THE LIABILITY OF THE PARTNERS TO BE LIMITED TO THEIR AGREED CONTRIBUTION IN THE LLP
Minister of Corporate Affairs, Shri Prem Chand Gupta today introduced the Limited Liability Partnership Bill, 2008 in the Rajya Sabha today. The Bill provides for the formation and regulation of limited liability partnerships and for matters connected therewith or incidental thereto.
Limited Liability Partnership (LLP)as proposed in the Bill, 2008 is a new corporate form that enables professional expertise and entrepreneurial initiative to combine, organize and operate in an innovative and efficient manner. In
Services sector is playing a major role in the national economy and there is a growing diversity in the range of services being offered. The services sector would also find this form very useful.The advantage of the LLP form would be that it will not impose detailed legal and procedural requirements intended for large widely held companies on such enterprises. In this way it will also be useful for small enterprises.
The need for LLP legislation has been recognized for a very long time. Various committees and Expert Groups have, from time to time, recommended introduction of LLP legislation in
However, it is the recent initiative of the Ministry of Corporate Affairs that has enabled this legislation to be finalized and tabled in the Parliament.
Government had earlier introduced the Limited Liability Partnership Bill, 2006 in the Rajya Sabha on
The salient features of the LLP Bill, 2008 are as follows:
(i) The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.
(ii) The Bill does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.
(iii) While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
(iv) LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to LLPs. Since LLP shall be in the form of a body corporate, it is also proposed that the relevant provisions of the Companies Act, 1956 may be made applicable to LLPs at any time in the future by Notification by Central Government, with such changes or modifications as appropriate.
(v) An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. Since tax matters of all entities in
(vi) Provisions have been made in the Bill for corporate actions like mergers, amalgamations etc.
(vii) While enabling provisions in respect of winding up and dissolutions of LLPs have been made in the Bill, detailed provisions in this regard would be provided by way of rules under the Act.
Prior to introducing the LLP Bill, 2008, Shri Prem Chand Gupta withdrew the earlier Limited Liability Partnership Bill, 2006.