Article contains FAQs On Nature Of Limited Liability Partnership (LLP), Applicability Of The LLP Act, Partners And Designated Partners, LLP Agreement, Registration, Change In Partners, Partners’ Contribution And Transactions Of Partners With LLP, Liability Of Partners, Disclosure, Audit And Filing Requirements, Investigation Of Affairs Of LLPs And Role Of Government To Check Unscrupulous LLPs Etc., Taxation, Conversion Of Other Entities Into LLPs And Vice Versa, Merger And Winding-Up Of LLPs, Offences & Penalties And Jurisdiction Of Courts/Tribunal, Miscellaneous Provisions, Introduction Of LLP Bill, 2006 In The Parliament And Examination By Standing Committee And Subsequent Action.
Q.1 What are the steps to incorporate LLP?
Ans: Name reservation: The first step to incorporate Limited liability partnership (LLP) is reservation of name of LLP. Applicant has to file eForm 1, for ascertaining availability and reservation of the name of a LLP business.
Incorporate LLP: After reserving a name, user has to file eForm 2 for incorporating a new Limited Liability Partnership (LLP).
eForm 2 contains the details of LLP proposed to be incorporated, partners’/ designated partners’ details and consent of the partners/ designated partners to act as partners/ designated partners.
LLP Agreement: Execution of LLP Agreement is mandatory as per Section 23 of the Act. LLP Agreement is required to be filed with the registrar in eForm 3 within 30 days of incorporation of LLP.
Q.2 Can an existing partnership firm be converted to LLP?
Ans: Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act. Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.
Q.3 Can an existing company be converted to LLP?
Ans: Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act. Form 18 needs to be filed with the registrar along with Form 2 for such conversion.
Q.4 Can a listed company be converted to LLP?
Ans: No, only private / unlisted public company can be converted into LLP.
Q.5 In case form 17 or form 18 has been filed for conversion of partnership firm/ company into LLP, can conversion application be rejected? Is there any provision for filing an appeal against such rejection?
Ans: Yes, conversion application (Form 17 or 18) can be rejected by the registrar, if not found appropriate along with eForm 2.
The applicant has the option to go for appeal against the application rejected within 90 days and inform the registrar about the action undertaken. After the appeal is decided, the registrar can mark the status of eForm as ‘Sent for re-application’ or ‘Rejection confirmed’.
Q.6 Status of my conversion application is ‘Sent for re-application’. Do I need to file the application again? Do I also need to make the payment again?
Ans: In case the eForm is marked as ‘Sent for re-application’, the applicant is required to file fresh Form 17 or 18 along with Form 2 within 60 days, failing which the Form will be marked as ‘Rejection confirmed’ by the system.
In case of re-application, the fee is not required to be paid again while re-applying for conversion.
Q.7 I want to convert my private company ‘ABC Infotech Private Limited’ into LLP but with name ‘DEF Infotech LLP’. Can I get my LLP registered with new name?
Ans: Any private company or unlisted public company can be converted into LLP. However, in this case LLP shall take same name as that of the company at the time of conversion.
Q.8 How can I apply for reserving LLP Name?
Ans: File LLP Form No. 1 (Application for reservation or change of name) by logging on to the LLP portal along with the fee prescribed and attaching the digital signature of the designated partner proposing to incorporate a LLP.
Also, refer the LLP name availability guidelines prescribed under section-15 read with Rule-18 of LLP Rules, 2009.
Q.9 What is the duration during which the approved name is available for formation of the LLP? Or What is the validity period of approved name of LLP?
Ans: The approved name of LLP shall be valid for a period of 3 months from the date of approval. If the proposed LLP is not incorporated within such period, the name shall be lapsed and will be available for other applicant/ LLP. Please note that there shall not be any provision for renewal of the name.
Q.10 Whether name of LLP can end with words like ‘Limited’ or ‘Pvt. Limited’?
Ans: No, name of the LLP shall end with either ‘Limited Liability Partnership’ or ‘LLP’. Word ‘limited’ shall be allowed in name only within ‘Limited Liability Partnership’.
Q.11 What is the treatment for stamp duty issues, both in terms of original incorporation and conversion from other business structures? Would there be any stamp duty exemption in case of conversion?
Ans: Since Stamp Duty is the subject reserved for the States, the LLP Act does not contain any provision for treatment of stamp duty issues. The stamp duty payable will depend upon the relevant Stamp Act prescribed by the State Government/Union Territory.
Q.12 What will be the obligation of a partner in case he changes his name or address?
Ans: Every partner shall inform the LLP of any change in his name or address within a period of fifteen days of such change. The LLP, in turn, would be under obligation to file such details with the Registrar within thirty days of such change in Form 4.
Q.13 Can I comply with the requirement of two designated partner by appointing myself as a designated partner in individual capacity as well as a nominee of body corporate?
Ans: No, Appointment of at least two “Designated Partners” shall be mandatory for all LLPs.
Every LLP shall be required to have atleast two Designated Partners who shall be individuals and at least one of the Designated Partner shall be a resident of India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.
Q.14 I want to incorporate a LLP with more than 200 designated partners and partners. However, Form 2 has the limit of only 200 partners to be entered. What shall I do in that case? Or When Addendum to Form 2/ 4 is required to be filled by LLP?
Ans: Filing of addendum to Form 2 with Form 2 or addendum to Form 4 with Form 4 is required to be filed if the Total number of designated partners and partners for which the Form is filed exceed 200.
Q.15 In case Form 2 or Form 4 is marked for re-submission, then how the details of DPs/ partners numbering more than 200 are to be re-submitted?
Ans: In case Form 2 or any addendum to Form 2 is marked as RSUB, then the Form 2 and all the corresponding addendums shall be marked as RSUB and shall have to be resubmitted by the stakeholder. In case Form 2 is resubmitted, status of Form 2 ‘Pending for addendum to Form 2’ and shall be changed to ‘pending for action’ once all the required addendums are filed.
