Corporate Affairs Ministry (MCA) has put into effect a Budget 2024 announcement on extending the services of The Centre for Processing Accelerated Corporate Exit (C-PACE) for voluntary closure of Limited Liability Partnerships (LLPs).
For this purpose, the MCA has brought amendments to the LLP Rules through Limited Liability Partnership (amendment) Rules 2024.
The latest change will come into effect from August 27, MCA said in a notification issued on Monday.
It maybe recalled that C-PACE was set up in 2023 to centralise strike-off process of companies. The move was intended to crunch timeline for exits and boost entrepreneurship. C-PACE had gone live on May 1 last year.
In this year’s budget on July 23, Finance and Corporate Affairs Minister Nirmala Sitharaman had announced that C-PACE services will be extended for the voluntary closure of LLPs.
The latest MCA move to operationalise this budget announcement will streamline the filings and accelerate the closure process for LLPs, experts said.
Tannya Baranwal, Associate Partner, IndiaLaw LLP, said that C-PACE has been introduced to provide a hassle free, time bound and process oriented exit to companies. The latest MCA amendment has extended this facility to LLPs also. This will help easy removal of dormant LLPs from the records, Baranwal said.
Aurelia Menezes, Partner, King Stubb & Kasiva, Advocates and Attorneys said that LLPs which are not operational for one year or more can make an application to C-PACE for striking off its name.
This move will ensure speedy processing and ease of compliance and in addition to reducing the burden of jurisdictional registrars, Menezes said. Further, it shall strengthen the existing framework to provide for robust corporate governance.
Sucharita Basu, Managing Partner, AQUILAW, said the latest MCA move is another step towards improving ease of doing business for corporate landscape in India.
Noorul Hassan, Partner at Lakshmikumaran & Sridharan Attorneys, said this is a measure to provide expeditious approval of applications filed by the LLPs with an intention to close operations voluntarily. C-PACE will reduce stress on the Registry, keeps it clean, besides providing more meaningful data to stakeholders. This will also provide a hassle-free filing, timely and process-bound striking off of LLPs from the Register, Hassan said.
The last few years has seen a surge in the number of LLPs incorporated in the country.
LLP formation has boomed because company disclosures have become more stringent and moreover CARO (Auditor report order) is not applicable to LLPs, implying lesser questioning from auditors, said experts.
A LLP is quintessentially a hybrid between a Limited Liability Company and a Partnership. It has the advantage of being a body corporate, but at the same time internal governance and inter se relations among partners and LLP are regulated by the LLP Agreement and not by any statutory provisions.