As per one estimate, the scheme could benefit 20-25 per cent of the 1.25 lakh LLPs registered in the country*. To give one time opportunity to such defaulting LLPs, MCA, on March 4, 2020 announced LLP Settlement Scheme 2020 (Scheme). Under the Scheme, LLPs will be given a three-month window to complete overdue filings of four forms viz. LLP Form 3, LLP Form 4, LLP Form 8 and LLP Form 11. The additional fees on the forms is reduced to Rs. 10 from Rs. 100 per day of delay with upper cap of Rs. 5,000 per form.
The move is really important and one time opportunity for LLPs to ensure that they make necessary compliance in defaulting LLPs. In January, the Government, had extended provision in the Companies Act to LLPs allowing it to condone delays in filing of documents. Which means that post the scheme, LLPs may be bought at par with Companies for various non compliance done by LLPs.
LLPs are considered as a lower cost and lower compliance business structure relative to companies. However, the additional fees for filing of above mentioned four forms are Rs. 100 per day without any upper limit. Which means that if an LLP has not filed a form for 2 years it may end up paying Rs. 70,000 plus per form for such delay of 700 plus days. With the scheme, for next 90 days i.e. upto June 13, 2020 the maximum additional fees on such forms would be Rs. 5,000 only.
Brief Overview of LLP Settlement Scheme 2020
Ministry of Corporate affairs via General Circular No. 6/2020 on 4th March 2020 introduced LLP Settlement Scheme. The highlight of scheme is as under:
A. Applicability:
LLP Settlement Scheme 2020 is applicable to defaulting LLPs viz. LLP which are registered under LLP Act, 2008 and which has made default in filing of mandatory documents under LLP Act within Due Date which falls on or before October 31, 2019.
Basically it covers all the pending ROC Filing for LLP Form 3, LLP Form 4, LLP Form 8 and LLP Form 11 till October 31, 2019, which was the due date for LLP form 8. Which means that if a LLP form 3 or LLP Form 4, whose due date falls post October 31, 2019 and is not filed by LLP may still attract additional fees of Rs. 100 per day post due date.
B. Forms Covered under LLP Settlement Scheme 2020
The scheme covers mainly 4 forms, viz
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LLP Form 3 | Information with regard to limited liability partnership agreement and changes, if any, made therein |
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LLP Form 4 | Notice of appointment, cessation, change in name/ address/designation of a designated partner or partner. and consent to become a partner/designated partner |
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LLP form 8 | Statement of Account & Solvency (Annual Filing) with due date on October 31st every year. |
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LLP Form 11 | Annual Return of Limited Liability Partnership (LLP) – Annual Filing form with due date on May 31st every year. |
C. Validity of LLP Settlement Scheme 2020 (Time period):
Scheme is valid from March 16, 2020 to June 13, 2020 only.
D. Discount given under LLP Settlement Scheme 2020
- The additional fees of Rs. 100 per day is reduced to mere Rs. 10 per day.
- While there is no upper limit of additional fees which keep on rising by Rs. 100 per day is capped at Rs. 5,000/- under the scheme.
E. Immunity from prosecution under LLP Settlement Scheme 2020
The defaulting LLPs, which have filed their pending documents till 13th June 2020 and made good the default, shall not be subjected to prosecution by Registrar for such defaults.
F. What if LLP does not file pending forms under LLP Settlement Scheme 2020?
The additional fees would be back to Rs. 100 and it will have no upper cap post expiry of scheme. Further, it is expected that ROC may start crackdown at LLP post completion of scheme. While the action is still not clear but looking at past experience, LLP may see next round of cleaning/striking off just like Companies have faced in past 2-3 years.
Conclusion: There is more stronger demand for such one time scheme for defaulting companies. For now it seems LLPs are lucky for time being, however, it also means that LLPs would be the next one in target for government in its effort to clear the mess . We may see more stringent action towards defaulting LLP post completion of Scheme.
Disclaimer: This material and the information contained herein are prepared by JMJA & Associates LLP, Practising Company Secretaries (JMJA) is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). None of JMJA, its associate firms, or its members/employees is, by means of this material, rendering professional advice or services. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. JMJA shall not be responsible for any loss whatsoever sustained by any person who relies on this material.
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