Llp Presentation Ksv


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A Presentation on the new LLP Act

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Llp Presentation Ksv

  1. 1. Limited Liability Partnership Presented by: CA Kamlesh Vikamsey CA. Kamlesh Vikamsey
  2. 2. Indian history • 2003: Naresh Chandra Committee Report highlighted need for LLPs & suggested application of LLPs to Service industry, Chartered Accountants, Lawyers, Architects, etc. • 2005: J J Irani Expert Committee on Company Law recommended introduction of LLPs-suggested small enterprises be included in scope of LLP & there should be a separate LLP Act • 2006: LLP Bill introduced in Parliament • 2007: Bill referred to Parliamentary Standing Committee (PSC) for examination • 2008: Lok Sabha passes New LLP Bill as revised by PSC CA. Kamlesh Vikamsey
  3. 3. Indian history • 2009: LLP Act, 2008 receives presidential assent & is published in Official Gazette • 2009: LLP Act, 2008 gets notified w.e.f March 31st, 2009 CA. Kamlesh Vikamsey
  4. 4. Different Chapters of the Act • Chapter I-Preliminary (Ss. 1 & 2) • Chapter II-Nature of LLP (Ss. 3-10) • Chapter III-Incorporation & Incidental Matters (Ss. 11-21) • Chapter IV-Partners & their Relations (Ss. 22-25) • Chapter V-Extent & Limitation of Liability of LLP & Partners (Ss. 26-31) • Chapter VI-Contributions (Ss. 32 & 33) • Chapter VII-Financial Disclosures (Ss. 34-41) • Chapter VIII-Assignment & Transfer of Partnership Rights (S. 42) • Chapter IX-Investigation (Ss. 43-54) CA. Kamlesh Vikamsey
  5. 5. Different Chapters of the Act • Chapter X-Conversion to LLP (Ss. 55-58) • Chapter XI-Foreign Limited Liability Partnerships (S. 59) • Chapter XII-Compromise, Arrangement or Reconstruction of LLPs (Ss. 60-62) • Chapter XIII-Winding Up & Dissolution (not notified as on date) (Ss. 63-65) • Chapter XIV-Miscellaneous Provisions (Ss. 66-81) • First Schedule-Mutual Rights & Liabilities of Partners & LLP • Second Schedule-Conversion of Partnership Firm to LLP • Third Schedule-Conversion of Private Company to LLP • Fourth Schedule-Conversion of Unlisted Public Company to LLP CA. Kamlesh Vikamsey
  6. 6. Preliminary (Ch. I) • Short title, extent & commencement  This Act may be called the Limited Liability Partnership Act, 2008  It extends to the whole of India  All sections have been notified as on March 31st, 2009, vide notification no. S.O. 891(E), except- 3 Clauses (c) and (u) of sub-section (1) of S. 2-Appellate Tribunal & Tribunal 3 Extent of applicability of Section 31 in respect of ‘Tribunal’ 3 S. 51-Application by Central Government for Winding-up of LLP 3 Ch. X-Conversion to LLPs [Notified vide Notification no. S.O. 1323(E) dated May 22nd, 2009] 3 Ch. XIII-Winding Up of LLPs 3 S. 72-Jurisdiction of Tribunal & Appellate Tribunal 3 Clauses (b), pertaining to its applicability to Ss. 51, 63 & 64; & (c) of S. 81 3 Second, Third & Fourth Schedule-Pertaining to Conversion of Firms & Companies (except Listed Companies) to LLPs [Notified vide Notification no. S.O. 1323(E) dated May 22nd, 2009] CA. Kamlesh Vikamsey
  7. 7. Preliminary (Ch. I) Important Definitions: • Body Corporate [S. 2 (1) (d)]: ‘means a company defined in section 3 of the Companies Act, 1956 and includes- (i) a limited liability partnership registered under this Act; (ii) a limited liability partnership incorporated outside India; and (iii) a company incorporated outside India, but does not include- (i) a corporation sole; (ii) a co-operative society registered under any law for the time being in force; and (iii) any other body corporate (not being a company as defined in section 3 of the Companies Act, 1956 or a limited liability partnership as defined in this Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf’ CA. Kamlesh Vikamsey
  8. 8. Preliminary (Ch. I) • Business [S. 2 (1) (e)]: ‘includes every trade, profession, service and occupation’ • Financial Year [S. 2 (1) (l)]: ‘in relation to limited liability partnerships, means the period from the 1st day of April of a year to the 31st day of March of the following year: Provided that in case of a limited liability partnership incorporated after the 30th day of September of a year, the financial year may end on the 31st day of march of the year next following that year’ CA. Kamlesh Vikamsey
  9. 9. Preliminary (Ch. I) • Limited Liability Partnership Agreement [S. 2 (1) (o)]: ‘means any written agreement between the partners of the limited liability partnership or between the limited liability partnership and its partners which determines the mutual rights and duties of the partners and their rights and duties in relation to that limited liability partnership’ • Registrar [S. 2 (1) (s)]: ‘means a Registrar, or an Additional, a Joint, a Deputy or an Assistant Registrar, having the duty of registering companies under the Companies Act, 1956’ CA. Kamlesh Vikamsey
