Limited liability partnership

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Limited liability partnership

  1. 1. Srilakshmi Attorney Corporate Division
  2. 2. <ul><li>Recommendation of separate LLP legislation in India by various committees /expert: </li></ul><ul><li>Abid Hussein Committee for SSI sector </li></ul><ul><li>Naresh Chandra Committee on regulation of Private Companies and Partnership </li></ul><ul><li>Dr. Irani Committee recommended separate LLP legislation </li></ul><ul><li>Government of India introduced Limited Liability Partnership Bill, 2006 in December 2006 in Upper House of Parliament </li></ul><ul><li>It was referred to Parliamentary Standing Committee on Finance for its recommendation </li></ul><ul><li>Committee submitted report on 27th November, 2007 </li></ul><ul><li>Government of India introduced Limited Liability Partnership Bill, 2008 (LLP Bill 2008) </li></ul>
  3. 3. • LLP Act 2008 has been divided as under: 81 sections 4 Schedules Central Government has power to prescribe rules for 39 sections / sub-sections Penalty provisions specified in 21 sections/ sub-sections • All except the following provisions have come into force w.e.f. 31-March-2009 Clauses (c) and (u) of section 2(1) Section 31 to the extent of its application in context of the Tribunal Section 51 – application for winding up of LLP
  4. 4. Section 55 to 58 – conversion from firm / Pvt. Company / unlisted company to LLP Section 63 to 65 – winding up and dissolution Section 81 except clause (b) to the extent of its application to Section 51, 63 and 64 and clause (c) Second Schedule – conversion from firm into LLP Third Schedule – conversion from private company into LLP Fourth Schedule – conversion from unlisted company into LLP
  5. 5. • LLP Rules 2009 issued by MCA have been notified w.e.f. 1 April 2009 Rules relating to operative provisions of the LLP Act have been made effective Others rules will be made effective once operative provisions are made effective • MCA has also issued draft rules for the following – LLP (Winding up and Dissolution) Rules Forms to LLP (Winding Up and Dissolution) Forms
  6. 6. • Enables professional expertise and entrepreneurial initiative to combine, organize and operate in an innovative and efficient manner • To meet the requirements of service, knowledge and technology based organizations • No detailed legal and procedural requirements - useful for small enterprises No restriction for large enterprises Flexibility in management and operations Liability limited based on the LLP agreement Rights, duties and obligations of the partners governed by the LLP Agreement
  7. 7. • Individual • Body Corporate – Company as per Companies Act, 1956 – LLP – Foreign LLP – Company incorporated outside India
  8. 8. • &quot;LLP to be: a &quot;body corporate&quot; and a legal entity separate from its partners, having perpetual succession • Any individual or a body corporate can be a partner in LLP In case of an individual, he should not be: o found to be of unsound mind o an un-discharged insolvent or o a person who has applied to be adjudicated as insolvent and the application is pending • Minimum no. of partners – 2
  9. 9. Designated Partners (DP): At least 2 “DP&quot; who are individuals and at least 1 of them to be a resident in India &quot;Resident in India&quot; means stay in India for minimum 182 days during the immediately preceding one year • If one or more of the partners of a LLP are bodies corporate at least 2 individuals who are partners of such LLP or nominees of such bodies corporate • If no designated partner is appointed, all partners are deemed to be designated partners • “ DP&quot; to be responsible for compliance with the provisions of LLP Act • Liable to all penalties under the LLP Act
  10. 10. • Procedure similar to company formation • LLP to be issued a certificate of incorporation by the Registrar of Companies (ROC) of the State in which the registered office of the LLP is to be situated • Name of every LLP to end with the words &quot;Limited Liability Partnership&quot; or &quot;LLP&quot; • Name which is – Undesirable; or nearly resembles to that of any other partnership firm or LLP or any body corporate or trade mark is not allowed • Any entity (body corporate / registered partnership firm) which has a name similar to the name of LLP which has been incorporated subsequently may seek change of name of such LLP through ROC within 24 months from date of registration of such LLP
  11. 11. • Use of the words &quot;LLP&quot; in the name / title of any person without registration under the LLP Act to be a punishable offence • 2 year time to change name of LLP which is formed with undesirable name • Name of foreign LLP / co. can be reserved for 3 years – as per LLP Rule • Change of name to be as per partnership agreement. If agreement is silent –unanimous consent required
  12. 12. • Rights and duties of partner mutual rights and duties of partners of an LLP inter se and those of the LLP and its partners: to be governed by an agreement between the partners, or between the LLP and its partners • In absence of any such agreements, the mutual rights and duties to be governed by the LLP Act • Incoming partner – intimation to be filed with the ROC • Cessation of a partner (resignation, death, dissolution of LLP, unsound mind, adjudged/ declared as insolvent) not effective unless – the person has notice that the partner has ceased to be so notice of cessation has been delivered to the ROC notice of cessation may be filed by the outgoing partner if he has reasonable cause to believe that LLP has not file the said notice
