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2. Prominent Drivers • Bhat Committee (1972), Naik Committee (1992) • Expert Committee on development of Small Sector Enterprises headed by Shri Abid Hussain (1997) • Study Group on development of Small Sector Enterprises headed by Dr.S.P.Gupta (2001) Contd..
Contd.. • Committee on regulation of private companies and partnerships headed by Shri Naresh Chandra (2003) • Committee on new Company Law - Dr.JJ Irani (2005)
3. History • Based on the recommendations of Expert Committees, draft LLP Bill was formulated • Introduced in Rajya Sabha on 15-12-2006 as LLP Bill 2006 • Referred to the Department Related Parliamentary Standing Committee on Finance for exmination and report Contd..
Contd.. • Committee submitted its recommendations to the House of Parliament on 27-11-2007 • The Government redrafted and finalized LLP Bill 2008 and introduced revised LLP Bill 2008 in Rajya Sabha on 21-10-2008 • Bill was passed by Rajya Sabha on 24-10-2008 Contd..
Contd.. • The Bill was passed by Lok Sabha on 12-12-2008 • The President gave consent to the Bill on 7-1-2009 • LLP Rules, 2009 was notified in the Gazette on 1-4-2009. All rules notified except, Rules 32,33 and 38 to 40 relating to conversion of Firm/ Private company/ Unlisted public company
4. Pre-condition for registering LLP • Object to do lawful business for profit ( no non-profit organization can be registered under LLP ) • Permissible name • Minimum two partners • LLP Agreement if not available – Schedule I to apply Contd..
Contd.. • Minimum two designated partners having DPIN and given consent • Consent of all partners • Submission of prescribed incorporation documents
5. Structure of LLP Act Chapter 1 -- Definition • Entity includes firm set up under Indian Partnership Act, 1932 • Financial Year stipulated from 1st April to 31st March except first Financial Year can be 18 months if incorporated after 30th September
Chapter 2 -- Nature of LLP • Legal entity • Perpetual succession • Indian Partnership Act, 1932 shall not apply to LLP Contd..
Contd.. • Body Corporate may be partner in LLP • Disqualification for partners • Minimum two partners, no maximum number • Minimum two designated partners who are liable for compliance of the provisions of LLP and having DPIN Contd..
Contd.. > In the absence of minimum required designated partner, every partner shall be designated partner
3. Incorporation and Incidental matters • Documents prescribed under LLP Rules to be filed • Declaration of compliance to be filed by Company Secretary/ Chartered Accountant/ Cost Accountant/ Advocate and by one of the subscribers • Incorporation document include all details like Objects, names of partners etc. Contd..
Contd.. • On compliance, ROC to register LLP within 14 days • LLP has privilege to give an address other than registered office for communication • Acronym LLP to be added to the name • Name registration as applicable to company and similar name to existing partnership firm also cannot be allowed Contd..
Contd.. > LLP registered with undesirable name can be directed to change its name without any time limit, however, any interested party can apply to ROC for issue of direction within 24 months from the date of registration for change of name
Chapter 4 -- Partners and their relations • The mutual rights and duties determined as per Partnership Agreement failing which Schedule I will apply • Change to be intimated to ROC • Any partner can resign in terms of LLP Agreement Contd..
Contd.. • Cessation of partner does not exonerate past liability • Resigned or ceased partner entitled for share of profits, return of capital contribution after deduction of accumulated losses • Similar right available to the legal heir Contd..
Contd.. • A ceased partner can directly intimate ROC, his cessation if he believes that LLP will not intimate ROC. In such cases, ROC shall obtain confirmation from LLP within 15 days and register thereof.
Chapter 5 -- Extent and Limitation of Liability of LLP and Partners • Every partner liable to the agreed contribution • LLP not bound by acts of any partner contrary to LLP Agreement • Liability of LLP to be met out of property of LLP • A wrongful credit to LLP on account of misrepresentation by partner is acccountable by LLP Contd..
Contd.. • Act of fraud on the part of partner will make the liability unlimited
Chapter 6 -- Contribution • Contribution can be either tangible or intangible • Intangible contributions to be accountable in monetary value as per valuation of Chartered Accountant • Contribution as per LLP Agreement
Chapter 7 -- Financial disclosures • Appropriate books of accounts to be maintained on cash or accrual basis according to Double Entry System • Within 6 months from the end of financial year, statement of account and solvency to be signed by designated partners only and filed with ROC • LLP Accounts to be audited as per Rules ( small companies exempted from audit ) -- if turnover does not exceed Rs.40 lakhs or turnover does not exceed Rs.25 lakhs Contd..
Contd.. • Certification by Statutory Auditor “It is hereby certified that I have verified the particulars contained in the statement of account and insolvency including the statement of assets and liabilities as at _____ and the income and expenditure for the period ended ______ from the accounting records and other books and papers of _______ ( Name of LLP) and found them to be true and fair” Name of the Auditor
Contd.. • LLP to file Annual Return within 60 days of closure of Financial Year • LLP documents are available for public inspection • Any false statement in financial statements or other documents will attract two years imprisonment and penalty Contd..
Contd.. • ROC has power to call for information both from existing partners/ employees and past partners/ employees
Chapter 8 -- Assignment and transfer of partnership rights • Economic rights are transferable such as share in profit, right to receive distribution • Transfer of economic right itself does not result in cessation of partnership
Chapter 9 - Investigation • Central Government can appoint inspectors on directions of NCLT • On directions of Court having jurisdiction on the company • Based upon report of ROC Contd..
