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The amendments to the LLP Act, 2008, notified on February 11, will take effect from April 1. Here’s a look at some of the salient features.
Small LLPs
The Amendment has introduced the concept of 'Small Limited Liability Partnership'. These are LLPs in which the contribution is upto ₹25 lakh or any prescribed amount which shall not exceed ₹5 crore; has a previous year turnover of up to ₹40 lakh or any prescribed amount which shall not exceed ₹50 crore.
Start-up LLPs
A concept of start-up LLP has been introduced. The central government has the powers to recognize and designate certain LLPs as 'start-up LLPs' and issue notifications / regulations in relation thereto from time to time. However, the Amendment is silent on the definition of a start-up LLP.
Punishment less stringent
The Amendment de-criminalises certain offences such as those relating to filing of statement of accounts and solvency, annual returns, reporting changes in partners, reconstruction or amalgamation, reporting of arrangements between LLP and creditors or partners. Now only monetary penalties will apply, which shall not exceed ₹1 lakh for a LLP or ₹50,000 for a partner.
Also, the amendment introduces ‘Regional Directors’, who are persons appointed by the central government. The Regional Directors have been given the power to compound various offences. If an offence by an LLP or its partners is compounded, then a similar offence cannot be compounded for a period of three years. However, the same offence, if committed after the expiry of three years, shall be deemed to be a ‘first offence’.
Special Courts, Adjudication Officers
The Amendment provides for special courts to be established or designated as such by the Central government for expediting the trial of various offences under the LLP Act. Also, ‘adjudicating officers’ will be appointed by the central government for deciding upon non-compliance and penalty matters.
Miscellaneous
The LLP Act says that every LLP must have at least two authorized/designated partners, one of whom must be a resident of India. Now the amendment has changed the definition of ‘resident of India’ as one who has spent at least 120 days during a financial year. Earlier, it was 182 days.
The Central government has been given the power to prescribe the standards of auditing and accounting, in consultation with the National Financial Reporting Authority and as recommended by the Chartered Accountants of India to LLPs. The time limit for late filings has now been removed; earlier it was 300 days. Now any act committed with fraudulent intention/purpose by an LLP or its partners shall be punishable with imprisonment which may extend to five years. Earlier it was two years.
The introduction of Small LLPs and Start-Up LLPs meant to provide a boost to entrepreneurship. Writing in Mondaq, Shambhawi Sinha, a lawyer with Dhaval Vussonji & Associates, observes that the amendment reduces onerous provisions, provides for speedy trials, levies a heavier punishment for fraud and overall seeks to streamline the regulation and setup of LLPs. “However, it is still a matter of time before the Amendment and the complementary LLP Rules are put to test,” Sinha says.
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