The regulatory framework for limited liability partnerships (LLPs) is all set for a makeover this month, with the government preparing to infuse a big dose of transparency over the ownership of these entities and introduce a simpler penalty regime.
The ministry of corporate affairs is expected to notify a key disclosure requirement for LLPs this month that will mandate them to report the ultimate natural person behind these business vehicles.
This lifting of corporate veil would bring LLPs on par with companies in the disclosure of who is actually behind the business. An effort towards this was made by the ministry earlier this year, but was deferred due to the second wave of the pandemic. With the wave having abated now, the ministry feels the time is ripe to go ahead with the regulatory change.
“This disclosure requirement would be implemented with prospective effect. That is, once it is notified, LLPs will get some time for compliance,” said a person informed about the government’s move. The idea is to give LLPs sufficient notice before the regulatory shift kicks in from a specified prospective date. The government considers that a high degree of transparency in the affairs of businesses by itself will improve corporate governance.
The ministry is also expected to limit the number of LLPs in which a person can be a ‘designated partner’, who is responsible for its management and compliance. The move seeks to ensure that designated partners are able to do justice to their statutory obligations.
Source: livemint.com
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