Significant Beneficial Ownership (SBO0 and Its Compliance LLP Act, 2008, Extended Date of Filing 01.07.2024
The Ministry of Corporate Affairs (MCA) has recently issued new compliance requirements for LLPs under the LLP Act, 2008, through the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023, notified on November 9, 2023. These rules mandate all LLPs to file Form LLP BEN-2 and LLP Form No. 4D by July 1, 2024, as per General Circular No. 03/2024 dated May 7, 2024, allowing for fee waiver until the deadline. This article explores the criteria for identifying Significant Beneficial Owners (SBOs), the reporting obligations imposed on LLPs, and exceptions to these rules, offering insights into regulatory requirements and their implications for LLPs in India.
The significance of this rule is this rule applies to all LLP irrespective of its status;
As per these rules
“Significant beneficial owner” in relation to a reporting limited liability partnership, means an individual who acting alone or together or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting limited liability partnership, namely :-
(i) holds indirectly or together with any direct holdings, not less than ten per cent of the contribution;
(ii) holds indirectly or together with any direct holdings, not less than ten percent (10%) of voting rights in respect of the management or policy decisions in such limited liability partnership;
(iii) has right to receive or participate in not less than ten per cent of the total distributable profits, or any other distribution, in a financial year through indirect holdings alone or together with any direct holdings;
(iv) has right to exercise or actually exercises, significant influence or control, in any manner other than through direct-holdings alone:
Nothing in the section applies with respect to significant beneficial holding if holding by
i. Individual directly
ii. Individual holds or acquires beneficial interest and made declaration under Rules 22B (2) of LLP Rules 2009
What construes holding a right or entitlement indirectly then; If a partner of LLP
Is a Body Corporate (not including LLP)
(i) the SBO will be person who holds majority stake, i.e., >50% of equity OR Voting Right
(ii) holds majority stake in the ultimate holding company (whether incorporated or registered in India abroad) of that partner;
H. U.F, (THROUGH KARTA) Karta is SBO
Partnership Firm
(a) is a partner; or
(b) individual holds majority stake in the body corporate, if that Body Corporate is partner of the partnership entity; or
(c) holds majority stake in the ultimate holding company of the body corporate if that Body Corporate which is a partner of the partnership entity
1. Trust
(a) is a trustee in case of a discretionary trust or a charitable trust;
(b) is a beneficiary in case of a specific trust;
(c) is the author or settlor in case of a revocable trust.
2. Where partner is Pooled Investment Vehicle OR Controlled by Pooled investment Vehicle
based in member State of the Financial Action Task Force on Money Laundering and the regulator of the securities market in such member State is a member of the International Organisation of Securities
Commissions, and the individual in relation to the pooled investment vehicle,-
(a) is a general partner; or
(b) is an investment manager; or
(c) is a chief
OBLIGATION OF REPORTING LLP :
Every reporting limited liability partnership shall in all cases where its partner (other than an individual), holds not less than 10%. of its- (a) contribution; or (b) voting rights; or (c) right to receive or participate in the distributable profits or any other distribution payable in a financial year,
(i) identify him and cause such individual to make a declaration in Form No. LLP BEN-1
(ii) give notice to such partner by email/by post in Form No. LLP BEN-4, seeking information in accordance with sub-section sub-section (5) of section 90 of the Companies Act, 2013 as applied to the limited liability partnership as per the notification.
(iii) Reporting shall file LLP BEN-2 declaration, within a period of thirty days of receipt LLP BEN-1
(iv) Maintain a Register a register of significant beneficial owners in Form No. LLP BEN-3
(v) The register shall be open for inspection during business hours, at such reasonable time of not less than two hours, on every working day as may be decided by limited liability partnership agreement, or by partners of the limited liability partnership on payment of such fee as may be specified by the limited liability partnership but not exceeding fifty rupees for each inspection.
(vi) The reporting limited liability partnership shall apply to the Tribunal,
(a) where any person fails to give the information required by the notice in Form No. LLP BEN-4, within the time specified therein; or
(b) where the information given is not satisfactory, under sub-section (7) of section 90 of Companies Act,2013
Liability of SBO :
SBO shall file a declaration in Form No. LLP BEN-1 to the Reporting LLP
- within 90days from commencement of rules
- If subsequent becomes OR changes in interest within 30 days
These rules shall not apply to the extent the contribution is held by
- Government (Central/state) or local Authority
- LLP/Body Corporate/an Entity controlled by (i)
- Investment Vehicle registered with SEBI/MFs/ AIFs/REITs/InVITS
- An investment Vehicle regulated by RBI
NOTE: IF Rule 22A and 22B Limited Liability Partnership (LLP) Rules, 2009 have been complied with, SBO Rules shall not attract.