The above scenario is similarly applicable in case of Form 4 or any addendum thereto.
Q.16 Which forms are required to be filed to Registrar in case of appointment of new partners/ resignation of existing partners from the LLP?
Ans: eform 3 and eform 4 are required to be filed for appointment of new and resignation of existing partners within thirty days of such cessation or appointment without additional fee and with additional fee thereafter
Q.17 What is the process for intimation of changes in the partner’s details?
Ans: The change in partner’s details can be intimated by filing eform 4 within thirty days of such change without additional fee and with additional fee thereafter.
Q.18 Is it mandatory to file and get registered the partnership agreement under LLP?
Ans: Yes, it mandatory to execute and file LLP Agreement in view of Section 2(0) & (q) , 22 and 23 of the Act.
As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I
Q.19 I have incorporated a LLP with partners numbering more than 200. How can I file the details of partners in Form 3?
Ans: A limited liability partnership willing to file the information with regard to initial LLP agreements or any changes thereto, and the number of partners exceeds maximum number allowed in the eform, will need to enter/ update the details of all partners through a screen for ‘Enter/ Update partners’ detail for filing LLP agreement’ which shall be available to the designated partners (as business partner) after login to MCA portal.
Q.20 I have filed Form 3 and Form 4 for cessation of partners from the LLP. The eform are pending for approval. Can I file another Form3 and Form 4 for appointment of other partners in the LLP?
Ans: In this case filing shall not be allowed if there is any eform 3 and any eform 4 for cessation of a designated partner or partner pending for payment of fee or any eform 3/4 is under processing in respect of the LLP.
Q.21 What are the documents required to be filed by a LLP annually?
Ans: LLP is required to file LLP Form 8 (Statement of Account & Solvency) and LLP Form 11 (Annual Return) annually. The ‘Annual Return’ is required to be filed within 60 days of close of the financial year and ‘Statement of Accounts & Solvency’ shall be filed within 30 days from the end of six months of the financial year to which it relates. Every LLP has to maintain uniform financial year ending on 31st March of a year.
Q.22 What is “Statement of Accounts and Solvency” and whether it has a prescribed format?
Ans: Every LLP is required to file ‘Statement of Accounts & Solvency’ in prescribed LLP Form 8 which contains a declaration on the state of solvency of the LLP by the designated partners and also information related to statement of assets and liabilities and statement of income and expenditure of the LLP. This form has to be filed by the LLP on an annual basis.
Q.23 I have incorporated a LLP on 1st December of financial year, when do I require filing my statement of accounts and annual return?
Ans: In case LLP has been incorporated on or after 1st October of financial year, then LLP can close its first financial year either on the coming or next 31st March i.e. LLP files its first financial year details for 18 months.
Q.24 When the details of DP or partners are required to be updated through screen for ‘Verifying partner’s detail’?
Ans: In case total number of designated partners (DP) and partners as on 31st March of the financial year for which return is being filed exceeds two hundred, details are required to be updated through the screen. These details are required to be provided in the screen before filling eForm 11. Once the details are updated on the LLP portal, a service request number (SRN) shall be generated by the system and the same is to be mentioned at the time of filing of form 11. Also note that filing of form 11 shall not be allowed in case there is any other eForm 11 pending for payment of fee or any other eForm 11 is under processing or already approved in respect of the SRN.
Q.25 How can I intimate charge details to the registrar? Is it mandatory to file the charge details to the registrar office?
Ans: The charge details i.e. creation, modification or satisfaction of charge, can be filed through Appendix to eForm 8(Interim). However, it is not mandatory to file the charge details with the office of Registrar but the stakeholders can voluntarily file the same.
Q.26 The registered office of my LLP has been shifted from the jurisdiction of one ROC office to another. How do I file eForm 15 with both the ROCs?
Ans: You are required to file eForm 15 at LLP portal only once. Existing registrar shall process the eForm and forward the same to the new Registrar for registration. Please note that approval of such eForm 15 shall not be allowed in case there is any other eForm(s) pending for payment of fee or is under processing in respect of the LLP. Upon approval, Certificate for change of registered address from the Registrar office shall be provided.
Q.27 Can LLP give any other address (besides its registered office) for the purpose of receiving communication from Registrar?
Ans: It has been provided in the Act that a document may be served on a LLP or a partner or designated partner by sending it by post or by any other mode (to be prescribed under Rules) at the registered office and any other address specifically declared by the LLP for the purpose in such form and manner as may be prescribed (in the rules). Thus, an LLP shall have option to declare one more address within the jurisdiction of same ROC (other than the registered office) for getting statutory notices/letters etc. from Registrar.
Q.28 What are the provisions for reservation of name by a foreign entity under the LLP Act?
Ans: Foreign entity can file an application for reservation of its name or for renewal of name reserved earlier by filing an application in eForm 25.
The name will be reserved in system for a period of three years and an application for renewal of name should be filed before the expiry of three years. In case of renewal of name, the name should be reserved for a further period of three years after renewal date.
Q.29 Whether a foreign LLP can establish a place of business in India?
Ans: Foreign LLP can establish a place of business in India by filing Form 27 giving the particulars of incorporation of foreign LLP, details of DPs/ partners of that foreign LLP and details of atleast two authorised representatives for complying with regulation of LLP act.
Q.30 After filing an eForm, do I need to keep track of my SRN?
Ans: Yes. One should keep a track of the SRN till it is approved. In case of any defect, incompleteness or to call any further information, concerned MCA office can mark the status of SRN as ‘Required Resubmission’ or ‘Waiting For User Clarification’. In such a case, the concerned company/ person will be required to rectify such defects or incompleteness or furnish further information, within prescribed period.