  13. 13. • Every partner of a LLP to be, for the purpose of the business of LLP, the agent of LLP, but not of other partners • LLP is not bound by anything done by a partner in dealing with a person if – the partner in fact has no authority to act for the LLP in doing a particular act; and the person knows that he has no authority or does not know or believe him to be a partner of the LLP • LLP is liable if the partner of a LLP is liable to any person for wrongful act/ omission on his part in the course of business of LLP / with its authority
  14. 14. • Obligation of LLP whether arising in contract or otherwise, shall be solely the obligation of LLP • Liabilities of LLP shall be met out of properties of LLP • Partner is not personally liable for the obligations of LLP solely by reason of being a partner of LLP • No partner is liable for the wrongful act or omission of any other partner of LLP, but the partner will be personally liable for his own wrongful act or omission
  15. 15. • A contribution of a partner to LLP may consist of – tangible, or intangible property movable or immovable property other benefit to the LLP – like money, promissory notes, contracts for services etc. • Valuation by CA / ICWA/ approved panel of valuer • The obligation of a partner for the contribution shall be as per the LLP agreement • Creditor, which extends credit or acts in reliance on an obligation described in LLP agreement, without the notice of any compromise made between the partners, may enforce the original obligation against such partner.
  16. 16. • LLP to maintain the prescribed books of accounts relating to its affairs on cash or accrual basis; and according to the double entry system of accounting • Accounts of LLP to be audited within 6 months of the year end as per the rules prescribed Central Government may exempt certain class of LLPs from requirement of a compulsory audit • LLP to file with the ROC: Statement of Account and Solvency and; Annual return • ROC have powers to call for any declaration/ information from the present or past partner or designated partner or employee of a LLP
  17. 17. • Rights of a partner: to a share of the profits and losses of the LLP and to receive distribution in accordance with the LLP agreement are transferable (wholly or in part). However, this does not cause either: disassociation of the partner; or a dissolution and winding up of the LLP • Transfer of right, shall not entitle, the assignee or the transferee to: participate in the management or conduct of the activities of the LLP; or access information concerning the transactions of LLP
  18. 18. • Provisions made in LLP bill for conversion of – a firm into LLP; private company into LLP; unlisted public company into LLP • On conversion of firm/ company into LLP, LLP to intimate ROF/ ROC about conversion within 15 days of registration • On and from the date specified in the certificate of registration issued by the ROC: all tangible (movable / immovable) & intangible property, liabilities, interest, obligation etc. relating to the firm or company; and the whole of the undertaking of the firm or company shall be transferred to and shall vest in LLP without further assurance, act or deed; the firm or company shall be deemed to be dissolved and removed from the records of ROF/ ROC, as the case may be.
  19. 19. • Central government to make rules for provisions in relation to establishment of place of business by foreign LLPs in India Applying or modifying the provisions of the Companies Act with modifications
  20. 20. • Provisions made in the LLP Act for allowing a compromise and arrangement o including mergers and amalgamations winding up dissolution • NCLT to pass order if majority representing 3/4th in value of creditors/ partners subject to disclosure of all material facts/ latest financial position & pendency of investigation proceedings • NCLT order passed to be filed with the ROC within 30 days, in order to be effective • Report from the ROC to NCLT that the affairs of the LLP (transferor LLP) have not been conducted in the manner prejudicial to the interest of the partner /public • Report from the OL to NCLT that the affairs of the LLP (dissolution of transferor LLP) have not been conducted in the manner prejudicial to the interest of the partner / public
  21. 21. • LLP may be wound up voluntary or by NCLT • LLP may be wound up by NCLT if – LLP decides to wound up by the Tribunal; Number of partners is reduced below 2 for a period of more than 6 months; if LLP is unable to pay its debts; if LLP has acted against the interests of the sovereignty and integrity of India, the security of the State or public order; if LLP has defaulted in filing Statement of Account and Solvency or annual return with the ROC for 5 consecutive financial years; or NCLT is of the opinion that it is just and equitable that the LLP be wound up
  22. 22. • Transferable Rights – Right to receive share of profit and losses – Right to receive distribution
  23. 23. • Central government empowered to apply any of the provisions of the Companies Act, 1956 to LLPs with suitable changes or modification • E-filing recognized • General penalty where no specific penalty is provided • ROC may strike off the name of LLP from the register of LLP if LLP is not carrying on business or its operation, in accordance with the provisions of the Act in the manner to be prescribed • Central Government may, alter Schedules by notification in the Official Gazette
  24. 24. Thank You

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