  10. 10. Preliminary (Ch. I) • S. 2 (2): ‘Words and expressions used and not defined in this Act defined in the Companies Act, 1956 shall have the meanings respectively assigned to them in that Act’ CA. Kamlesh Vikamsey
  11. 11. Nature of Limited Liability Partnership (Ch. II) • LLP is body corporate formed & incorporated under LLP Act [S. 3 (1)] • LLP is legal entity separate from its partners [S. 3 (1)] • LLP has perpetual succession [S. 3 (2)] • Existence, Rights & Liabilities of LLP not affected by change in partners [S. 3 (3)] • Indian Partnership Act, 1932 does not apply to LLPs [S. 4] • Partners  Individuals / Body Corporate can be partners [S. 5]  Minimum two partners [S. 6 (1)] CA. Kamlesh Vikamsey
  12. 12. Nature of Limited Liability Partnership (Ch. II) • Designated Partners (DP) [S. 7 (1)]  At least two DPs  Only Individuals can be DPs  At least one resident in India  Every DP to obtain a Designated Partner Identification No. (DPIN) • Responsibilities & Liabilities of DPs [S. 8]  Responsible for doing all acts, matters & things required to be done by LLP w.r.t compliance of LLP Act including filing of any document, return, statement & like report under LLP Act & as specified in LLP Agreement  Liable to all penalties imposed on LLP for any contravention of above CA. Kamlesh Vikamsey
  13. 13. Nature of Limited Liability Partnership (Ch. II) • Changes in DPs [S. 9]  LLP to appoint DP within 30 days of vacancy  If no DP is appointed or if, at any time, there is only 1 DP, each partner shall be deemed to be a DP • Penalty for Contravention [S. 10]  For S. 7 (1): LLP & its every partner shall be fined > Rs. 10,000 (Maximum Rs. 5 Lacs)  For Ss. 7 (4) & (5), 8 & 9: LLP & its every partner shall be fined > Rs. 10,000 (Maximum Rs. 1 Lac) CA. Kamlesh Vikamsey
  14. 14. Nature of Limited Liability Partnership (Ch. II) • Disqualifications of DPs • R. 9 (1): No person can be DP of LLP, if-  He is adjudged as insolvent within preceding 5 years  He has suspended payment to his creditors & not made any composition with them within preceding 5 years  He is convicted by Court for any offence including moral turpitude & sentenced to imprisonment not less than 6 months  He is convicted by Court for offence under Section 30 of LLP Act CA. Kamlesh Vikamsey
  15. 15. Incorporation & Incidental Matters (Ch. III) • Incorporation Document [S. 11]  Is among Prime Documents of LLP  Must be submitted to registrar in ‘Form-2’ [R. 11]  S. 11 (2) requires particular information to be contained in Incorporation Document- 3 Name of LLP 3 Proposed Business of LLP 3 Address of Registered Office (RO) 3 Names & Addresses of Partners 3 Names & Addresses of DPs 3 Other Information as may be prescribed • RO shall be place of all correspondence for LLP [S. 13 (1)]  On Contravening provisions relating to RO, LLP & its every partner shall be punishable with fine upto Rs. 25,000 but not less than Rs. 2,000 [S. 13 (4)] CA. Kamlesh Vikamsey
  16. 16. Incorporation & Incidental Matters (Ch. III) • Effect of Registration [S. 14]: LLP will be able to, in its own name-  Sue & be sued  Acquire, hold & develop or dispose off any property  Have common seal  Do & suffer such other acts & things as bodies corporate may lawfully do or suffer • Name of LLP must end with words ‘Limited Liability Partnership’ or acronym ‘LLP’ [S. 15 (1)] • Change in name of LLP [S. 17] • Penalty for improper use of words ‘Limited Liability Partnership’ or ‘LLP’ [S. 20]  Punishable with fine of Rs. 50,000 but may extend upto Rs. 5 Lacs • Publication of name, address of RO, Registration No. & Statement of limited liability [S. 21] CA. Kamlesh Vikamsey
  17. 17. Incorporation & Incidental Matters (Ch. III) • Procedure for formation of LLP:  Check availability of name on site ‘’  Acquire Digital Signature Certificate (DSC)  Acquire DPIN by applying in prescribed ‘Form-7’  Apply for Reservation of Name in prescribed ‘Form-1’  Apply for Incorporation Document in prescribed ‘Form-2’  Alongwith Incorporation Document, submit application for- 3 Information regarding LLP Agreement in ‘Form-3’ 3 Appointment of Persons and their consent as such to act as Partners / DPs in ‘Form-4’ & ‘Form-9’, respectively  Receive Form-2 duly signed by Registrar & certificate from registrar regarding incorporation, within 14 days of filing such documents  LLP is ready to function CA. Kamlesh Vikamsey
  18. 18. Incorporation & Incidental Matters (Ch. III) CA. Kamlesh Vikamsey
  19. 19. Partners & their Relations (Ch. IV) • Eligibility to be partner [S. 22]  Persons who subscribe to Incorporation Document  By LLP Agreement • Relationship of partners [S. 23]  Rights & duties of partners with other partners & with LLP governed by LLP Agreement  In absence of any agreement, principles set out in First Schedule will apply • Cessation of Partnership Interest  In accordance with LLP Agreement [S. 24 (1)]  By resignation notice in writing of 30 days [S. 24 (1)]  On death, dissolution of LLP, or if he is of unsound mind or insolvent as declared by court [S. 24 (2)] • Liability of Outgoing Partner [S. 24 (4)] CA. Kamlesh Vikamsey
