Written By – Komal Sharma, Policy Associate
The Limited Liability Partnership (Amendment) Bill 2021 seeks to amend The Limited Liability Partnership Act 2008 which was enacted to introduce and to give legal sanction to Limited Liability Partnership Firms. A basic understanding of LLP suggests that it is a hybrid form of business organization consisting features of both of a company and of a partnership firm. The main features of LLP are that it works as a separate legal entity, enjoys perpetual succession and partners have limited liability hence making it a simpler and flexible version of business formation.
The present amendment bill which was introduced by Minister of State for Corporate Affairs Rao Inderjit Singh has recently been approved by both the Houses of Parliament. It was approved by Rajya Sabha on August, 04th 2021 and by the Lok Sabha on August, 9th 2021. The bill seeks to bring some important changes in the act to facilitate the ease of doing business, encourage start-ups, small and micro enterprises to participate in a more structural form of business and to revive their business growth in the post covid period. Some of the important amendments are listed below-
- First of them being the Decriminalization Of Certain Offences under the act on the basis that the less serious and minor offenses be decriminalized and be moved to an “In-house Adjudication Mechanism” instead of Criminal Courts and offences that are dealt with under other enactments/laws are omitted. There are in total 24 penal provisions in the act, of which 21 are compoundable offences and 3 non-compoundable ones. The bill seeks to decriminalize 12 offences.
- The bill proposes to introduce the concept of Small Limited Liability Partnership firms by insertion of Section 2(1)(t) to boost entrepreneurship as these small LLPs will be subjected to less and limited compliances, reduced fee/additional fees. The purpose of creating such classification is to encourage unincorporated micro and small partnerships to convert into the organised structure of an LLP.
- The bill seeks to insert Section 34A in the present act, to empower the Central Government to prescribe The Standards Of Accounting And Auditing for certain classes of LLPs so as to bring the standardization in the procedure of the LLPs.
- The bill inserts three new Sections, Section 67A, 67B, 67C to introduce the concept of Special Court by empowering the Central Govt. to establish Special Courts for the purpose of providing speedy trial for offences under the act.
- As the covid period has greatly affected the business sector, so as to reduce the burden; the bill amends Section 69 of the act to reduce the additional fees and the limit of 300 days is also taken down, the fixed amount of additional fees, ₹100 for every day is removed and a proviso is added to provide for different fees structure for different classes of LLPs.
- Further, Section 76A is inserted to make provisions for adjudication of penalties, appointment of Adjudicating officers, appeal against the order of Adjudicating Officers and to provide principles and procedures for such adjudications and appeal.
- The bills substitute throughout the act the words and figures “Companies Act, 1956” with the words and figures “Companies Act, 2013” to align and bring the provision of the LLP with The Companies Act 2013.
- The bill with other amendments seeks to insert Section 2(1)(i) to introduce the concept of non-convertible debentures in the act to make LLPs eligible to issue the non-convertible debentures.
- The bill also inserts section 2(1)(r) to define the Regional Director in the act and further amends Section 39 where on being authorized by CG the Reginal Director has given some certain rights and duties in accordance with the act.
The LLP already is one of the most flexible form of business for it being the combination of both partnership and a company. It through its own formation itself encourages the unincorporated firms to do business in a legal sanctioned structure. The present amendments will provide an easy and growing environment to a lot of small and large enterprises with the benefits of a company as well as traditional partnership firms, revive their business growth, give support to the enterprises in the post covid phase, would simplify the language and remove the ambiguities from the present act.