INTRODUCTION
The concept of Limited Liability Partnerships (LLPs) in India was introduced in the year 2009 with the enactment of the “Limited Liability Partnership Act, 2008 (6 of 2009) which was notified on 31.03.2009. The first LLP was formed on the 02nd Day of April 2009 and since then almost 10,000 LLPs have been formed so far as per the records of the Ministry of Corporate Affairs.
LLP in India is viewed as an alternative corporate business vehicle that provides the benefits of limited liability and also allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.
PROMINENT FEATURES
Some of the main highlights of LLP are:
|
Good Hybrid of Company and Partnership form of organization |
LLP has limited liability and perpetual succession |
| Removes defects of unlimited liability under partnership and rigidity of provisions as prevalent |
LLP is a ‘body corporate’ having legal entity different from its partners |
|
A partner can bind LLP but not other partners |
LLP can be formed for carrying out any lawful business with a view to profit |
| Ideal for medium businesses, professionals, joint ventures but not available for charitable organizations |
A company, LLP, foreign LLP and foreign company can be partner of LLP |
| Minimum two partners should be nominated as ‘designated partners’ to fulfill statutory obligations |
Small LLP exempt from audit provisions |
|
Very heavy penalty (of Rs 100 per day) for late filing of returns |
Provisions of reconstruction, amalgamation and compromise, winding up, inspection and investigation are similar to those under CA, 1956 |
ADVANTAGES AND SHORTCOMINGS OF LLP
Some of the main advantages and disadvantages of LLP at a glance are:
|
ADVANTAGES |
DISADVANTAGES |
|
No major Investment |
Mandatory Disclosure of financial information |
|
Limited Liability |
Cannot raise public money |
|
Commercially efficient vehicle |
Loss of secrecy of information |
|
No personal liability |
Untried structure |
|
Internal flexibility |
More legal documentation |
|
Less statutory compliances |
Stringent rules on FDI |
|
Lesser paper work and formalities |
Practical issues in formation |
|
Perpetual succession |
Lack of awareness among general public |
|
Secure and financial less risky |
|
|
Scope for expansion and growth |
|
RECENT CHANGES
One of the major changes which has taken place in LLP is the integration of LLP site with MCA site w.e.f 11th June 2012. The erstwhile LLP website (www.llp.gov.in) has been merged with the MCA site (www.mca.gov.in) and all filing pertaining to LLPs has to be done on the MCA portal only.
MCA has issued detailed guidelines on how to login and access records of existing LLPs on the MCA website and what all updations need to be done by designated partners and LLPs in order to be able to do filing on MCA site.
The Procedure for formation of LLP is almost same. For the erstwhile forms on LLP website, corresponding forms have been made available on MCA website and the names of forms have remained same in most of the cases. One practical difference is that Residential status of each designated partner needs to be updated by filing form DIN 4.
A look at the recent Circulars and Notifications issued by MCA pertaining to LLPs:
|
REFERENCE NO. |
DATE |
DESCRIPTION |
|
No. 22 |
02.06.2012 |
Notice under Rule 37(3) of LLP Rule, 2009 |
|
G.S.R. (E) |
05.06.2012 |
The Limited Liability Partnership (Amendment) Rules, 2012 |
|
General Circular No. 13/2012 |
06.06.2012 |
Extension of time in Filing Annual Return by Limited Liability Partnerships |
|
G.S.R. (E) |
21.06.2012 |
Corrigendum to LLP notification dated 05.06.2012 |
|
General Circular No. 15/2012 |
29.06.2012 |
Extension of time in Filing of annual return by Limited Liability Partnerships(LLPs) |
|
G.S.R. (E) |
10.07.2012 |
Sections 51, 63-65 of LLP Act, 2008 notified. |
|
G.S.R. (E) |
10.07.2012 |
Limited Liability Partnership (Winding up and Dissolution) Rules, 2012 |
Synopsis of the above circulars and notifications:
Notifications No. 22 - Notice Under Rule 37(3) Of LLP Rule, 2009
G.S.R. (E) - The Limited Liability Partnership (Amendment) Rules, 2012
General Circular No. 13/2012 - Extension of time in Filing Annual Return by Limited Liability Partnerships
G.S.R. (E) - Corrigendum to LLP notification dated 05.06.2012
General Circular No. 15/2012 - Extension of time in Filing Annual Return by Limited Liability Partnerships
 |
G.S.R. (E) - Sections 51, 63-65 of LLP Act,2008 notified
G.S.R. (E) - Limited Liability Partnership (Winding up and Dissolution) Rules, 2012
Ministry has notified the new Limited Liability Partnership (Winding up and Dissolution) Rules, 2012 which will be effective from 10th July 2012.
The Following modes of winding up have been notified:
CIRCUMSTANCES FOR WINDING UP
Wrapping Up
Limited Liability Partnership though came very late to India, has finally found its space. LLP is best suited to small and medium business enterprises by offering a good mix of company and partnership form of organization. The Ministry of Corporate Affairs is continuously striving to bring about improvements in the field of regulations governing LLP and their formation. Integration of LLP and MCA site has further simplified the procedure for formation of a LLP and other filings related thereto.
S Dhanapal & Associates
Practising Conpany Secretaries
CAclubindia