Q.31 Transaction status of my SRN is ‘Waiting For User Clarification’. What should I do?
Ans: You are required to file eForm 32 (Addendum), to rectify the defects pointed out or furnish further information/ document(s) called for by the concerned registrar office.
Q.32 I want to provide additional information in respect of an already filed LLP Form. Can I file addendum Form 32 for this?
Ans: Addendum Form 32 can be filed only in case status of the relevant LLP eForm(s) in respect of which addendum is being filed is ‘Pending for user clarification’ (PUCL). This eForm cannot be filed suo-motu by the LLP or stakeholder (that is in case status is other than PUCL).
Q.33 Transaction status of my SRN is ‘Required Resubmission’. What should I do?
Ans: You are required to re-submit your eForm to rectify the defect(s)/ incompleteness pointed out by the concerned MCA office. If you fail to re-submit your eForm, you will be required to file the eForm afresh with payment of fee and additional fee, as applicable.
Q.34 How can I inspect the documents as filed and registered by a LLP?
Ans: The user has to log on to LLP portal to avail the service. The following documents/ information of LLP will be available for inspection by any person:-
The fees for such inspection of a LLP is Rs 50/-
Q.35 Can I apply for certified copies of the documents as filed and as registered by a LLP?
Ans: Yes, a user can take a certified copy or extract of any document from the below mentioned list of documents by paying a nominal fee of Rs. 5/- per page:-
Q.36 Is it required to file Form 14 for conversion of private company/unlisted public company in to Limited Liabilities Partnership (LLP)?
Ans: As per notification dated 15th October, 2015 issued by Ministry, Form-14 is not required to be filed in case of conversion of private company/unlisted public company into LLP.
Q.37 Is it required to file Form 14 for conversion of firm in to Limited Liabilities Partnership (LLP)?
Ans: As per notification dated 15th October, 2015 issued by Ministry, Form-14 is required to be filed in physical form with Registrar of Firms, after approval of Form 17 by Registrar of LLP.
Q.38 When should a user file Form 2A (addendum)?
Ans: As per notification dated 15th October, 2015 issued by Ministry, Form 2A (addendum) is linked to Form 2. As soon as Form 2 is filed and number of partners exceeds 200, then Form 2A (Addendum) needs to be filed for number of partners exceeding 200.
Q.39 When should a user file Form 4A (addendum)?
Ans: As per notification dated 15th October, 2015 issued by Ministry, Form 4A (addendum) is linked to Form 4. As soon as Form 4 is filed and number of partners exceeds 200, then Form 4A needs to be filed for number of partners exceeding 200.
Q.1 Concept of “limited liability partnership”
Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership.
Q.2 Structure of an LLP
Ans: LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.
Q.3 Advantages of LLP form
Ans: LLP form is a form of business model which:
(i) is organized and operates on the basis of an agreement.
(ii) provides flexibility without imposing detailed legal and procedural requirements
(iii) enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner
Q.4 Other countries where this form is available
Ans: The LLP structure is available in countries like United Kingdom, United States of America, various Gulf countries, Australia and Singapore. On the advice of experts who have studied LLP legislations in various countries, the LLP Act is broadly based on UK LLP Act 2000 and Singapore LLP Act 2005. Both these Acts allow creation of LLPs in a body corporate form i.e. as a separate legal entity, separate from its partners/members.
Q.5 Difference between LLP & “traditional partnership firm”
Q.6 Difference between LLP & a Company
Q.1 Whether the LLP Act is applicable to any specific services like professional services regulated by Statutes?
Ans: No. Any two or more persons associating for carrying on a lawful business with a view to profit may set up an LLP.
In the light of various inputs received by this Ministry for applicability of the LLP form to small entities and venture capital funded enterprises, it is proposed that the framework should not be restricted to professional services alone as was earlier recommended by Naresh Chandra Committee. Accordingly, the LLP Act does not restrict the benefit of LLP structure to certain classes of professionals only.
Q.2 Likely users/beneficiaries of the LLP Law?
Ans: India has witnessed considerable growth in services sector and the quality of our professionals is acknowledged internationally. It is necessary that entrepreneurship knowledge and risk capital combine to provide a further impetus to our impressive economic growth. Equally the services sector promises an economic opportunity similar to that provided by information technology over the past few years. It is likely that in the years to come Indian professionals would be providing accountancy, legal and various other professional/technical services to a large number of entities across the globe. Such services would require multidisciplinary combinations that would offer a menu of solutions to international clients. In view of all this, the LLP framework could be used for many enterprises, such as:-
Q.3 Whether an entity which has objectives like “charitable or other not for profit objectives” would be able to set up under LLP Act?
Ans: No. The essential requirement for setting LLP is ‘carrying on a lawful business with a view to profit’.
Q.4 Whether provisions of Indian Partnership Act, 1932 would be applicable to LLPs?
Ans: No, these shall not be applicable to LLPs.
Q.5 Why a new legislation for LLP? Why not amendments in Companies Act or Partnership Act are made?
Ans: The Companies Act is not suited to the liability and governance structure intended for LLPs. The overall intent of the legislation to regulate widely-held companies is different. Therefore, in accordance with the recommendations of the Irani Committee, it is felt appropriate to bring about a separate legislation for LLPs. The administration and enforcement of partnership firms under the Indian Partnership Act, 1932 is at the State level. Besides, a partnership firm involves full joint and several liability of the partners. Because of this, many firms/enterprises engaged in biotech, information technology, Intellectual property and other knowledge based sectors find traditional partnerships unsuitable. The traditional partnerships are also considered unsuitable for multi-disciplinary combinations comprising a large number of partners, seeking a flexible working environment but with limited liability. LLP structure would promote growth and enable such firms/enterprises expand their trade/business or services across States in India as also abroad.
