The Central Government in exercise of its powers under Section 460 of the Companies Act, 2013 decided to introduce a scheme called “LLP Settlement Scheme, 2020” to grant the defaulting Limited Liability Partnership (LLP), a one-time window to condone the delay in filing of some statutorily required documents with Registrar. Ministry of Corporate Affairs (MCA) vide General Circular No – 6/2020 dated 4th March, 2020 came up with this scheme after receiving representation from business houses for waiver of fee or condonation of delay and to wave off additional fee taking the plea of excessive financial burden which was against Government’s constant effort to promote Ease of doing business.
This Circular aims at providing one-time relaxation in additional fee which the LLP were required to pay to make good the default and retain the status of Compliant LLP in future. LLPs are considered as a preferred business option for small entrepreneurs as it provides the benefits of Limited Liability on one hand whereas its members has the total elasticity of organizing its own structure, roles and responsibilities as a partnership firm on the basis of an mutually agreed pre-defined agreement.
The said scheme shall come into force w.e.f. 16th March, 2020 and will be applicable till 13th June, 2020 as stated in the Circular, which means the Ministry has given more than three months to come to terms and make such firms compliant. It would be applicable to a “defaulting LLP” for filing documents, which were due for filing till October 31, 2019, on payment of a nominal additional fee of ₹10 per day for the period of delay, instead of Rs. 100/- which every LLP is required to pay at present, in addition to the normal fee, subject to a maximum amount of Rs. 5,000/- as additional fee per document.
This welcome step came at a time when a large number of LLP has become non-compliant because of their failure to pay late fees for a long span of time which keeps on adding to their financial burden irrespective of the size of the business of the firm.
Applicability:
On all such “Defaulting LLPs” who have failed to file such documents which were due for filing by 31st October, 2019 as stated below along with the mentioned forms.
(i) Form-3– Information with regard to limited liability partnership agreement and changes, if any, made therein;
(ii) 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;
(iii) Form-8– Statement of Account & Solvency (Annual or Interim); and
(iv) Form-11– Annual Return of Limited Liability Partnership (LLP).
Owing to non – filing of these key forms the records in the Ministry website cannot be updated and hence unavailable to stakeholders for inspection. Moreover, due to non filing of such forms on time, both the LLP and their designated partners are also accountable for criminal liability and LLP cannot file Form – 24, i.e. Application to the Registrar for striking off name as a business cannot be shut until all its compliances are updated.
Non Applicability of scheme :
- This scheme shall not apply to filing of any documents other than the one stated below, i.e. Form – 3 for filing LLP Agreement and changes therein, Form – 4 for appointment, resignation and change in details of Partners / Designated Partners, statutory return in Form – 8, i.e. Statement of Account & Solvency (Annual or Interim) and Form-11- Annual Return of LLP.
- The scheme shall also not be applicable to all such LLP which has already made an application to RoC in Form – 24 for striking off its name from records of Registrar as per provisions of Rule – 37(1) of the LLP Rules, 2019.
Immunity from prosecution :
Once the pending documents have been filed by the LLP and the mistake being made good till 13th June, 2020, they will be spared from prosecution for such documents by Registrar, which simply shows the intent of Ministry to come down heavily to such defaulting LLP once the period to file such documents expires under the provisions of LLP Act, 2008.
FAQ on LLP Settlement Scheme, 2020 :
| Sl. No | INFORMATION SOUGHT |
| 1. | Is this scheme applicable to all LLP?
No, its applicable only to such “defaulting LLP” who have failed to file their documents with Registrar on time. |
| 2. | When shall I avail the said scheme?
The scheme shall come into force on 16th March, 2020 and will last till 13th June, 2020. |
| 3. | Is this scheme applicable irrespective of dates?
This scheme is applicable for filing of certain documents which were due for filing only till 31st October, 2019. |
| 4. | Will I still be allowed if my due date of filing was just a day after 31st October, 2019?
No, the cut off date for applicability of scheme is only till 31st October, 2019. |
| 5. | Do I need to avail this scheme if I need to convert my LLP into a Company?
Yes, because you have to be updated in your compliance before such conversion. |
| 6. | Can a “defaulting LLP” get its name stuck off without availing such scheme?
NO, filing of Form 24 is not allowed without updating of all compliance. |
| 7. | Is this scheme applicable on filing of all forms ?
No, only on four forms, i.e. LLP – 3, LLP – 4, LLP – 8, LLP – 11. |
| 8. | What fees I have to pay after availing such scheme?
A nominal fees of Rs. 10/- per day instead of Rs. 100/- per day apart of normal fees. |
| 9. | What shall be the maximum quantum of fees I need to pay ?
Maximum additional fee per form is limited to Rs. 5,000/- per form. |
| 10. | What will happen to such LLP if they are still in default even after 13th June, 2020?
They shall be subject to prosecution for such default by Registrar. |
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