SHORT SUMMARY
The author will cover "Everything about Beneficial Interest in LLP" in this article.
The MCA has issued a Notification. Dated: October 27th, 2023-Subject: Limited Liability Partnership (Third Amendment) Rules,2023 and added Rule 22B after Rule 22. The provisions of Beneficial Interest provided in Section 89 of Companies Act, 2013 read with rule 9 of the Companies (Management and Administration) Rules, 2014.
The Ministry of Corporate Affairs, in its drive to enhance transparency, investor protection and corporate governance, has notified amendments in the LLP Act, 2008 read with LLP Rules. In accordance with the said rules, LLP’s have to file certain returns for the Beneficial Interest.
Provisions of LLP Act, 2008
• Rule 22B- Declaration in respect of beneficial interest in any contribution
PROVISIONS
In this rule, two types of interests are identified. One is legal interest vested with the registered partner of the contribution, who is also referred to as the ‘registered or ostensible partner. Another is a beneficial interest vested with the beneficial owner or the beneficial partner.
A. Basic Terms to understand the Concept
I. Registered Partner: means a person whose name is entered in the register of partner of a LLP as the holder of contribution in that LLP but who does not hold beneficial interest in such contribution;
In general words
- this person are not an actual owner of contribution.
- Only his name is entered into register of partner.
II. Beneficial Partner: Every person who holds or acquires a beneficial interest in contribution of a Limited Liability Partnership, but his name isnot registered in the register of partners.
In general words,
- Beneficial partner is actual owner of the contribution.
- Only his name is not entered in the register of partner.
- He is entitled to all beneficial interest on such contribution.
III. Beneficial Interest: A beneficial interest is the right to receive benefits on contribution held by another party. Beneficial interest is often referred to in matters concerning trusts, whereby one has a vested interest in the trust’s assets. A beneficial interest is "that right which a person has in a contract made with another (third party)".
Example: Mr. D desires to hold complete ownership of GDALLP, but due to the mandatory minimum number of partners, he cannot do so alone. Thus, he may present Mr. P as a representative to fulfill the minimum requirement of at least two partner. Mr. P’s name would be listed on the register of partners, although he would indirectly serve as the LLP’s owner (beneficial owner) and controller.
In this scenario, Mr. P serves as the registered partner, while Mr. D serves as the beneficial partner, with GDA LLP serving as the LLP.
Provisions under Act: Rule 22B requires making of declaration in cases where the registered partner and the beneficial partner of contribution in an LLP are two different persons.
B. Mandatory Compliances
I. Declaration by Registered Partner: As per Rule 22B(1), Where the name of a person is entered in the register of partners of an LLP as the holder of contribution in that LLP but who does not hold the beneficial interest fully or partly in such contribution, such person is required to make, a declaration in Form4B within 30 days from the date of entry in the register to the partner. Such declaration shall specify the name and other particulars of the person who actually holds any beneficial interest in such contributions.
II. Declaration by Beneficial Partner: As per Rule 22B (2), Every person who holds or acquires a beneficial interest in contribution of a Limited Liability Partnership but his name is not registered in the register of partners shall file with Limited Liability Partnership, a declaration disclosing such interest in Form 4C within a period of thirty days after acquiring such beneficial interest in the contribution of the Limited Liability Partnership specifying the nature of his interest, particulars of the partner in whose name the contribution stand registered in the books of the limited liability partnership:
III. Return to be filed by LLP: As per Rule 22B (3), Where any declaration under this rule is made to a LLP, the LLP must make a note of such declaration in the register of partner and shall file, within 30 days from the date of receipt of declaration by it, a return in form 4D with the Registrar in respect of such declaration with such fees.
C. Declaration of changes in beneficial ownership
As per the proviso of rule 22B (1 & 2), Where any change occurs in the beneficial interest in such contribution, the registered partner and the beneficial partner shall, within a period of 30 days from the date of such change, make a declaration to the company in Form 4B and 4C.
The company shall make a note of such declaration in the register concerned and shall file, within 30 days from the date of receipt of declaration by it, a return in the Form 4D with the Registrar with requisite fees. This provision covers both the, change in holder of beneficial interest and the change in registered owner in register of members.
D. Designation of a Person as Beneficial Owner Officer
Every LLP shall designate a person under rule 22B (4) "who shall be responsible for furnishing, and extending co-operation for providing, information to the Registrar or any other authorized officer with respect to beneficial interest in contribution of the LLP."
Que 1: Who will be considered as designated person until LLP doesn’t designate any partner under these rule 22B (4)? (DG)
Ans 1: Until a person is designated as referred under sub-rule (4), every designated partner shall be deemed to be responsiblefor furnishing of, and extending co-operation for providing, information with respect to beneficial interest in contribution underthis sub-rule.
CAclubindia