Q.6 Committees, which have made recommendations for legislation on LLPs in India
Ans: The desirability of LLP form has been expressed in the context of small enterprises by :-
Following Committees set up by M/o Company Affairs have also recommended for legislation on LLPs:-
Q.7 Whether Ministry has adopted a “Consultative Approach” while bringing out the LLP Act?
Ans: Yes. The Ministry of Corporate Affairs, on 2nd November, 2005, placed a Concept Paper on LLP Law on its website so that all interested stakeholders may express their opinions on the concepts involved and suggest formulations for the consideration of the Ministry on various aspects of LLP Law. The Concept Paper was also circulated to various concerned Ministries/Departments and autonomous bodies like Comptroller and Auditor General of India (C&AG), Securities and Exchange Board of India (SEBI), Insurance Regulatory Development Authority (IRDA) etc. for their comments.
Large number of comments and suggestions were received by the Ministry on the Concept Paper. These were examined in light of international practice/law on the subject. The Act has been prepared keeping in view the Indian requirements.
Q.1 What are the restrictions in respect of minimum and maximum number of partners in an LLP?
Ans: A minimum of two partners will be required for formation of an LLP. There will not be any limit to the maximum number of partners.
Q.2 Whether a body corporate may be a partner of an LLP?
Q.3 What are the qualifications for becoming a partner?
Ans: Any individual or body corporate may be a partner in a LLP. However an individual shall not be capable of becoming a partner of a LLP, if—
(a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending.
Q.4 What are the requirements in respect of “Designated Partners”?
Ans: Appointment of at least two “Designated Partners” shall be mandatory for all LLPs. “Designated Partners” shall also be accountable for regulatory and legal compliances, besides their liability as ‘partners, per-se”.
Q.5 Who can be a “Designated Partner”?
Ans: Every LLP shall be required to have atleast two Designated Partners who shall be individuals and at least one of the Designated Partner shall be a resident of India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.
Q.6 Should the number of designated partners resident in India not be more than partners from outside India?
Ans: LLPs, particularly those as may be engaged in the services or technology-based sectors, may provide services globally. This may require any number of its partners to locate them abroad. In view of liability structure of partners, designated partners and LLP, clearly provided for in the Act, there does not appear to be any necessity and justification for restriction relating to designated partners to out-number partners located abroad. In fact it may pose unnecessary restriction.
Q.7 Whether there would be any requirement of ‘identification number’ of Designated Partner? Whether Designated Partners would be subject to any other condition/requirement before they are appointed as such?
Ans: Every Designated Partner would be required to obtain a “Designated Partner’s Identification Number” (DPIN) on the lines similar to “Director’s Identification Number” (DIN) required in case of directors of companies. Enabling provisions have been made to prescribe under rules conditions, which would have to be fulfilled by an individual who is eligible to be appointed as a ‘designated-partner’.
Q.1 How the mutual rights and duties of partners inter-se and those of partners and LLPs would be governed?
Ans: The mutual rights and duties of partners inter se and those of the LLP and its partners shall be governed by the agreement between partners or between the LLP and the partners. This Agreement would be known as “LLP Agreement”.
Q.2 Whether LLP Agreement would be mandatory for all LLPs?
Ans: As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I.
Q.1 What are the registration formalities relating to LLPs?
Ans: LLPs shall be registered with the Registrar of Companies (ROC) (appointed under the Companies Act, 1956) after following the provisions specified in the LLP Act. Every LLP shall have a registered office. An Incorporation Document subscribed by at least two partners shall have to be filed with the Registrar in a prescribed form. Contents of LLP Agreement, as may be prescribed, shall also be required to be filed with Registrar, online.
Contents of LLP Agreement or any changes made therein, if any, may be filed in Form 3 and details of partners/designated partners may be filed in Form 4 in accordance with LLP Rules, 2009.
Q.2 Whether foreigners can incorporate LLP?
Ans: Yes, the LLP Act 2008 allows Foreign Nationals including Foreign Companies & LLPs to incorporate a LLP in India provided at least one designated partner is resident of India. However, the LLP/Partners would have to comply with all relevant Foreign Exchange Laws/ Rules/ Regulations/ Guidelines.
Q.3 What are the broad provisions of the Act in respect of names of LLPs?
Ans: Every limited liability partnership shall have either the words “limited liability partnership” or the acronym “LLP” as the last words of its name. LLPs would not be given names, which, in the opinion of the Central Government, are undesirable. Registrar would be under obligation to follow such rules, which would be framed by the Central Government in connection with allotting names to LLPs. There are also provisions in respect of ‘rectification of name’ in case two LLPs have been registered with the same name, inadvertently.
Q.4 For what period a name can be reserved by Registrar?
Ans: The name can be reserved by ROC on approval of Form 1, for a period of 3 months from the date of intimation by the Registrar. However, Foreign LLP/Companies have an option to reserve their existing names, under which they are operating outside India, for a period of 3 years in India, which can be further renewed on application to Registrar in Form 25.
Q.5 Can LLP give any other address (besides its registered office) for the purpose of receiving communication from Registrar?
Ans: It has been provided in the Act that a document may be served on a LLP or a partner or designated partner by sending it by post or by any other mode (to be prescribed under Rules) at the registered office and any other address specifically declared by the LLP for the purpose in such form and manner as may be prescribed (in the rules). Thus, an LLP shall have option to declare one more address (other than the registered office) for getting statutory notices/letters etc. from Registrar.
Q.1 How can a person become a partner of an LLP?
Ans: Persons, who subscribed to the “Incorporation Document” at the time of incorporation of LLP, shall be partners of LLP. Subsequent to incorporation, new partners can be admitted in the LLP as per conditions and requirements of LLP Agreement.
