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  • This is a summarisation of the article published in ICAI Journal for benefit of Study Circle members

LLP LLP Presentation Transcript

  •  
  • CA. Kalyan Chakravarthy Vennety Presentation on LIMITED LIABILITY PARTNERSHIP 3 rd January, 2009 Source: Article published in ICAI Journal Dec ’08 issue
  • Journey so far…
  • Reasons for change…
  • Formation… Ltd. Co. LLP Non- Resident Foreign Ltd.co Foreign LLP HUF Karta Co-operative Society Corporation Sole
  • Dis-Qualifications…
    • A Person with Unsound Mind
    • An Undischarged Insolvent
    • Person who has Applied to be adjudged as Undischarged Insolvent & application pending
    • Minor : No mention in Act. Answer = General Law.
    • (A Minor can be admitted to the benefits of Partnership)
  • Registration…
    • ROC
    • File Incorporation Document with ROC office of the state
    • Form & Prescribed Particulars (Name, address etc.)
    • Inc-Doc to be signed by 2 or more Partners
    • File with a Compliance Statement signed by :
      • Advocate or CA or CS or CWA engaged in formation,
      • One of the Partners who has signed the Inc-Doc
    • Compliance Statement should state whether LLP Act, Rules complied with or not.
    • Fees
    • Registrar Reg’n Certificate issued within 14 days
  • Status of Existence…
  • Changes during Existence…
    • Possible to change Name, Regd.Office, Partners via Supplementary Agreement & ROC Filing
    • Procedure for change in Name:
    • 1. Apply to ROC with Fees
    • 2. ROC ensures name not identical or near resemblance
    • 3. No Central Database of Partnership Firm names
    • (reason being Administration is done by States)
    • 4. Other entity with similar name can object to ROC
    • 5. Time Limit=within 24months − ROC satisfied − Direct to LLP to change it’s name after opportunity of Hearing
  • 20 Partners Condition…
  • Relationship of Partners…
    • Agreement in Writing
    • Determine Rights & Duties in respect to LLP
    • Who can sign Agreement?
    • ROC Filing of Agreement with Fees
    • ROC Filing of Details of Changes if any later in Agreement
    • Agreement exists before Reg’n of LLP?
    • Change in name & address of Partners
  • SCHEDULE I of LLP Act…
    • If no written Agreement exists, the Relationship of Partners is governed by Schedule I. It says mutual Rights & Duties determined as under in absence of written Agreement.
    • All Partners entitled to share
    • LLP to indemnify each Partner in respect of payments & liabilities
    • Every Partner to indemnify LLP for Losses caused by his fraud in conduct
    • Every Partner to take part in management of the LLP
    • No Partner shall be entitled to Remuneration for acting in business/mgt.
    • No person to be introduced as a Partner without consent of all Partners
    • Any Matter/issue Resolve by Majority One Vote Each
    • (For change of business Unanimous Majority)
    • Record Decisions 30days Minute Book Keep at Regd.Office
    • Each Partner render True Accounts, Full info about things affecting LLP, other partners or his Legal Representatives.
  • SCHEDULE I of LLP Act contd…
    • If Partner carries on without consent of LLP, any business in the same nature of & competing with LLP,
    • Partner
    • Every Partner shall account to the LLP for any benefit derived by him without consent of LLP from
    • No Partner can expel any Partner Unless Power conferred by express Agreement
    • Unresolved Disputes Arbitration and Conciliation Act, 1996
  • Joining, Retirement, Cessation…
    • A person may join as Partner if all Partners agree to admit
    • Cessation on Death, Retirement, W/up of Co., or LLP which he is representing
    • If a Partner declared
    • Execute Fresh Agreement Record new Terms & Conditions of Revised Constitution
    • Intimate ROC 30days
  • Payments to Partners…
    • Agreement May provide for Interest on capital, Rem’n.
    • It Will have to provide share of each in Profits/Losses
    • These conditions can be changed via amendment to Agreement
    • Rights of the Partner to Share of Profits/Losses is Transferable in whole or part.
    • Implications of Transfer:
      • Does not cease to be Partner
      • Does Not Entitle the Transferee to participate in management or conduct of activities of LLP
      • Does Not Entitle the transferee any RTI on Tr’ns of LLP
  • Limited Liability…
    • Partner not Personally Liable LLP
    • If Liability arises out of own
    • If Liability arises out of one Partner’s
  • Agency & Contribution…
    • Partner is Agent of LLP but not of other Partners
    • LLP not bound by anything done by Partner with 3 rd Party
      • If the Partner is not Authorised to act &
      • The 3 rd Party is aware of this fact
    • LLP is liable to meet during the course of business, Trade, profession or service
    • Contribution As per Agreement
    • Liability To the Extent specified in Agreement
  • DESIGNATED PARTNERS…
    • At Least 2 Individuals
    • Appointment governed by Agreement
    • Vacancy due to Death, Retirement or otherwise
    • Appoint Another Designated Partner 30 days
    • ROC Filing Particulars, changes etc.
