CS S. Dhanapal
The concept of Limited Liability Partnerships (LLPs) in India was introduced in the year 2009 with the enactment of the “Limited Liability Partnership Act, 2008 (6 of 2009) which was notified on 31.03.2009. The first LLP was formed on the 02nd Day of April 2009 and since then almost 10,000 LLPs have been formed so far as per the records of the Ministry of Corporate Affairs.
LLP in India is viewed as an alternative corporate business vehicle that provides the benefits of limited liability and also allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.
ADVANTAGES AND SHORTCOMINGS OF LLP
Some of the main advantages and disadvantages of LLP at a glance are:
No major Investment
Mandatory Disclosure of financial information
Cannot raise public money
Commercially efficient vehicle
Loss of secrecy of information
No personal liability
More legal documentation
Less statutory compliances
Stringent rules on FDI
Lesser paper work and formalities
Practical issues in formation
Lack of awareness among general public
Secure and financial less risky
Scope for expansion and growth
One of the major changes which has taken place in LLP is the integration of LLP site with MCA site w.e.f 11th June 2012. The erstwhile LLP website (www.llp.gov.in) has been merged with the MCA site (www.mca.gov.in) and all filing pertaining to LLPs has to be done on the MCA portal only.
MCA has issued detailed guidelines on how to login and access records of existing LLPs on the MCA website and what all updations need to be done by designated partners and LLps in order to be able to do filing on MCA site.
The Procedure for formation of LLP is almost same. For the erstwhile forms on LLP website, corresponding forms have been made available on MCA website and the names of forms have remained same in most of the cases. One practical difference is that Residential status of each designated partner needs to be updated by filing form DIN 4.
A look at the recent Circulars and Notifications issued by MCA pertaining to LLPs:
|No. 22||02.06.2012||Notice under Rule 37(3) of LLP Rule, 2009|
|G.S.R. (E)||05.06.2012||The Limited Liability Partnership (Amendment) Rules, 2012|
|General Circular No. 13/2012||06.06.2012||Extension of time in Filing Annual Return by Limited Liability Partnerships|
|G.S.R. (E)||21.06.2012||Corrigendum to LLP notification dated 05.06.2012|
|General Circular No. 15/2012||29.06.2012||Extension of time in Filing of annual return by Limited Liability Partnerships(LLPs)|
|G.S.R. (E)||10.07.2012||Sections 51, 63-65 of LLP Act, 2008 notified.|
|G.S.R. (E)||10.07.2012||Limited Liability Partnership (Winding up and Dissolution) Rules, 2012|
Synopsis of the above circulars and notifications:
- Notifications No. 22 – Notice Under Rule 37(3) Of LLP Rule, 2009
- G.S.R. (E) – The Limited Liability Partnership (Amendment) Rules, 2012
- General Circular No. 13/2012 – Extension of time in Filing Annual Return by Limited Liability Partnerships
- G.S.R. (E) – Corrigendum to LLP notification dated 05.06.2012
General Circular No. 15/2012 – Extension of time in Filing Annual Return by Limited Liability Partnerships
- G.S.R. (E) – Sections 51, 63-65 of LLP Act,2008 notified
- G.S.R. (E) – Limited Liability Partnership (Winding up and Dissolution) Rules, 2012
Þ Ministry has notified the new Limited Liability Partnership (Winding up and Dissolution) Rules, 2012 which will be effective from 10th July 2012.
Þ The Following modes of winding up have been notified:
CIRCUMSTANCES FOR WINDING UP
VOLUNTARY WINDING UP
Þ Resolution with approval of 3/4th majority of partners
Þ Approval of secured / unsecured creditors
WINDING UP BY TRIBUNAL
Inability to pay debts, i.e. to a creditor exceeding one lakh rupees / Execution in favour of Creditor returned unsatisfied / Tribunal is satisfied that LLP is unable to pay debts.
Limited Liability Partnership though came very late to India, has finally found its space. LLP is best suited to small and medium business enterprises by offering a good mix of company and partnership form of organization. The Ministry of Corporate Affairs is continuously striving to bring about improvements in the field of regulations governing LLP and their formation. Integration of LLP and MCA site has further simplified the procedure for formation of a LLP and other filings related thereto.
(Written by S.Dhanapal, Senior Partner, S Dhanapal & Associates, A firm of Practising Company Secretaries, Chennai.)