Q.2 How can an existing partner cease to be a partner of an LLP?
Ans: A person may cease to be a partner in accordance with the agreement or in the absence of agreement, by giving 30 days notice to the other partners.
A person shall also cease to be a partner of a limited liability partnership-
(a) on his death or dissolution of the limited liability partnership; or
(b) if he is declared to be of unsound mind by a competent court; or
(c) if he has applied to be adjudged as an insolvent or declared as an insolvent.
Notice is required to be given to ROC when a person becomes or ceases to be partner or for any change in partners.
Q.3 What will be the obligation of a partner in case he changes his name or address?
Ans: Every partner shall inform the LLP of any change in his name or address within a period of fifteen days of such change. The LLP, in turn, would be under obligation to file such details with the Registrar within thirty days of such change in Form 4.
Q.1 What is the manner in which a partner of an LLP can bring his contribution? How will it be recorded/disclosed in the accounts?
Ans: Partner’s contribution may consist of both tangible and/or intangible property and any other benefit to the LLP. The monetary value of contribution of each partner shall be accounted for and disclosed in the accounts of the limited liability partnership in the manner as may be prescribed in the rules.
Q.2 Whether a partner would be able to give loan to or transact other commercial transactions with LLP? What will be his rights and obligations in this regard?
Ans: A partner may lend money to and transact other business with the LLP and shall have the same rights and obligations with respect to the loan or other transactions as a person who is not a partner.
Q.3 Whether a partner would be able to transfer his ‘economic rights’?
Ans: A partner’s economic rights (i.e. rights of a partner to a share of the profits and losses of the LLP and to receive distribution at the time of winding up) in the LLP shall be transferable. However, such a transfer shall not by itself cause the partner’s disassociation or a dissolution and winding up of the LLP.
However, such transfer shall not entitle the transferee or assignee to participate in the management or conduct of the LLP’s activities. Therefore, the transferee would not be deemed to be a ‘partner’ of the LLP just because a partner has transferred him the ‘economic rights’. For becoming a partner of LLP, the manner specified in the LLP Agreement or the provisions of the Act would have to be followed.
Q.1 Nature & extent of liability of a partner of an LLP?
Ans: Every partner of an LLP would be, for the purpose of the business of the LLP, an agent of the LLP but not of the other partners. Liability of partners shall be limited except in case of unauthorized acts, fraud and negligence. But a partner shall not be personally liable for the wrongful acts or omission of any other partner. An obligation of the limited liability partnership whether arising in contract or otherwise, is solely the obligation of the limited liability partnership. The liabilities of LLP shall be met out of the property of the LLP.
Q.2 What is the liability of a Partner upon reduction of minimum number of members in an LLP?
Ans: The Act provides for the minimum of two partners to carry on LLP. If at any time the number of partners of a limited liability partnership is reduced below two and the limited liability partnership carries on business for more than six months while the number is so reduced, the person, who is the only partner of the limited liability partnership during the time that it so carries on business after those six months and has the knowledge of the fact that it is carrying on business with him alone, shall be liable personally for the obligations of the limited liability partnership incurred during that period.
Q.3 Whether a ‘partner by holding out’ will be liable under the Act?
Ans: The Act provides that any person (not being a partner in any LLP), who by words spoken or written or by conduct, represents himself, or knowingly permits himself to be represented to be a partner in a LLP (known as ‘partner by Holding out’) is liable to any person who has on the faith of any such representation given credit to the LLP, whether the person representing himself or represented to be a partner does or does not know that the representation has reached the person so giving credit.
It has further been provided that where any credit is received by the LLP as a result of such representation, the LLP shall, without prejudice to the liability of the person so representing himself or represented to be a partner, be liable to the extent of credit received by it or any financial benefit derived thereon.
The provisions have also been made in the Act to provide that where after a partner’s death the business is continued in the same LLP name, the continued use of that name or of the deceased partner’s name as a part thereof shall not of itself make his legal representative or his estate liable for any act of the LLP done after his death.
Q.4 How penal action on errant partners who are not residents of India will be taken?
Ans: For statutory compliances provisions of at least one resident designated partner (DP) in every LLP is would ensure that at least one partner is available in India for at least six months for regulatory compliance requirements. The LLPs would have freedom to appoint more than one resident as DP. LLP as an entity would always remain liable for regulatory or other compliances. Civil liability on such a partner would be adjudicated by the courts under civil law which recognises ‘foreign awards’. Criminal liability would require adjudication/ enforcement by the courts including using the extradition process. Position would be similar to the cases of directors of companies who are foreign nationals.
Q.1 Whether every LLP would be required to maintain and file accounts?
Ans: An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. A “Statement of Accounts and Solvency” in prescribed form shall be filed by every LLP with the Registrar every year.
Q.2 Whether audit of all LLPs would be mandatory?
Ans: The accounts of every LLP shall be audited in accordance with Rule 24 of LLP, Rules 2009.
Such rules, inter-alia, provides that any LLP, whose turnover does not exceed, in any financial year, forty lakh rupees, or whose contribution does not exceed twenty five lakh rupees, is not required to get its accounts audited. However, if the partners of such limited liability partnership decide to get the accounts of such LLP audited, the accounts shall be audited only in accordance with such rule.
Q.3 Whether any provisions in respect of ‘mandatory insurance’ are being proposed in the Act?
Ans: No mandatory insurance has been proposed in the Act. It would be difficult to assess insurance requirements of different types and sizes of LLPs. This would depend upon the nature of commercial risk attached with work or assignment handled by each. Applying common insurance requirements across a class of LLPs would result in increasing their costs of operation. Therefore, the underlying concern as to the credit worthiness of the LLP in the event of a contractual default is being addressed through statutory provisions for solvency declaration, disclosure of financial information and audit.
