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

    • 1.  
    • 2. CA. Kalyan Chakravarthy Vennety Presentation on LIMITED LIABILITY PARTNERSHIP 3 rd January, 2009 Source: Article published in ICAI Journal Dec ’08 issue
    • 3. Journey so far…
    • 4. Reasons for change…
    • 5. Formation… Ltd. Co. LLP Non- Resident Foreign Ltd.co Foreign LLP HUF Karta Co-operative Society Corporation Sole
    • 6. 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)
    • 7. 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
    • 8. Status of Existence…
    • 9. 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
    • 10. 20 Partners Condition…
    • 11. 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
    • 12. 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.
    • 13. 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
    • 14. 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
    • 15. 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
    • 16. Limited Liability…
      • Partner not Personally Liable LLP
      • If Liability arises out of own
      • If Liability arises out of one Partner’s
    • 17. 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
    • 18. 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
    • 19. 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
    • 20. 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
    • 21. 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
    • 22. 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
    • 23. 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
    • 24. 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
    • 25. 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
    • 26. 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:
    • 27. 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
    • 28. 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
    • 29. 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
    • 30. 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
    • 31. 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
    • 32. To Sum up…
    • 33. End of Presentation.
      • Thank you…