditors or LLP and its Partners. (The purpose and matters of

Compromise/ Arrangement are yet to be defined)Compromise/ Arrangement are yet to be defined)

The Tribunal may, on an application made by LLP/ Creditors/ Partners/ Liquidator (in case of LLP being wound up), order aThe Tribunal may, on an application made by LLP/ Creditors/ Partners/ Liquidator (in case of LLP being wound up), order aMeeting of the Creditors/ partners.Meeting of the Creditors/ partners.

The Application to be accompanied by an Affidavit stating all material facts relating to the LLP, latest financial position andThe Application to be accompanied by an Affidavit stating all material facts relating to the LLP, latest financial position andpendency of any investigation.pendency of any investigation.

Such compromise/ arrangement shall be binding on the parties as stated above, if Such compromise/ arrangement shall be binding on the parties as stated above, if

- agreed by a majority of 3/4th in value of the creditors/partners, and- agreed by a majority of 3/4th in value of the creditors/partners, and

- sanctioned by the Tribunal by an Order.- sanctioned by the Tribunal by an Order.

Order shall be filed by the LLP with ROC within 30 days of its passing and shall be effective only when the same is filed.Order shall be filed by the LLP with ROC within 30 days of its passing and shall be effective only when the same is filed.

Provision for Amalgamation/ Reconstruction of LLPs is there to give effect to any Compromise/ Arrangement.Provision for Amalgamation/ Reconstruction of LLPs is there to give effect to any Compromise/ Arrangement.

Powers of Tribunal:Powers of Tribunal:

To supervise carrying out of the compromise or arrangement.To supervise carrying out of the compromise or arrangement.

To give directions/make such modifications for the proper working of compromise or arrangement.To give directions/make such modifications for the proper working of compromise or arrangement.

It can pass an order for winding up of the LLP, either suo motu or an Application made by any person interested in theIt can pass an order for winding up of the LLP, either suo motu or an Application made by any person interested in the

affairs of LLP, where the compromise/ arrangement cannot be worked out, with or without modifications.affairs of LLP, where the compromise/ arrangement cannot be worked out, with or without modifications.


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INVESTIGATIONINVESTIGATION

[CHAPTER IX (Clause 43 TO 54)][CHAPTER IX (Clause 43 TO 54)]

Central Govt. to appoint one or more persons to investigate the affairs of LLP.Central Govt. to appoint one or more persons to investigate the affairs of LLP.

Investigation shall be ordered by Tribunal either suo motu or upon an application received from not less than 1/5th of the total partnersInvestigation shall be ordered by Tribunal either suo motu or upon an application received from not less than 1/5th of the total partnersalongwith supporting evidence and security as may be prescribed or upon an order of the Court.alongwith supporting evidence and security as may be prescribed or upon an order of the Court.

No firm, body corporate or other association shall be appointed as an inspector.No firm, body corporate or other association shall be appointed as an inspector.

The inspector can also carry out investigation of the affairs of related entities if he feels necessary to carry out his investigation of LLPThe inspector can also carry out investigation of the affairs of related entities if he feels necessary to carry out his investigation of LLPafter obtaining prior approval of Central Govt.after obtaining prior approval of Central Govt. (The Term Related Entities is yet to defined)(The Term Related Entities is yet to defined)

Inspectors shall have power to inspect & seize Books of Accounts and other documents and to examine persons on oath, as may beInspectors shall have power to inspect & seize Books of Accounts and other documents and to examine persons on oath, as may benecessary for proper conduct of investigation.necessary for proper conduct of investigation.

Central Govt., through any authorized person, may make a petition to Tribunal for winding up, if it is just and equitable for the LLP to beCentral Govt., through any authorized person, may make a petition to Tribunal for winding up, if it is just and equitable for the LLP to bewound up.wound up.


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Whistle Blowing & Compounding ofWhistle Blowing & Compounding of

OffencesOffences

(Cl. 31 & 39)(Cl. 31 & 39) Any penalty leviable against any partner or employee may be reduced orAny penalty leviable against any partner or employee may be reduced or

waived by the Court or Tribunal, ifwaived by the Court or Tribunal, if

- Such partner or employee provides useful information during- Such partner or employee provides useful information during

investigation; orinvestigation; or

- Information given by any partner or employee (whether or not during- Information given by any partner or employee (whether or not during

investigation) leads to conviction of LLP or its partner/employee.investigation) leads to conviction of LLP or its partner/employee.

