LIMITED LIABILITY PARTNERSHIP [LLP] LIMITED LIABILITY PARTNERSHIP [LLP] BILL, 2008BILL, 2008

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

LIMITED LIABILITY PARTNERSHIP [LLP] BILL, 2008LIMITED LIABILITY PARTNERSHIP [LLP] BILL, 2008

SYNOPSISSYNOPSISI.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 Rights Assignment and Transfer of Partnership Rights • Conversion to LLP & Foreign LLPsConversion to LLP & Foreign LLPs• Compromise, Arrangement or Reconstruction of LLP Compromise, Arrangement or Reconstruction of LLP • InvestigationInvestigation• Whistle Blowing & Compounding of Offences Whistle 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

LLP – the Concept LLP – 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 – A LLP – A hybrid business entity hybrid business entity combining the features of both a Partnership and a combining the features of both a Partnership and a Company:Company:

Organizational flexibility of Partnership Organizational flexibility of Partnership : No dependence on any statute for : No dependence on any statute for the internal management of affairs.the internal management of affairs.

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

In simpler terms, LLP is a In simpler terms, LLP is a partnershippartnership, having a , having a legal entity distinct from its legal entity distinct from its partnerspartners..

COMPARISONCOMPARISONKEY AREASKEY AREAS LLP BillLLP Bill PARTNERSHIP ACTPARTNERSHIP ACT COMPANIES ACTCOMPANIES ACTRegistrationRegistration CompulsoryCompulsory OptionalOptional CompulsoryCompulsory

Minimum no. of Minimum no. of Partners/Partners/MembersMembers

2 2 Designated Partners – At Designated Partners – At least 2, out of which one least 2, out of which one of them to be resident in of them to be resident in IndiaIndia

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

7 - in case of Public Ltd. 7 - in case of Public Ltd. co.co.

Maximum no. of Maximum no. of Partners/Partners/MembersMembers

No limitNo limit 10 in case of banking business,10 in case of banking business,20 in case of other business 20 in case of other business

50 - in case of Pvt. Co.50 - in case of Pvt. Co.No limit – in case of Public No limit – in case of Public Co. Co.

Perpetual SuccessionPerpetual Succession YesYes The Partnership Firm would be The Partnership Firm would be dissolved upon the death of a dissolved upon the death of a partner/partnership at Will. partner/partnership at Will.

YesYes

Separate Legal Entity Separate Legal Entity from Partners/from Partners/MembersMembers

YesYes NoNo YesYes

Liability Liability LimitedLimited UnlimitedUnlimited LimitedLimited

ManagementManagement As per LLP Agreement/ As per LLP Agreement/ First Schedule.First Schedule.

All partners are entitled to take All partners are entitled to take part in the management of the part in the management of the business.business.

Management of the Management of the affairs is vested in the affairs is vested in the Board.Board.

COMPARISON - CONTD.COMPARISON - CONTD.

KEY AREASKEY AREAS LLPLLP PARTNERSHIP ACTPARTNERSHIP ACT COMPANIES ACTCOMPANIES ACT

CharterCharter LLP Agreement/ First LLP Agreement/ First Schedule in absence of LLP Schedule in absence of LLP Agreement.Agreement.

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

Incorporation Incorporation DocumentsDocuments

Only two Documents Only two Documents required:required:-Incorporation Document-Incorporation Document-Statement from a Statement from a professional.professional.-LLP Agreement to filed with LLP Agreement to filed with RoC after incorporation.RoC after incorporation.

Partnership Deed.Partnership Deed. -MoA & AoAMoA & AoA-Form 32Form 32-Form 18Form 18-Form 1Form 1-Power of AttorneyPower of Attorney

Principal Agent Principal Agent RelationshipRelationship

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

Each partner has implied Each partner has implied authority to bind his co-authority to bind his co-partners by acts done within partners by acts done within ordinary course of business.ordinary course of business.

No such relationship exists.No such relationship exists.

Transfer of Transfer of interestinterest

Partner can be ceased to act Partner can be ceased to act as such by virtue of an as such by virtue of an agreement with the agreement with the partners/ giving 30 days partners/ giving 30 days notice in writing to other notice in writing to other partners.partners.

No such provision exists.No such provision exists. Pvt. Co. – Not Freely Pvt. Co. – Not Freely transferabletransferablePublic Co. - Freely Public Co. - Freely TransferableTransferable

COMPARISON - CONTD.COMPARISON - CONTD.

KEY AREASKEY AREAS LLPLLP PARTNERSHIP ACTPARTNERSHIP ACT COMPANIES ACTCOMPANIES ACT

Remuneration/ Remuneration/ Profit Sharing Profit Sharing

As per First Schedule to the As per First Schedule to the Act, no remuneration to Act, no remuneration to partners is to be paid.partners is to be paid.