BENEFICIAL OWNERSHIP IN LLP
LLP (THIRD AMENDMENT) RULES 2023: REGISTER OF PARTNERS & BENEFICIAL INTEREST
(The Ministry of Corporate Affairs, New Delhi, has issued a significant notification, G.S.R. 803(E), dated October 27, 2023, amending the Limited Liability Partnership (LLP) Rules, 2009).
22A. Register of Partners.-
(1) Every limited liability partnership shall, from the date of its incorporation, maintain a register of its partners in Form 4A which shall be kept at the registered office of the limited liability partnership. (attached)
in the case of existing LLP on the date of commencement of these Rules, 2023, shall maintain the register of partners in Form 4A within 30days from such commencement.
Entries must be updated within (seven) 7days of changes. Rectifications made pursuant to orders by competent authorities must be recorded.
22B. Declaration in respect of beneficial interest in any contribution:-
- A person whose name is entered in the register of partners of a Limited Liability Partnership but does not hold any beneficial interest fully or partly in contribution such person shall file with the LLP, a declaration to that effect in Form 4B within a period of 30(thirty) days from the date on which his name is entered in the register of partners specifying the name and other particulars of the person who actually holds any beneficial interest in such contributions
For changes, if any, occurs in the beneficial interest in such contribution, declaration of such change to the limited liability partnership in Form 4B.
Every person who holds or acquires a beneficial interest in the contribution of a LLP but whose name is not registered in the register of partners ( “the beneficial partner”) shall file with Limited Liability Partnership, a declaration disclosing such interest in Form 4C within 30(thirty)days after acquiring such beneficial interest in the contribution of the Limited Liability Partnership specifying the nature of his interest,
in case of changes, if any, in the beneficial interest in such contribution, the beneficial partner shall, within 30(thirty) days from the date of such change, declare such change to the limited liability partnership in Form 4C.
Upon receipt of any above declaration the LLP shall record such declaration in the register of partners and shall file, within a period of thirty days from the date of receipt of declaration by it, a return in Form 4D to the Registrar in respect of such declaration with fees.
APPOINTMENT OF DESIGNATED PARTNER
Every Limited Liability Partnership shall specify a designated a partner who shall be responsible for furnishing of and extending co-operation for providing, information with respect to beneficial interest in contribution in Limited Liability Partnership to the Registrar or any other officer authorised by the Central Government and shall file information of such designated partner with the Registrar in Form 4:
If no designated partner is appointed as above, every designated partner shall be deemed to be responsible for furnishing of, and extending co-operation for providing, information with respect to beneficial interest in contribution.
Note: Every LLP is mandatorily required to maintain a Register of Partners in Form 4A.
Conclusion: Navigating the regulatory landscape of Significant Beneficial Ownership in LLPs demands meticulous compliance with updated filing requirements and maintaining accurate records. LLPs must adhere to deadlines and ensure transparency in disclosing SBOs to avoid penalties and legal repercussions. By aligning with these regulations, LLPs can enhance governance practices and maintain credibility in the business environment.
FORMAT OF FORM- 4A REGISTER OF PARTNERS
FORM- 4A REGISTER OF PARTNERS
[Pursuant to section 23 of Limited Liability Partnership Act, 2008 and rule 22A of the Limited Liability Partnership Rules, 2009]
LLPIN:
Name of the LLP:
Registered Office Address:
S. N.
PERSONAL DETAILS OF THE PARTNER
1 NAME OF THE PARTNER:
2 CORPORATE IDENTIFICATION NUMBER, / REGISTRATION NO.
3 UNIQUE IDENTIFICATION NO:
4 ADDRESS/ REGISTERED ADDRESS (IN CASE OF BODY CORPORATE
5 E-MAIL ID:
6 FATHER’S/ MOTHER’S/ SPOUSE’S NAME:
7 STATUS:
8 OCCUPATION:
9 PAN NO.:
10 WHETHER CITIZEN OF INDIA (YES/NO):
11 NATIONALITY :
15* Total amount of contribution:
16* % share in total contribution:
17* % change in total contribution by effect of admission of Partner:
19. Date of declaration under rule 22B of Limited Liability Partnership Rules, 2009, if applicable:
20. Name and address of beneficial partner:
21. Amount of contribution by beneficial partner: Details of Nominee:
22. Date of receipt of nomination, if applicable:
23. Name and address of nominee: Details of Cessation:
24. Date of cessation of partnership:
25. Reason of cessation of partnership:
26. Name of transferee, if any :
26A SRN number and date of filing E-form-3 intimating the information about the partner Remarks, if any:__________.
27 Authentication/ Signature:
*Note: Whenever there is change in agreement or beneficial interest, the same may be entered date-wise in the Register of member.
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