A total of 1171 LLPs are about to be struck off by the Roc Delhi and Haryana due to non-filing of Financial Statements and Annual Returns for previous two years. In this write up endeavor is made on discussing the validity of this notice issued to the LLP and the primary remedy available to the LLPs.

The Notification

On 31st May 2018, the Ministry of Corporate Affairs (MCA) issued a notice dated 30th May, 2018 vide Notice No. ROC-DELHI / LLP/SM/PHASE -II/2385 wherein Registrar of Companies (RoC), Delhi & Haryana has proposed to remove the name of 1171 Limited Liability Partnerships (LLPs) from the Register of LLPs. It was also mentioned in the notice that any aggrieved LLP may raise written objection and send it to the ROC within these 30 days.

The proposed Strike Off was decided due to increased irregularities by LLPs in non-filing of Financial Statement and Annual Return in Form 8 and Form 11 respectively for the period 2015-16 & 2016-17 thereby causing the ROC to reasonably believe that these LLPs are non-functioning and non-carrying on any business or Operation.

The Notice is issued in pursuant to Section 75 of the LLP Act, 2008 read with Rule 37 of the LLP Rules, 2009 wherein the ROC is empowered to strike off the name of any LLP after giving the reasonable opportunity of being heard to the LLP.

The Notice is available here: http://mca.gov.in/Ministry/pdf/NoticeLLPDElhi_30052018.pdf

LLPLimited Liability Partnership

Section 75 of the LLP Act, 2008 is produced below:

75. Power of Registrar to strike defunct limited liability partnership off register- Where the Registrar has reasonable cause to believe that a limited liability partnership is not carrying on business or its operation, in accordance with the provisions of this Act, the name of limited liability partnership may be struck off the register of limited liability partnerships in such manner as may be prescribed:

Provided that the Registrar shall, before striking off the name of any Limited Liability partnership under this section, give such limited liability partnership a reasonable opportunity of being heard.

Understanding Section 75:

Section 75 empowers the Registrar of Companies to Strike off a LLP, if it has sufficient reasons to believe that the LLP is not functioning or not carrying on any activities as stated in the Act. Such removal shall be done in the manner provided in Rule 37 of the LLP Rules 2009. Before removing the name of LLP from the register, RoC will give a reasonable opportunity of being heard to the LLP.

Relevant excerpts from Rule 37of the LLP Rules, 2009 is produced below:

37 (1) Where a limited liability partnership is not carrying on any business or operation –

(a) for a period of two years or more and the Registrar has reasonable cause to believe the same, for the purpose of taking suo motu action for striking off the name of the LLP; or

The Registrar shall send a notice to the limited liability partnership and all its partners, of his intention to strike off the name of the limited liability partnership from the register and requesting them to send their representations along with copies of the relevant documents, if any, within a period of one month from the date of the notice:

(3) At the expiry of the time mentioned in the notice under sub-rule (1), or one month under sub-rule (2) above, the Registrar may, by an order, unless cause to the contrary is shown by the limited liability partnership, or the Registrar is satisfied that the name should not be struck off from the register, strike its name off the register, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the limited liability partnership shall stand dissolved.

Understanding relevant portion of Rule 37:

If the Roc has a reason to believe that the LLP is non-functioning and not carrying on any activity for last 2 years, it shall issue a notice to the LLP and its Partners stating its intention to strike off the LLP and request for the representation and relevant documents in its support within one month.

After completion of one month, if representation is not made by the LLP or no supporting document is produced before Registrar and Registrar is of belief that it is appropriate to remove the name of LLP from the Register then it may remove the name of LLP from the Register and shall publish of its removal in the Official Gazette.

Question arises:

Whether the Notice has been sent to every LLP and its Partners at their given E-mail addresses as required to be sent in Rule 37 read with Rule 36 (3) (iii)?

Requirement of Form 8:

As per Section 34 of the LLP Act read with Rule 24 (4) of LLP Rules, 2009, Every LLP is required to prepare the Books of Accounts and Statement of Solvency within 6 months from the end of each Financial Year as on the last day of Financial Year and to be signed by the Designated partner. Such Books of Accounts and Statement of Solvency is required to be filed to Roc within 15 days from the end of six months of the Financial Year to which such Statement of Account and Solvency relates.

Requirement of Form 11

As per Section 35 of the LLP Act, 2008 read with Rule 25 of LLP Rules, 2009, Every LLP is required to file an Annual Return within 60 days from the end of Financial Year. The Annual Return of an LLP having turnover upto Five Crore rupees or contribution upto rupees fifty lakh should be accompanied with a certificate from a Designated Partner that Annual Return contains true and correct information. In all other cases, the Annual Return should be accompanied with a Certificate from a Company Secretary in practice that he has verified the particulars from the books and records of the LLP and found them to be true and correct.

The remedy available to the LLPs

As mentioned in Sub-Rule 1 of Rule 37 of LLP Rules, 2009, ROC has given an opportunity to the LLP wherein LLPs can make representation along with the Books of Account and Statement of Solvency along with the Annual Return of every year for which filing is not completed, LLPs also need to show reasonable cause to Roc to believe that the LLP is functioning and the Operations are being carried on. Non-filing of Form 8 and Form 11 as required under Section 34 and 35 was inadvertent in nature and was due to not knowing the relevant provisions of the Act or due to any genuine reason.

Disclaimer: 

Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, Author is not responsible for any errors or omissions in the article. Therefore, users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.

(In case of any discussion or discussion/ suggestions, Author can be reached for further details at kmalegal@outlook.com)

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