Contd.. • Application to be made by partners having 1/5th of the total partners • Investigation of related entities • Inspector has powers similar to that of Companies Act • Provisions for recovery of damages from partners in respect of fraud, misfeasance, misconduct under Recovery of property
Chapter 10 -- Conversion into LLP • A Partnership firm under the Indian Partnership Act, 1932, may be converted into LLP as per IInd Schedule • Properties, assets etc. vest in the LLP without further act, assurance or deed • A firm may be a registered one under the Indian Partnership Act, 1932 or may not be registered Contd..
Contd.. • If registered under the Indian Partnership Act, 1932, give intimation to Registrar of Firms/ ROC within 15 days after the date of registration • Registrar’s refusal is appelable to CLB/NCLT • All pending proceedings against the firm shall continue against LLP • All licenses, approvals granted to partnership firm will continue with LLP Contd..
Contd.. • If any partner of the erstwhile firm discharges any liability, he is liable to be fully indemnified in terms of LLP Agreement • LLP shall ensure for 12 months disclosing on letter head and documents that it was converted • All existing partners of the firm should also be partners of LLP Contd..
Contd.. • Private company can convert into LLP as per IIIrd Schedule • No subsisting security interest in assets at the time of application • All existing shareholders should also be partners of LLP • On incorporation as LLP, intimate to the concerned ROC within 15 days. The company shall be deemed to be dissolved from the records of ROC on the date of registration of LLP Contd..
Contd.. • All tangible and intangible assets will vest in LLP without any act, assurance or deed • All proceedings, contracts, agreements, deeds in relation to erstwhile private company to continue with LLP • LLP shall ensure for a period of 12 months to disclose in all correspondence that it was a private company
Contd.. © An unlisted public company may convert into LLP as per Schedule IV • No subsisting security interest in any asset of public limited company • All shareholders of Unlisted Public Limited company continue as partners • The concerned ROC to be informed within 15 days about the conversion Contd..
Contd.. • The Unlisted Public Limited company shall stand dissolved on the date of registration of LLP • All tangible and intangible assets will be vested in LLP • All proceedings, contracts etc. of the erstwhile Unlisted Public Limited company shall continue with LLP including approvals, licenses etc. Contd..
Contd.. > The LLP shall ensure for a period of 12 months from the date of registration to disclose the intimation of erstwhile Unlisted Public Limited Company in all correspondence etc.
Chapter 11 -- Foreign LLP • Same as in the Companies Act, 1956
Chapter 12 - Compromise, Arrangement and Reconstruction of LLP • Similar to Companies Act, 1956
Chapter 13 -- Winding up and Dissolution • Similar to Companies Act, 1956 • Separate Rules will be framed for dissolution of LLP
Chapter 14 -- Miscellaneous • A partner can have transaction with LLP and no restriction regarding Related Party transactions • Central Government can give special exemptions to LLP • Information Technology Act incorporated in LLP -- digitally signed documents and electronic documents admissible as evidence in the Court Contd..
Contd.. • Any document can be filed up to a period of 300 days delay with prescribed additional fee -- after 300 days liable for prosecution in addition to additional fee • Until constitution of NCLT, CLB shall exercise powers except relating to winding up, compromises and arrangement etc. which shall be exercised by High Court
Contd.. • Partner other than designated partner also liable if connivance is proved or negligence established • A Metropolitan Magistrate, Judicial/ Ist Class Magistrate have jurisdiction regarding LLP Litigation • Separate regulation by way of rules exhaustively govern every area of operation of LLP.
LLP Rules • DPIN to be obtained for each designated partner. -- Provisional DIN valid for 60 days • The fee payable to ROC can be paid by cash or directly into Public Account of India maintained by RBI or any authorized bank Provided -- where the e-forms are filed electronically, payment of fees shall be through credit card or internet banking or remittance at the authorized bank counter Contd..
Contd.. • Following persons are not eligible for terming as designated partners : • Undischarged Insolvent • Adjudged insolvent at any time within preceding 5 years • Suspended payment to creditors within preceding 5 years • Is or has been affected by the Court of Law in any business involving moral turpitude and sentenced to imprisonment for not less than 6 months Contd..
Contd.. • Document can be served on LLP or Partner either electronically or through courier • LLP can give an address other than registered office for communication/ service of documents • LLP can shift its registered office from one place to another as per partnership agreement, in the absence of any such agreement – consent of all partners required for shifting registered office Contd..
Contd.. • If the shifting of registered office is from one State to another, not less than one month before filing any notice with ROC, LLP to publish general notice in English and Vernacular language in the District in which the registered office is situated • The guidelines similar to those stated u/s 20 of the Companies Act, 1956 have been incorporated in LLP Rules for availability of name with the addition that there should not be similar name, vis-à-vis existing partnership firm under the Indian Partnership Act, 1932. Contd..
Contd.. • If the proposed name includes Company Secretary, Chartered Accountant or Advocate or any other profession, NOC from the Council governing the Institute or such authority should be submitted. • Foreign LLP can reserve its name in India for 3 years and may also renew Contd..
Contd. • In other circumstances, the availed name will be reserved for 3 months from the date of availability of name • Aggrieved entity can apply to ROC for issue of direction to the existing LLP to change its name with the details of grounds Contd..
Contd.. • LLP can change its name as per terms of partnership agreement, failing which, consent of all partners is required • Contribution of a partner can be tangible, cash, movable or immovable or intangible property in which case, valuation shall be done by practicing Chartered Accountant or practicing Cost Accountant or approved valuer -- Intangible assets can be quantified in monitory value Contd..
Contd.. • LLP to maintain books of accounts to disclose true and correct state of affairs of LLP • Statement of Account and Solvency to be signed by designated partners • Books of accounts to be maintained for 8 years Contd..