CG may compound any offence under this Act punishable withCG may compound any offence under this Act punishable with fine onlyfine only, from, from

the suspected person by collecting a sum which may extend to maximumthe suspected person by collecting a sum which may extend to maximum

prescribed fine for the offence.prescribed fine for the offence.


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WINDING UP AND DISSOLUTIONWINDING UP AND DISSOLUTION

[Chapter XIII (Clause 63 to 65)][Chapter XIII (Clause 63 to 65)] LLP may be wound up either voluntarily or by the Tribunal.LLP may be wound up either voluntarily or by the Tribunal.

LLP may be wound up by the Tribunal, if LLP may be wound up by the Tribunal, if

- LLP decides to be wound up by the Tribunal.- LLP decides to be wound up by the Tribunal.

- number of partners is reduced below 2, for more than 6 months.- number of partners is reduced below 2, for more than 6 months.

- it is unable to pay its debts.- it is unable to pay its debts.

- it has acted against the interests of the sovereignty and integrity of India,- it has acted against the interests of the sovereignty and integrity of India,security of State or public order.security of State or public order.

- it has made a default in filing with the ROC, the Statement of Account and- it has made a default in filing with the ROC, the Statement of Account andSolvency or Annual Return for any 5 consecutive financial years.Solvency or Annual Return for any 5 consecutive financial years.

- Tribunal is of the opinion that it is just and equitable that the LLP be wound- Tribunal is of the opinion that it is just and equitable that the LLP be woundup.up.

The Central Government may make rules in relation to winding up andThe Central Government may make rules in relation to winding up anddissolution of LLPs.dissolution of LLPs.

MISCELLANEOUSMISCELLANEOUS


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MISCELLANEOUSMISCELLANEOUS

[Chapter XIV (Clause 66 to 81)][Chapter XIV (Clause 66 to 81)] A partner may lend money & transact other business with the LLP and shall have the same rightsA partner may lend money & transact other business with the LLP and shall have the same rights

and obligations as that of a creditor.and obligations as that of a creditor.

Central Government may, by notification, direct the applicability of any of the provisions of theCentral Government may, by notification, direct the applicability of any of the provisions of theCompanies Act, 1956, to any LLP with or without modifications.Companies Act, 1956, to any LLP with or without modifications.

Any document, electronically filed with the ROC, would be admissible in evidence to be true,Any document, electronically filed with the ROC, would be admissible in evidence to be true,unless evidence to the contrary is adduced.unless evidence to the contrary is adduced.

Filing fee for the various documents to be filed with the RoC would be prescribed in due course.Filing fee for the various documents to be filed with the RoC would be prescribed in due course. Fee for Belated Filing:Fee for Belated Filing:

- upto 300 days from the due date : additional fee of Rs. 100 per day.- upto 300 days from the due date : additional fee of Rs. 100 per day.

- beyond 300 days : additional fees as specified in this section.- beyond 300 days : additional fees as specified in this section.

LLP, any partner/ designated partner of such LLP, who has committed any offence shall, for theLLP, any partner/ designated partner of such LLP, who has committed any offence shall, for thesecond or subsequent offence, be punishable with imprisonment as provided, but in cases wheresecond or subsequent offence, be punishable with imprisonment as provided, but in cases wherefine is provided with or without imprisonment, punishable with twice the amount of fine for suchfine is provided with or without imprisonment, punishable with twice the amount of fine for suchoffence.offence.

Any person aggrieved by an order of Tribunal may prefer an appeal to the Appellate Tribunal.Any person aggrieved by an order of Tribunal may prefer an appeal to the Appellate Tribunal.

Where no punishment is expressly provided for any provision, person guilty shall be liable to fineWhere no punishment is expressly provided for any provision, person guilty shall be liable to finewhich may extend to Rs. 5 Lacs but shall not be less than Rs. 5,000 and a further fine which maywhich may extend to Rs. 5 Lacs but shall not be less than Rs. 5,000 and a further fine which mayextend to Rs. 50 per day in case of continuing contravention.extend to Rs. 50 per day in case of continuing contravention.