No provision for payment of No provision for payment of remuneration to partners.remuneration to partners.Only profit/ Loss sharing is Only profit/ Loss sharing is there.there.

Remuneration to Directors Remuneration to Directors governed by provisions of governed by provisions of the Act.the Act.

AuditAudit To be mandatory carried out To be mandatory carried out on an annual basis.on an annual basis.

Tax Audit is required only in Tax Audit is required only in case of partnership whose total case of partnership whose total turnover exceeds Rs. 40 lacs. turnover exceeds Rs. 40 lacs.

It is mandatory.It is mandatory.

Transactions by Transactions by Partners/ Partners/ DirectorsDirectors

Partners are entitled to Partners are entitled to freely transact with the LLP. freely transact with the LLP.

Permissible.Permissible. Restrictions are imposed on Restrictions are imposed on Directors for transactions Directors for transactions with the Company. with the Company.

Annual Filing Annual Filing A Statement of Account and A Statement of Account and Solvency , to filed within the Solvency , to filed within the time as may be prescribed.time as may be prescribed.Annual Return to be filed Annual Return to be filed wuithin 6o days from the wuithin 6o days from the end of the Financial Year.end of the Financial Year.

No such provisions exist.No such provisions exist. Balance Sheet and Profit & Balance Sheet and Profit & Loss Account and Annual Loss Account and Annual Return to be filed within 30 Return to be filed within 30 days & 60 days from the days & 60 days from the date of AGM, respectively.date of AGM, respectively.

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

& includes – (i) A LLP registered under this Act;(ii) A LLP incorporated outside India(iii) A Company incorporated outside India

but excludes Corporation sole (Not defined in this Act) Co-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 the Companies

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.

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

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

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

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

NATURE OF LLP NATURE 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 LLPAny individual 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 shall be personally liable for - In case no such appointment is made & business carried on for more than 6 months, then remaining partner shall be personally liable for

obligations incurred during this period.obligations incurred during this period.

DESIGNATED PARTNERS (CHAPTER II – CL.3-6)DESIGNATED PARTNERS (CHAPTER II – 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 be Prior 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 of Designated 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 those document, return, statement and also liable for penalties imposed on LLP for any contravention of those provisions.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 partner If 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.

INCORPORATION OF LLP INCORPORATION 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 Two 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 Incorporation Document shall be its partners. Any other person may also become a partner of LLP in accordance with LLP Agreement.accordance with LLP Agreement.

An Application for name availability at the time of incorporation/ change of name, to be made to RoC in An Application for name availability at the time of incorporation/ change of name, to be made to RoC in the form and manner as may be prescribed. Reservation of name for 3 months from the date of the form and manner as may be prescribed. Reservation of name for 3 months from the date of intimation by RoC.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 A Statement in the prescribed form made either by CS/CA/CWA/Advocate engaged in formation of LLP along with any one of the subscriber.along with any one of the 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 LLP shall be incorporated with the words Limited Liability Partnership or the acronym “LLP” as the last words of its name.words of its name.

PARTNERS AND THEIR RELATIONS PARTNERS 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 Mutual 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.Agreement which 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 Decisions 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.minutes within 30 days and kept at the Registered Office. Disputes between Partners arising out of LLP Agreement shall be referred for Arbitration under the Disputes between Partners arising out of LLP Agreement shall be referred for Arbitration under the

Arbitration & Conciliation Act, 1996.Arbitration & Conciliation Act, 1996.

Cessation of Partner – either by virtue of an agreement with other partners or by giving a notice of minimum 30 Cessation of Partner – either by virtue of an agreement with other partners or by giving a notice of minimum 30 days to other partners.days to other 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 LLP shall inform RoC about changes in names/address of partner or in the event of becoming/ceasing of the partners within 30 days.partners within 30 days.

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

EXTENT AND LIMITATION OF LIABILITY OF LLP & EXTENT AND LIMITATION OF LIABILITY OF LLP & PARTNERS (CHAPTER V) PARTNERS (CHAPTER V)

AND CONTRIBUTIONS (CHAPTER VI)AND CONTRIBUTIONS (CHAPTER VI) Every Partner is an agent of LLP Every 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 liable forfor ultra-vires act ultra-vires act of 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 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 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.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 The 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.perform services for a LLP shall be as per the LLP Agreement.

FINANCIAL DISCLOSURES FINANCIAL 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 A 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 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 within prescribed time. (No format & filing time designated partners of LLP and filed with RoC within prescribed time. (No format & filing time of these documents have been prescribed )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 . (This provision seems to be contrary to the earlier provision of preparing Statement of Account and Solvencyto be contrary to the earlier provision 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 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 Account & Solvency & Annual Return filed with the RoC shall be available for inspection on payment of fees. payment of fees.