Q.4 Whether any Annual Return would be required to be filed by an LLP?
Ans: Every LLP would be required to file annual return in Form 11 with ROC within 60 days of closer of financial year. The annual return will be available for public inspection on payment of prescribed fees to Registrar.
Q.5 Whether the Registrar would have any power to call for information from LLPs?
Ans: Registrar would have power to obtain such information which he may consider necessary for the purposes of carrying out the provisions of the Act, from any designated partner, partner or employee of the LLP. He would also have power to summon any designated partner, partner or employee of any LLP before him for any such purpose, in case the information has not been furnished to him or in case the Registrar is not satisfied with the information furnished to him.
Q.6 Which documents will be available for public inspection in the office of Registrar?
Ans: The following documents/information will be available for inspection by any person:-
The fees for such inspection of an LLP is Rs 50/- and fees for certified copy or extract of any document u/s 36 shall Rs. 5/- per page.
Q.7 How would compliance management (i.e. ensuring that LLPs file their documents with Registrars timely and otherwise comply with other procedural requirements under the Act) be ensured in the Act?
Ans: The provisions of the Act require LLPs to file the documents like Statement of Account and Solvency (SAS) and Annual Return (AR) and notices in respect of changes among partners etc. within the time specifically indicated in relevant provisions. The Act contains provisions for allowing LLPs to file such documents after their due dates on payment of additional fees. It has been provided that in case LLPs file relevant documents after their due dates with additional fees upto 300 days, no action for prosecution will be taken against them. In case there is delay of 300 days or more, the LLPs will be required to pay normal filing fees, additional fee and shall also be liable to be prosecuted.
The Act also contains provisions for compounding of offences which are punishable with fine only.
Q.1 What are the measures, which can be taken against an LLP, which has engaged in fraudulent activities?
Ans: Central Govt may appoint inspectors to investigate the affairs of an LLP. The manner and procedure for conduct of investigation has been specified in the Act.
Q.2 What will be the role of Government in regulation of LLPs? How will the Act able to prevent ‘fly-by-night’ promoters or LLPs vanishing after incorporation?
Ans: LLP structure is proposed to allow entrepreneurs and businessmen/servicemen to combine themselves with a view to run a business/service for profit in a more flexible manner than companies. The internal processes of LLPs shall be governed by the LLP Agreement. To protect interests of various stakeholders, following approach has been followed in the LLP Act:-
Q.1 Please specify the services for which Stamp Duty can be paid through MCA21 system?
Ans: Stamp Duty payable on Filing of e-form 1 (including MOA & AOA), 5 and 44 can be paid through MCA21 system.
Q.1 Whether other business entities like firm or company would be able to convert themselves into LLP?
Ans: The LLP Act contains enabling provisions pursuant to which a firm (set up under Indian Partnership Act, 1932) and private company or unlisted public company (incorporated under Companies Act) would be able to convert themselves into LLPs. Provisions of clause 58 and Schedule II to Schedule IV to the Act provide procedure in this regard.
Q.2 Whether LLP would be able to convert itself into company under the Companies Act, 1956?
Ans: This would not be allowed under LLP Act. However, enabling provisions would be required to be made in the Companies Act for such conversion. Necessary action in this regard would be taken when Companies Act would be revised.
Q.3 What is the treatment for stamp duty issues, both in terms of original incorporation and conversion from other business structures? Would there be any stamp duty exemption in case of conversion?
Ans: Since Stamp Duty is the subject reserved for the States, the LLP Act does not contain any provision for treatment of stamp duty issues. The stamp duty payable will depend upon the relevant Stamp Act prescribed by the State Government/Union Territory.
Q.4 What are the requirements and consequence provided in the Act in respect of licences, permits, approvals etc obtained by a firm, private company or an unlisted public company, prior to its conversion into LLP?
Ans: It has been provided in the Act that on conversion of a firm/private company/unlisted public company into LLP, any approval, permit or licence issued to the firm/private company/unlisted company under any other Act shall, subject to the provisions of such other Act under which such approval, permit or licence was issued, be transferred in the name of converted entity viz LLP.
Q.1 Whether two LLPs would be allowed to merge?
Ans: Provisions of section 60 to 62 of the Act provide for the manner in which compromises or arrangements including mergers and amalgamations involving LLPs shall be allowed.
Q.2 What is the date of implementation of these Guidelines?
Ans: It is proposed to provide the provisions and procedures required to be complied with when the affairs of an LLP are to be wound-up and dissolved, by enabling the Central Government to make rules under the LLP Act, 2008.
Q.1 Broad provisions in respect of Offences and Penalties
Ans: Offences and penalties arising out of the non-compliance with the provisions of the Act have been defined along with the substantive provisions themselves. However, for defaults/ non-compliance on procedural matters such as time limits for filing requirements, penalties have been provided for application in a non-discretionary manner, through the levy of a default fee for every day for which the default continues. Such default fee would be payable at the rate of rupee one hundred per day after the expiry of the date of filing (as prescribed in relevant provision) upto a period of three hundred days. Charging of such default fees would, however, be without prejudice to any other action or liability under the Act, in case the filing is made beyond the expiry of three hundred days.
The offences can be punished either (i) through payment of fine or (ii) through payment of fine as well as imprisonment of the offender. The Judicial Magistrate of the first class, or, as the case may be, the Metropolitan Magistrate shall have jurisdiction to try offences under the LLP Act.
Though most of the offences in the Act provide for punishment by way of charging fine, imprisonment has been provided for in respect of violations relating to
(i) making by any person a false statement at the time of incorporation of LLP (ii) carrying on business of LLP with intent to defraud or for any fraudulent purposes and (iii) making, knowingly, false statements or omitting any material fact, in any return, documents etc under the Act. The offences which are punishable with fine only can be compounded by the Central Government, by collecting a sum not exceeding the amount of maximum fine prescribed for the offence.