ROC may, after giving opportunity of being heard to the LLP, strike off its name from the RegisterROC may, after giving opportunity of being heard to the LLP, strike off its name from the Registerof LLPs, where ROC has reasonable cause to believe that LLP is not carrying on the business or itsof LLPs, where ROC has reasonable cause to believe that LLP is not carrying on the business or itsoperation in accordance with the provisions of this Act.operation in accordance with the provisions of this Act.


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ADVANTAGES OF LLP ADVANTAGES OF LLP

A HYBRID LEGAL VEHICLEA HYBRID LEGAL VEHICLE

Internal rules and regulations shall be guided by the provisions contained in the LLPInternal rules and regulations shall be guided by the provisions contained in the LLPAgreement without involvement of any Statute.Agreement without involvement of any Statute.

Incorporates the limited liability attribute of a Company.Incorporates the limited liability attribute of a Company.

Synergies would be developed by the combination of two or more entities because of theirSynergies would be developed by the combination of two or more entities because of theirrespective expertise.respective expertise.

Lead to professional growth in a more flexible, innovative and efficient manner.Lead to professional growth in a more flexible, innovative and efficient manner.

Small scale enterprises would also be inclined towards LLP structure because of itsSmall scale enterprises would also be inclined towards LLP structure because of itsflexibility and ease of compliance.flexibility and ease of compliance.

No requirement to obtain any certificate in order to commence the operations of the LLP.No requirement to obtain any certificate in order to commence the operations of the LLP.


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NEW AREAS OF OPERATIONS FORNEW AREAS OF OPERATIONS FOR

COMPANY SECRETARIESCOMPANY SECRETARIES

During incorporation of LLP, a Statement is required from aDuring incorporation of LLP, a Statement is required from a CS,CS, CA, ICWA or Advocate certifying theCA, ICWA or Advocate certifying thecompliance of all the requirements of this Act. [Cl.11]compliance of all the requirements of this Act. [Cl.11]

Obtaining the DPIN may require certification fromObtaining the DPIN may require certification from CSCS, CA or ICWA, as the provisions of Section 266A to, CA or ICWA, as the provisions of Section 266A to266G of Companies Act, 1956 shall apply.[Cl. 7]266G of Companies Act, 1956 shall apply.[Cl. 7]

Authentication may be granted toAuthentication may be granted to CSCS, CA, ICWA or Advocate in respect to following documents:, CA, ICWA or Advocate in respect to following documents:

Annual ReturnAnnual Return Notice of Changes in PartnersNotice of Changes in Partners

Notice of Change in Name of LLPNotice of Change in Name of LLP

Notice of Changes in Registered Office.Notice of Changes in Registered Office.


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GREY AREASGREY AREAS

ROC, already burdened with the mammoth task of managing corporate structure,ROC, already burdened with the mammoth task of managing corporate structure,made the Regulatory Authority for LLPs. Regulatory Functions for LLPs & Cos. shouldmade the Regulatory Authority for LLPs. Regulatory Functions for LLPs & Cos. shouldbe kept separate.be kept separate.

Inability to pay debts is made a Ground for winding up of LLP. However, no limitsInability to pay debts is made a Ground for winding up of LLP. However, no limitsprescribed as to the amount of unpaid debt, time period of default or no. of creditors.prescribed as to the amount of unpaid debt, time period of default or no. of creditors.

Annual return to be filedAnnual return to be filed within 60 days from the end of the financial year.within 60 days from the end of the financial year. ThisThisprovision seems to be contrary to the provision of preparing Statement of Accountprovision seems to be contrary to the provision of preparing Statement of Accountand Solvency within 6 months.and Solvency within 6 months.

No limits on the no. of LLPs in which a person may become a Partner/ DesignatedNo limits on the no. of LLPs in which a person may become a Partner/ Designatedpartner.partner.

No provisions specified for conversion of LLP to other forms of business.No provisions specified for conversion of LLP to other forms of business.

Related Entities not defined.Related Entities not defined.


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