Home Company Law - Editorial Key Take Away, LLP (Amendment) Act, 2021

Key Take Away, LLP (Amendment) Act, 2021

by CS Divesh Goyal
Published: Last Updated on 0 comment 1061 views

In the Budget 2021, our hon’ble financial minister announced about Amendment in LLP Act. In continuation of same, Ministry of Corporate Affairs issued a press release on 03rd February 2021. https://pib.gov.in/PressReleasePage.aspx?PRID=1694837

Further in continuation of the same Wednesday, 28th July, 2021 Cabinet has passed LLP Amendment Bill, 2021. This will be the first time that changes are being made to the Act since it came into effect in 2009. They have made 29 amendments to LLP Act 2008 by LLP Amendment Bill 2021.

Both house of Parlimant has approved LLP Amendment Bill, 2021. Finally, the same got approval of President of the India on 13th August, 2021 and become LLP Amendment Act, 2021. This is Act no. 31 of 2021. This Amendment Act shall amend the LLP Act, 2008.

Date of Applicability

It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act

PURPOSE OF AMENDMENT IN VERSION:

  1. The government looks to improve ease of doing business and encourage start-ups.
  2. To encourage business class to incorporate LLP’s.
  3. To make it popular for Startups
  4. Conversion of Partnership firms into LLP’s
  5. To remove the fear of criminal prosecutions for non- substantive minor and procedural omissions and commissions in the normal course of their business transactions.
  6. The objective of the De-criminalization exercise is to remove criminality of offences from business laws where no malafide intentions are involved

KEY AMENDMENTS

  1. Definition of Business: business includes every trade, profession, service and occupation except any activity which the Central Government may, by notification, exclude 

NEW CONCEPT: New definition added in LLP Act.

  1. SMALL LLP

“Small Limited Liability Partnership” means a limited liability partnership—

  • the contribution of which, does not exceed twenty-five lakh rupees (Rs. 25,00,000/-) or such higher amount, not exceeding five crore rupees, as may be prescribed; and
  • the turnover of which, as per the Statement of Accounts and Solvency for the immediately preceding financial year, does not exceed forty lakh rupees (Rs. 40,00,000/-) or such higher amount, not exceeding fifty crore rupees, as may be prescribed; or
  • which meets such other requirements as may be prescribed, and fulfils such terms and conditions as may be prescribed;’
  1. Resident of India: (Section 7(1) Explanation)- Meaning of Resident of India for the purpose of Designated Partner

the term resident in India means a person who has stayed in India for a period of not less than One Hundred Twenty days (120) during the financial year.

Effect: Now a person who is resident in india for just 120 days in financial year can be appoint as designated partner.

  1. Names which are not allowed: (Section 15(2)(b))- About non availability of name.

No limited liability partnership shall be registered by a name which, in the opinion of the

  • Central Government is identical or
  • too nearly resembles to that of any other limited liability partnership or
  • a company or a registered trademark of any other person under the Trade Marks Act, 1999.”
  1. Change of nameof limited liability partnership: (Section 17)- This section fully substituted and Section 18 fully omitted.
  • In case of same Name Central Govt may direct to change the name within 3 months.
  • Trademark owner can make application within 3 month from the date of Incorporation.
  1. Accounting and auditing standards: (Section 34A)- This is New Section inserted after Section 34.

“34A. The Central Government may, in consultation with the National Financial Reporting Authority constituted under section 132 of the Companies Act, 2013,—

(a) prescribe the standards of accounting; and

(b) prescribe the standards of auditing,

as recommended by the Institute of Chartered Accountants of India constituted under section 3 of the Chartered Accountants Act, 1949, for a class or classes of limited liability partnerships.”

  1. Compounding of offences: (Section 39)- This section fully substituted. 
  • the Regional Director or any other officer not below the rank of Regional Director authorised by the Central Government may compound any offence under this Act which is punishable with fine only
  • a sum which may extend to the amount of the maximum fine provided for the offence but shall not be lower than the minimum amount provided for the offence
  • it is hereby clarified that any second or subsequent offence committed after the expiry of the period of three years from the date on which the offence was previously compounded, shall be deemed to be the first offence.
  • Every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Regional Director
  1. Establishment of Special Court: (Section 67A)- This is New Section inserted after Section 67.

The Central Government may, for the purpose of providing speedy trial of offences under this Act, by notification, establish or designate as many Special Courts. ETC.

  1. Procedure and powers of Special Court: (Section 67B)- This is New Section inserted after Section 67A
  • all offences specified under sub-section (1) of section 67A shall be triable only by the Special Court established or designated for the area in which the registered office of the limited liability partnership is situated in relation to which the offence is committed.
  • where there are more than one Special Courts for such area, by such one of them as may be specified in this behalf by the High Court concerned
  1. Appeal and Revision: (Section 67C)- This is New Section inserted after Section 67B.