    • Consent: DP LLP in 30 days ROC in 30 days
  • Obligations of Designated Partner…
    • Responsible for compliance of LLP Act & Rules
    • Liable for all penalties of Contravention of LLP Act & Rules
    • Every DP to sign Annual Fin.Stmts, Annual Solvency Stmt
    • Every DP obtain DPIN like DIN in case of companies
    • In case of
  • Accounts & Audit…
    • Maintain books as prescribed
    • Cash/Accrual
    • Prepare
    • Signed by the Designated Partners
    • Audit as per Rules framed under the LLP Act
    • Exemption Central Government has power
    • ROC Filing of Statement in prescribed Form, Time, Fees
    • ROC Filing of Annual Return 60 Days from end of FY
  • Conversion of Firm to LLP…
    • Procedure laid down in SCHEDULE II
      • If & Only if All Partners of LLP = All Partners of Firm
      • Apply to ROC
    • ROC Filing
      • Statement by all Partners containing Name & Reg’n no and Date of Reg’n
      • Inc-Doc along with Compliance Statement
    • ROC
  • Conversion of Firm to LLP…
    • On Certificate of Registration
      • LLP comes into existence
      • Properties, Assets, Interests, Rights, Priveledges, Liabilities, Obligations, of the Firm & whole undertaking gets transferred and vests to/in LLP without any further assurance, act or deed
      • Firm deemed to be dissolved. Removed from Register
      • Inform ROC within 15 days
    • If any Property registered without authority, LLP take steps to notify the Authority of the Conversion and of particulars & details as the Authority may specify
  • Conversion of Firm to LLP…
    • Pending Proceedings of Firm in Court/Tribunal etc. to be continued, completed or enforced by/against LLP
    • Conviction/Ruling/Order/ Judgement of Firm by any Court/Tribunal etc. to be ruled in favour or against LLP
    • Every Agreement which Firm was party shall have effect as if
      • LLP was party instead of Firm
      • Reference to Firm would mean Reference to LLP
    • All
  • Conversion of Firm to LLP…
    • Any Contract of Employment continue in force as if LLP was Employer instead of Firm
    • Any appointment in any role/capacity take effect & operate as if LLP was appointed
    • Any Authority/Power continue as if LLP was conferred with
    • Any Approval/License/Permit continue in name of LLP(subject to relevant Law)
    • Every Partner of Firm continue to be Jointly & Personally Liable for prior liabilities & obligations
    • In case of discharge of above liabilities by any Partner, he shall be entitled to be fully indemnified by LLP
  • Conversion of Firm to LLP…
    • Every official correspondence for a period of 12 months by LLP shall bear:
      • A statement that it was w.e.f. the date of Reg’n converted from a Firm to LLP
      • Name & Registration no. of erstwhile Firm
  • Conversion of Company to LLP…
    • Pvt. Ltd. Co. Section 56 & Third SCH of LLP Act
    • Public Ltd. Co. Section 57 & Fourth SCH of LLP Act
    • Procedure is more or less identical to conversion of Firm to LLP
    • One Extra condition:
  • Conversion of Co. to LLP…
    • What happens to Share Capital?
    • View= Credit to capital accounts in the ratio of shareholding (both Equity & Preference capital)
    • General & other Reserves:
    • After conversion, Firm & Co., need not follow Partnership Act & Companies Act respectively
  • Winding up…
    • Voluntary or by NCLT
    • By NCLT if:
      • LLP decides that it be wound up by the Tribunal
      • Min. no. of Partners remains < 2 for a period > 6 months
      • LLP unable to pay it’s debts
      • LLP acted against interest of Sovereignty, Integrity of India or Security of the state or Public Order
      • Default in ROC Filing: Stmt of A/c, Stmt of Solvency, Annual Return for 5 consecutive FYs
      • Tribunal Opines that it is Just & Equitable for LLP to be wound up
  • Procedural Points…
    • ROC can inspect Documents
    • ROC can call for information
    • ROC can conduct Investigation
    • Central Government make rules for Foreign LLP
    • Central Government notify Companies Act Applicability
    • Central Government make rules for E-Filing
    • Fine for Delay in Filing of Documents, Statements, Annual Returns Rs.100 per day
    • Reference to Tribunal: Companies Act provisions Apply
    • Fine for Default in Filing of Documents, Statements, Annual Returns Rs. 10,000 to Rs.50,000
  • Procedural Points…
    • ROC can strike off name of LLP for not carrying on business as per Act
    • The Act provides for Prosecution of Partners and Designated Partners for offences commited
    • Central Government make Rules
    • Tribunal has powers sanction Compromise, Arrangements, Reconstruction incl. Merger & Demerger and Compromise with creditors
    • Central Government can alter the contents of Schedules
    • Till the time Tribunal/Appellate Tribunal is constituted, Tribunal = CLB and Appellate Tribunal = High Court
  • To Sum up…
    • LLP enables small & medium org’ns & Family Partnerships to expand by admitting outsiders with capital & Skill
    • Financial Liability is Limited. Therefore there is no danger of Promoter Partner saddled with Personal Liability
    • No Danger of stoppage of business due to non-co-operative attitude of Partners
    • Advantage: In preference to companies, LLP has flexibility in operation. No need to comply complicated provisions of Companies Act
    • Any Outsider cannot attach personal property of Partners for Debts pertaining to LLP
  • To Sum up…
  • End of Presentation.
    • Thank you…