The Lok Sabha passed the Limited Liability Partnership (Amendment) Bill, 2021 (“the LLP Amendment Bill”). The LLP Amendment Bill seeks to de-criminalise certain provisions of the Limited Liability Partnership Act, 2008 (“the Principal Act”) and facilitate greater ease of living to corporates.
The key amendments which are made vide LLP Amendment Bill includes the introduction of the concept of ‘small LLP’ on the concept of small companies, establishing special courts, authorization to Regional Directors to compound certain offences, prescribing Accounting Standards and ‘Auditing Standards for a certain class of LLPs. Few of these amendments are detailed hereunder:
No fine for change of name:
Section 17 of the Principal Act requires LLPs to pay a fine on failure to get it’s name changed where name is identical with or too nearly resembles the name of any other LLP or body corporate or other name as to be likely to be mistaken. The fine amount for LLP is rupees 10,000 which may extend to five lakh rupees. Similarly for designated partners, fine amount is rupees 10,000 which may extend to one lakh rupees.
In terms of clause (8) of the LLP Amendment Bill, such penal provisions are done away with. Rather, Central Government shall allot a new name to the LLP.
Unlimited liability in case of Fraud:
Section 30 of the Principal Act specifies unlimited liability of LLP and it’s partners in the event of an act carried with intent to defraud creditors of the LLP or any other person, or for any fraudulent purpose. Also, every person who was knowingly a party to the carrying on of the business in the manner aforesaid shall be punishable with imprisonment for a term which may extend to two years.
In terms of clause (12) of the LLP Amendment Bill, imprisonment period is extended to five years.
Non-compliance of Annual Return:
Section 35 of the Principal Act mandates LLPs to file an annual return duly authenticated with the Registrar within sixty days of closure of its financial year. Non-compliance of which shall be punishable with fine:
- For LLP- 25,000 Rupees, which may extend to five lakh rupees
- Designated Partners- 10,000 Rupees, which may extend to one lakh rupees
In terms of clause (15) of the LLP Amendment Bill, such fine has amended as under:
- For LLP- 100 Rupees for each day during which such failure continues, subject to a maximum of 1,00,000 Rupees
- Designated Partners- 100 Rupees for each day during which such failure continues, subject to a maximum of 50,000 Rupees
Compounding of offences:
Section 39 of the Principal Act the central government may compound any offence which is punishable only with a fine, by collecting a sum which may extend to the amount of the maximum fine prescribed for the offence.
In terms of clause (16) of the LLP Amendment Bill, Section 39 ibid has been fully substituted to provide inter alia that, Regional Director or any other officer not below the rank of Regional Director authorized by the Central Government, may compound such offences by collecting a sum which may extend to the amount of the maximum fine prescribed for the offence. If an offence by an LLP or its partners was compounded, then a similar offence cannot be compounded within a three-year period.
Establishment of Special Courts:
In terms of clause (19) of the LLP Amendment Bill, Section 67A is inserted in the Principal Act for establishment or designation of as many Special Courts as may be necessary for such area or areas, as may be specified in the notification, for providing speedy trial of offences.
For procedure and powers of Special Court Section 67B and for ‘appeal and revision’ Section 67C is inserted in the Principal Act.
Jurisdiction of Tribunal and Appellate Tribunal:
Section 72 of the Principal Act states, any person aggrieved by an order or decision of Tribunal may prefer an appeal to the Appellate Tribunal.
In terms of clause (22) of the LLP Amendment Bill, supra appeals cannot be made against an order that have been passed with the consent of the parties. Appeals must be filed within 60 days (another 60 days extension) of the order.
Non-compliance of any order passed by Tribunal:
Section 73 of the Principal Act states, whoever fails to comply with any order made by the Tribunal shall be punishable with imprisonment which may extend to six months and shall also be liable to a fine which shall not be less than fifty thousand rupees.
In terms of clause (23) of the LLP Amendment Bill, Section 73 ibid is omitted.
Creation of Small LLP:
In terms of clause (3) of the LLP Amendment Bill, introduction of the concept of ‘Small LLP’ is made in consonance with the concept of ‘Small Company’ under the Companies Act, 2013. It is done to encourage entrepreneurs as these LLPs will be subject to fewer compliances, reduced fee or additional fee, and smaller penalties for default etc.
‘Small LLP’ means a LLP:
- the contribution of which, does not exceed 25 lakh rupees or such higher amount, not exceeding 5 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 40 lakh rupees or such higher amount, not exceeding 50 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.
General penalties:
As per Section 74 of the Principal Act, person guilty of an offence for which no punishment is expressly provided shall be liable to a fine which may extend to 5,00,000 Rupees but which shall not be less than five thousand rupees and with a further fine which may extend to 50,00,000 for every day after the first day after which the default continues.
In terms of clause (24) of the LLP Amendment Bill, Section 74 ibid has been fully substituted to provide that, LLP or any partner or any designated partner or any other person, who is in the default, shall be liable to a penalty of 5,000 Rupees and in case of a continuing contravention a further penalty of 100 Rupees for each day after the first day during which such contravention continues, subject to a maximum of one lakh rupees.
Limited Liability Partnership (Amendment) Bill, 2021 can be accessed at: http://www.a2ztaxcorp.com/wp-content/uploads/2021/08/Limited-Liability-Partnership-Amendment-Bill-2021.pdf
Source: a2ztaxcorpllp.com
***
Follow us for free tax updates : facebook Twitter
Subscribe to our portal and get FREE Tax e-books, quality articles and updates on your e-mail.
Resolve your GST queries from national level experts on GST free of cost.
TW Editorial Team comprises of team of experienced Chartered Accountants and Advocates devoted to spread the knowledge of GST amongst the various stakeholders.