ASSIGNMENT & TRANSFER OF ASSIGNMENT & TRANSFER OF PARTNERSHIP RIGHTS PARTNERSHIP RIGHTS [CHAPTER VIII (Clause 42)] [CHAPTER VIII (Clause 42)]

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

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

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

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 A 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.provisions of this Act 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 In order to convert itself into a LLP, all the existing partners of a firm/ shareholders of a Company, as the case maybe, must be the partners in the resulting LLP. case maybe, must be 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/ 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 shareholders, containing name and registration no. of the firm/ Company, as the case maybe, and the date on which the firm/ Company was registered.on which the firm/ Company was 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 conversion in such form and manner as may be prescribed.about such 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, the 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.shall be bound by the 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 All 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.from the date of 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 Foreign LLP has been defined in the Act as a LLP incorporated or registered outside India which establishes a place of business within India The Central Government may make rules regarding establishment of place a place of business within India The Central Government may make rules regarding establishment of place of business by Foreign LLP and carrying on business within India.of business by Foreign LLP and carrying on business within India.

COMPROMISE, ARRANGEMENT OR RECONSTRUCTION COMPROMISE, ARRANGEMENT OR RECONSTRUCTION [Chapter XII (Clause 60 to 62)][Chapter XII (Clause 60 to 62)]

Compromise/ Arrangement can be made between a LLP and its Creditors or LLP and its Partners. (The purpose Compromise/ 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)and matters of 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), The Tribunal may, on an application made by LLP/ Creditors/ Partners/ Liquidator (in case of LLP being wound up), order a Meeting of the Creditors/ partners.order a Meeting of the Creditors/ partners.

The Application to be accompanied by an Affidavit stating all material facts relating to the LLP, latest financial The Application to be accompanied by an Affidavit stating all material facts relating to the LLP, latest financial position and pendency of any investigation.position and 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 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.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 It 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 interested in the affairs of LLP, where the compromise/ arrangement cannot be worked out, with or without modifications. modifications.

INVESTIGATION INVESTIGATION [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 Investigation shall be ordered by Tribunal either suo motu or upon an application received from not less than 1/5th of the total partners alongwith supporting evidence and security as from not less than 1/5th of the total partners alongwith supporting evidence and security as may be prescribed or upon an order of the Court.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 The inspector can also carry out investigation of the affairs of related entities if he feels necessary to carry out his investigation of LLP after obtaining prior approval of Central Govt. necessary to carry out his investigation of LLP 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 Inspectors shall have power to inspect & seize Books of Accounts and other documents and to examine persons on oath, as may be necessary for proper conduct of investigation.examine persons on oath, as may be necessary for proper conduct of investigation.

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

Whistle Blowing & Compounding of OffencesWhistle Blowing & Compounding of Offences(Cl. 31 & 39) (Cl. 31 & 39)

Any penalty leviable against any partner or employee may be reduced or waived Any penalty leviable against any partner or employee may be reduced or waived by the Court or Tribunal, ifby the Court or Tribunal, if• - Such partner or employee provides useful information during investigation; - Such partner or employee provides useful information during investigation;

oror• - 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 with CG 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 maximum the suspected person by collecting a sum which may extend to maximum prescribed fine for the offence.prescribed fine for the offence.

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

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

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

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

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 rights and A partner may lend money & transact other business with the LLP and shall have the same rights and obligations as that of a creditor.obligations as that of a creditor.

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

Any document, electronically filed with the ROC, would be admissible in evidence to be true, unless evidence Any document, electronically filed with the ROC, would be admissible in evidence to be true, unless evidence to the contrary is adduced.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 the second or LLP, any partner/ designated partner of such LLP, who has committed any offence shall, for the second or subsequent offence, be punishable with imprisonment as provided, but in cases where fine is provided with subsequent offence, be punishable with imprisonment as provided, but in cases where fine is provided with or without imprisonment, punishable with twice the amount of fine for such offence.or without imprisonment, punishable with twice the amount of fine for such 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 fine which may Where no punishment is expressly provided for any provision, person guilty shall be liable to fine which may extend to Rs. 5 Lacs but shall not be less than Rs. 5,000 and a further fine which may extend to Rs. 50 per day extend to Rs. 5 Lacs but shall not be less than Rs. 5,000 and a further fine which may extend to Rs. 50 per day in case of continuing contravention.in case of continuing contravention.

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

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 LLP Internal rules and regulations shall be guided by the provisions contained in the LLP Agreement 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 their Synergies would be developed by the combination of two or more entities because of their respective 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 its Small scale enterprises would also be inclined towards LLP structure because of its flexibility 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.

NEW AREAS OF OPERATIONS FOR NEW AREAS OF OPERATIONS FOR COMPANY SECRETARIESCOMPANY SECRETARIES

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

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

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

Annual Return Annual 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.

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. made the Regulatory Authority for LLPs. Regulatory Functions for LLPs & Cos. should be kept separate.should be kept separate.

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

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

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