Further, for defaults/non-compliance on procedural matters such as time limits for filing requirements provisions have been made for charging default fees (on daily basis) in a non-discretionary manner.
Q.2 Whether offences would be compounded under the LLP Act? Whether any protection to whistle-blowers is being proposed in the Act?
Ans: The Act contains provisions empowering Central Government to compound any offence punishable with fine only by collecting a sum not exceeding the amount of maximum fine prescribed for the offence.
Enabling provisions have also been made in the Act in respect of protection to “Whistle Blowers”.
Q.1 What are the provisions being proposed in the Act for striking off defunct LLPs? Whether LLPs would be allowed a less stringent framework for closing of business?
Ans: The Act empowers Registrars to strike off names of LLPs which are not carrying on any business or operation. They will be under obligation to give an opportunity of being heard to LLP concerned. Details for manner of striking off would be prescribed through rules. Since LLPs would be governed by LLP Agreement it would be possible for LLPs to make suitable clauses in such Agreement prescribing time limits or duration of LLPs. In such cases, provisions for striking off names could be used.
Besides, the Act empowers Central Government to make rules in respect of winding up and dissolution of LLPs. It is proposed to prescribe a simple procedure for voluntary winding up of LLPs under such rules.
Q.2 Whether electronic filing of documents with ROC would be allowed? How far MCA-21 e-Governance initiative will be extended and be useful for LLPs structure under the Act?
Ans: The LLP Act contains enabling provisions for use of electronic mode for filing of documents with Registrars. Details have been specified in the LLP Rules, 2009. Authentication of documents as per Information Technology Act, 2000 has also been recognized in the LLP Act.
At present , Office of Registrar for registration etc of LLPs has been set up at Delhi (3rd Floor, Paryavaran Bhavan, CGO Complex, New Delhi-3). The filing and inspection of documents with the Registrar pursuant to LLP Act, 2008/ LLP Rules, 2009 can be made through website www.llp.gov.in
Q.3 Whether provisions of the Companies Act, 1956 would be applicable to LLPs?
Ans: Since LLP shall be in the form of a body corporate, it is proposed that to address various situations applicable to LLPs as such, the relevant provisions of the Companies Act, 1956 may be made applicable to LLPs at any time in the future by Notification by Central Government, with such changes or modifications as appropriate.
Q.4 Whether, amendments will be required in the Regulatory Acts governing the various professional services so that these can be aligned with the objectives of the Act?
Ans: Yes. Amendments to various such Acts would be necessary which can be considered by concerned Ministries/Departments.
Q.1 When was the LLP Bill, 2006 was introduced? Whether the Bill was referred to Standing Committee? Has the Bill been revised?
Ans: The Limited Liability Partnership (LLP) Bill, 2006 was introduced in the Rajya Sabha on 15th December, 2006. The Bill was referred to the Lok Sabha Standing Committee on Finance, for examination. The Standing Committee consulted various chambers of commerce, professional institutes and other experts and also heard the M/o Corporate Affairs.
The said Committee presented/submitted its report to the Parliament on 27th November, 2007. Based on such report the Ministry of Corporate Affairs revised the LLP Bill and the revised LLP Bill, 2008 was introduced in the Rajya Sabha on 21st October, 2008. This was passed by the Rajya Sabha on 24th October, 2008. The Bill was passed by Lok Sabha on 12th December, 2008. The President has given assent to this Bill on 7th January, 2009.
Q.2 Whether all recommendations made by Standing committee have been accepted by the Government?
Ans: All the recommendations except one made by Hon’ble Standing Committee have been accepted by the Government. The recommendation which has not been accepted related to proposing a restriction on number of LLPs in which a designated partner may become designated partner. During examination of this recommendation, it was felt that since under the Companies Act, 1956 there is no restriction on a person to be come directors in any number of private companies. Since proposed structure for LLPs would be similar to private companies, it was felt that putting a restriction relating to maximum number of LLPs in which a person may become designated partner may not be necessary.
Q.3 Whether the ongoing financial crisis across the globe requires any change in thoughts regarding the LLP Act, 2008?
Ans: The ongoing financial crisis across the globe does not appear to have affected Indian economy. The Indian companies and other business entities, including those engaged in banking and financial business are not likely to have any major impact in view of financial crisis of US or Europe, thanks to the strict and conservative legal and regulatory systems working in India.
Since a more professional and mature approach is needed in any country to handle such kinds of crisis, the LLP Act, 2008, which would allow professionals from various fields to combine and work together in providing various services, would be even more useful.
FAQs On Integration Of LLP With MCA21 System
Q.1 I already have user-id registered in earlier LLP system (prior to 11th June 2012). Do I need to get myself registered again in new LLP portal?
Ans: No, there is no need to register on new LLP portal again. The user can login to MCA system based on following rules/ guidelines:
Q.2 I am having a SRN generated through earlier LLP system (prior to 11th June 2012). Will I be able to access the LLP details using this SRN on new LLP portal?
Ans: The first two digits of SRN of the earlier LLP system (i.e. prior to 11th June 2012) are being replaced with “K”. All users are requested to access their transactions henceforth by replacing the first two digits with “K”.
For ex: SRN 0900086311 of existing LLP system shall be converted to K00086311 in the new system.
Q.3 How do I find Charge ID of Charge registered in earlier LLP system (prior to 11th June 2012)?
Ans: The Charge ids issued to the users in the earlier LLP system (i.e. prior to 11th June 2012) are being regenerated. The Users are required to use the “View Index of Charges” link to get the new charge ids. The Users will be able to view their new charge id’s using this link.