The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Sessions trying cases within the local limits of the jurisdiction of the High Court.”

  1. Registration offices: (Section 68A)- This is New Section inserted after Section 68.

For the purpose of exercising such powers and discharging such functions as are conferred on the Central Government by or under this Act or under rules made thereunder and for the purpose of registration of limited liability partnerships under this Act, the Central Government shall, by notification, establish such number of registration offices at such places as it thinks fit, specifying their jurisdiction. ETC.

  1. Payment of additional fee: (Section 69)- This section fully substituted.

A different fee or additional fee may be prescribed for different classes of limited liability partnerships or for different documents or returns required to be filed under this Act or rules made thereunder

  1. Jurisdiction of Tribunal and Appellate Tribunal: (Section 72(2))- This sub -section fully substituted.
  • Any person aggrieved by an order of Tribunal may prefer an appeal to the Appellate Tribunal
  • Provided that no appeal shall lie to the Appellate Tribunal from an order made by the Tribunal with the consent of parties.
  1. Penalty on non-compliance of any order passed by Tribunal: (Section 73)- This section fully omitted. 
  1. General Penalties: (Section 74)- This Section fully substituted. 

If a limited liability partnership or any partner or any designated partner or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act,

the limited liability partnership or any partner or any designated partner or any other person, who is in the default, shall be liable to a penalty of five thousand rupees and in case of a continuing contravention with a further penalty of one hundred rupees for each day after the first during which such contravention continues, subject to a maximum of one lakh rupees.”

  1. Adjudication of penalties.: (Section 76A)- This is New Section inserted after Section 76. 
  • the Central Government may, by an order published in the Official Gazette, appoint as many officers of the Central Government, not below the rank of Registrar, as adjudicating officers
  • The Central Government shall, while appointing adjudicating officers, specify their jurisdiction in the order
  • ETC
  1. Jurisdiction of Courts: (Section 77)- This Section fully substituted. 
  • The Special Court referred to in clause (a) of sub-section (2) of section 67A shall have jurisdiction and power to impose punishment under section 30 of the Act
  • the criminal cases against the limited liability partnership or its partners or designated partners or any other person in default filed under this Act and pending before the court of Judicial Magistrate of the first class or Metropolitan Magistrate, as the case may be, shall be transferred to the Special Court
  1. Cognizance of offences.: (Section 77A)- This is New Section inserted after Section 77A. 

No court, other than the Special Courts referred to in section 67A, shall take cognizance of any offence punishable under this Act or the rules made thereunder save on a complaint in writing made by the Registrar or by any officer not below the rank of Registrar duly authorised by the Central Government for this purpose.

  1. Power to make rules.: (Section 79)- there are additions/ substitutions in sub section 2.

(i) for clause (a), the following clauses shall be substituted, namely:— “

  • the contribution of such higher amount under sub-clauses (i) and (ii) of clause (ta) of section 2;
  • (aa) the terms and conditions to be fulfilled by class or classes of limited liability partnerships under long line to clause (ta) of section 2;
  • (ab) the form and manner of prior consent to be given by designated partner under sub-section (3) of section 7;”;

(ii) ETC.

  1. Power to remove difficulties.: (Section 80)- After sub section 1 new sub section 1A inserted:

(1A) Notwithstanding anything contained in sub-section (1), if any difficulty arises in giving effect to the provisions of this Act as amended by the Limited Liability Partnership (Amendment) Act, 2021, the Central Government may, by order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act, as may appear to it to be necessary for removing the difficulty:

Provided that no such order shall be made under this section after the expiry of a period of three years from the date of commencement of the Limited Liability Partnership (Amendment) Act, 2021.”

  1. Transitional provisions: (Section 81)- This section fully omitted.

PENALTY:

  1. Section 10: Punishment for contravention of sections 7, 8 and 9

Penalty clauses amended in Section 10

2. Section 13: Registered office of limited liability partnershipand change therein

Penalty clauses amended in Section 13

3. Section 21: Publication of nameand limited liability

Penalty clauses amended in Section 21

4. Section 25: Registration of changes in partners

Penalty clauses amended in Section 25

5. Section 30: Unlimited liability in case of fraud

Penalty clauses amended in Section 30

6. Section 34: Maintenance of books of account, other records and audit, etc

Penalty clauses amended in Section 34

7. Section 35: Annual Return

Penalty clauses amended in Section 35

8. Section 60: Compromise, or arrangement of limited liability partnerships

Penalty clauses amended in Section 60

9. Section 62: Provisions for facilitating reconstruction or amalgamation of limited liability partnerships

Penalty clauses amended in Section 62

10. Section 74: General penalties

Penalty clauses amended in Section 72

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).

Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a piece of professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION

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