Introduction
Amendment highlights
Comment


Introduction

On 13 August 2021, President Ram Nath Kovind gave assent to the Limited Liability Partnership (Amendment) Act, 2021 (the Amendment Act). The government is expected to announce the date from which the Amendment Act will be made effective. This is the first time that changes have been made to the Limited Liability Partnership Act, 2008 (the Act) since it entered into force in 2009.

A limited liability partnership (LLP) offers an alternative corporate structure to traditional partnership firms. Under an LLP agreement, the liability of partners is limited to their investment in the business.

The Amendment Act represents the government's effort to further facilitate business in India as it seeks to encourage the nation's start-up ecosystem.

Amendment highlights

Some of the key highlights of the Amendment Act are as follows.

Small LLPs
The new concept "of small LLPs" has been introduced with the intention to create a class of LLPs that are subject to less strict compliance requirements, lower fees, etc.

Resident in India
The term "resident in India" has been modified and now includes a person who has stayed in India for a period of no fewer than 120 days during a financial year.

Decriminalisation of 12 offences
The Amendment Act has decriminalised 12 penal provisions under the Act. In the case of continuing contraventions, further penalties will apply to the LLP and all of its partners.

Compounding of offences
Section 39 of the Act, which relates to the compounding of offences under the Act, has been substituted. A regional director or any other higher-ranking officer now may compound any offence under the Act, which is now punishable with fine only.

Special courts
The newly inserted section 67A provides for the speedy trial of offences under the Act by establishing special courts.

Registration offices
For the purpose of registering LLPs, the Amendment Act proposes the establishment of registration offices.

Rectification of LLP name
The Amendment Act states that the government may direct an LLP to change its name on certain grounds, such as the name being undesirable or identical to a trademark pending registration. In case of failure to do so, the government may assign a new name to such an LLP, instead of levying a fine.

Adjudication of penalties
The newly inserted section 76A, which provides for the adjudication of penalties, appoints the LLP's registrar as the adjudicating officer who is, therefore, responsible for the adjudication of penalties. Lesser penalties have been prescribed for small LLPs and start-up LLPs under the Act.

Different fee or additional fee
The Act provides that a different fee or additional fee may be prescribed for:

  • different classes of LLPs;
  • different documents or returns required to be filed under the Act; or
  • rules made in accordance with the Act.

Comment

The Amendment Act is intended to promote the establishment of LLPs, encourage the start-up ecosystem, rationalise the imposition of penalties in case of non-compliance and impose higher penalties in case of fraudulent activities. Furthermore, the government believes that law-abiding business should be rewarded, while bad practice should be discouraged.

For further information on this topic please contact Neetika Ahuja or Satinder Singh at Clasis Law by telephone (+91 11 4213 0000) or email ([email protected] or [email protected]). The Clasis Law website can be accessed at www.clasislaw.com.