Q.4 I am a designated partner of LLP incorporated in earlier LLP system (i.e. prior to 11th June 2012). Post migration, when I am filling the forms in new LLP portal, I am getting an error message to update the partners details. Please guide?
Ans: LLPs incorporated under the earlier LLP system (i.e. prior to 11th June 2012) which functions with both designated partners and ordinary partners, are mandatorily required to verify the details of their Designated Partners and Partners. This facility is available to any registered or business user including professional on the LLP portal/ MCA21 portal as per the revised process. The User would use the link ‘Migrated LLP Partners details’ available after logging in the new LLP Portal. However, at the time of final submission, it should be digitally signed through the DSC of Designated Partner of the LLP. Please note that no eForm filing will be allowed to such LLP without verifying and updating these details. In case the existing LLP functions only with Designated Partners and without ordinary partners, then verification of migrated details is not mandatory. Such LLPs can file the eForm(s) on the LLP portal without the need for verifying the migrated details.
Q.5 Is it mandatory for all LLP incorporated in earlier LLP system (i.e. prior to 11th June 2012) to verify/ update the partners’ details?
Ans: No, verification/ updations of partners’ details is mandatory only for those existing LLPs which functions with both designated partners and ordinary partners.
In case the existing LLP functions only with Designated Partners and without ordinary partners, then verification of migrated details is not mandatory. Such LLPs can file the eForm(s) on the LLP portal without the need for verifying the migrated details.
Q.6 Which details are required to be verified/ updated in respect of the partners and designated partners of the LLP?
Ans: Designated Partner details: Only certain details like monetary value of contribution, Percentage (%) of profit sharing, residential status, occupation, number of companies/ LLPs in which the person is a director or designated partner. Adding or deleting a DP is not allowed through the screen.
Partner details: All details of the partners are required to be verified/ updated. In case details of any partners are not there or any partner is incorrectly shown, you may update the same by adding of partner/ deletion of partner.
Q.7 What is the process for verifying/ updating partners’ details through the link ‘Migrated LLP Partners details’?
Ans: Any registered or business user including professional on LLP/ MCA21 portal can verify/ update the partner’s details by using the link ‘Migrated LLP Partners details’ available on the LLP portal. The partners’ details as available in the system shall be displayed. In case any detail is required to be updated, you may update and save the same. You may update and save the details multiple times before final submission. Once all the details are updated/ verified, the DP needs to affix his/ her digital signature and finally ‘Submit’ the details. Once the details are finally submitted, no further changes/ updations shall be allowed. Please ensure that all the details have been verified before affixing digital signature and final submission. In case the existing LLP functions only with Designated Partners and without ordinary partners, then verification of migrated details is not mandatory. Such LLPs can file the eForm(s) on the LLP portal without the need for verifying the migrated details.
Q.8 Whether only the Designated partner (DP) of the LLP is allowed to verify/ update the partner’s details through the link ‘Migrated LLP Partners details’?
Ans: No, any registered or business user including professional on MCA portal can verify/ update the partner’s details by using the link ‘Migrated LLP Partners details’ available on the new LLP portal. However, the information on this link would be required to be digitally signed by the Designated Partner associated with the LLP.
Q.9 How can I find the status of SRN generated in earlier LLP system (i.e. prior to 11th June 2012)?
Ans: User should first convert earlier LLP system generated SRN into MCA21 SRN by replacing the first two digit with the character ‘K’. Thereafter, user can track the status by using the converted SRN in the ‘Track Transaction Status’ functionality.
Q.10 I had filed a form which was marked for resubmission in earlier LLP system (i.e. prior to 11th June 2012). Now in the new system, how shall I resubmit this form?
Ans: The eForms filed in the earlier LLP system (i.e. prior to 11th June 2012) which are having status as Resubmission shall need to be resubmitted using the new LLP eForms on the new LLP portal. Users need to download the new eForms from the new LLP Portal using ‘LLP Forms Download’ link.
Q.11 I had filled up a form which I had downloaded from the earlier LLP system (i.e. prior to 11th June 2012). Now in the new system, when I am submitting that eForm, system is giving an error message? How do I file the eForm?
Ans: Please note that the eForms as per the earlier LLP system have been discontinued upon integration of the LLP system with MCA21. Users are required to download the new LLP eForms from the LLP portal. These new LLP eForms need to be filled up and submitted for processing. Thereafter these eForms shall be processed by the respective jurisdictional Registrars or by the system under STP mode, depending upon the type of eForm.
Q.12 What are the various payment options available in the new LLP portal?
Ans: The payment options available in the new LLP portal are same as the payment options available on the MCA21 portal. For more details, please refer FAQs under category ‘Payments’ available on MCA21 portal
Q.13 In case of viewing public documents on the new LLP portal, will there be any time limit for viewing the same?
Ans: Yes, public viewing of documents on the new LLP portal shall be allowed for a maximum time limit of 3 hours per request similar to the MCA21 portal. For more details, please refer FAQs under category ‘Other Services’ available on MCA21 portal.
Q.14 I have queries in respect of new LLP portal? Who should I contact? Or Where are the details of RFO’s centres and helpdesk numbers available on new LLP portal?
Ans: You can contact the MCA helpdesk in case of any query in respect of new LLP portal. The details of RFO’s centres and helpdesk numbers are available on the home page of LLP on MCA portal. The details are available through link ‘List of Facilitation Centres’ and ‘RoC Facilitation Office/ Helpdesk’ . You can also raise a ticket on the LLP portal using the ‘User Complaints & Grievances’ facility.
Q.15 I am a user already registered on earlier LLP system (i.e. prior to 11th June 2012. but now I have forgotten my earlier User ID , what should I do ?
Ans: In case you have forgotten your earlier User ID, you are required to create a new User ID on the MCA- LLP portal. In case you are a Designated Partner (DP) in any LLP, you should register yourself as a new business user .