  20. 20. Partners & their Relations (Ch. IV) • Registration of changes in partners / details of partners to be filed in prescribed time & in prescribed ‘Form-6’ [R. 22 (1)] CA. Kamlesh Vikamsey
  21. 21. First Schedule (Ch. IV) Relates to mutual rights & duties between partners & LLP & its partners absence of Agreement on such matters •Partners of LLP entitled to share equally in capital & profits / losses •Partners shall be indemnified by LLP in respect of payments made & liabilities incurred by him-  In ordinary & proper conduct of business of LLP  In anything necessarily done for Preservation of business or property of LLP •LLP shall be indemnified by Partners for any loss caused by his fraud in conduct of business of LLP •Partners may participate in management of LLP •Partners shall not be entitled to any remuneration for acting in business or management of LLP •No partner may be introduced without consent of all other partners •Any ordinary matter regarding LLP may be decided by resolution passed by majority of partners CA. Kamlesh Vikamsey
  22. 22. First Schedule (Ch. IV) • However, change in nature of business may be decided only by consent of all partners • Every decision taken by LLP be recorded in minutes within 30 days of such decision • Minute Book be maintained & kept at RO of LLP • Partners must render true accounts & full information of all things affecting LLP to any partner or his legal representative • Partners to account for & pay over all profits earned from business of similar nature & competing with LLP, to LLP if there is no consent from LLP in that respect • Partners to account to LLP for any benefit derived by him without LLP’s consent, from any transaction concerning LLP or from use of name, property or business connection of LLP • No partner may be expelled by a majority unless there is an express power conferred by LLP Agreement to do so • All disputes which cannot be resolved by LLP Agreement can be referred to for arbitration as per Arbitration and Conciliation Act, 1996 CA. Kamlesh Vikamsey
  23. 23. Liability of LLP & Partners (Ch. V) ust like partnership, every partner is an agent; not of other partners but of LLP [S. 26] LP not bound by unauthorized acts of partners in dealing with person if that person knows that the partner had no authority or did not know him to be partner of LLP [S. 27 (1)] LP liable in respect of wrongful acts or omissions of partners in course of its business or with its authority [S. 27 (2)] bligation of LLP is solely an obligation of LLP & shall be met out of property of LLP [S. 27 (3) & (4)] artners not personally liable [S. 28 (1)] CA. Kamlesh Vikamsey
  24. 24. Liability of LLP & Partners (Ch. V) • Unlimited Liability in case of fraud [S. 30]  If fraud done with knowledge / authority of LLP, LLP’s & partner’s liability will be unlimited. LLP’s liability = Partner’s liability  Otherwise, LLP will not be liable  Imprisonment for 2 years & fine upto Rs. 5 Lacs • Whistle Blowing [S. 31]  Court / Tribunal may reduce penalty if partner / employee assists Court / Tribunal CA. Kamlesh Vikamsey
  25. 25. Contributions (Ch. VI) • Form of Contribution in any manner- in cash or in kind [S. 32 (1)] • Accounting & Disclosure of Contribution must also involve the nature & amount of Contribution [S. 32 (2) & R. 23 (1)] • R. 23 (2): Contribution in kind must be valued by practicing CA or CWA or approved valuer from panel maintained by Central Government • Obligation to Contribute as per LLP Agreement [S. 33 (1)] • Creditor may enforce Original Obligation against partner in case if he was unaware of compromise between partners [S. 33 (2)] CA. Kamlesh Vikamsey
  26. 26. Financial Disclosures (Ch. VII) aintain proper books of accounts as prescribed in R. 24-  Must disclose all sums of money expended & received & matters pertaining thereto  Must record all assets & liabilities of LLP  State all purchases & sales & record all information regarding inventories  Other particulars which partners may decide ash or Accrual; Double-Entry System of Accounting [S. 34 (1)] aintain books at RO for period of 8 years as per R. 24 (3) repare ‘Statement of Accounts & Solvency’ in prescribed ‘Form-8’ within 6 months from end of FY & must be signed by DPs [S. 34 (2)] ust be filed with ROC alongwith prescribed fees udit as per prescribed rules [R. 24 (8)] CA. Kamlesh Vikamsey
  27. 27. Assignment & Transfer of Partnership Rights (Ch. VII) ight of partner to share profits is transferable / assignable (in whole or in part) [S. 42 (1)] ransfer does not imply that transferor / assignor has ceased to be partner [S. 42 (2)] ikewise, transferee / assignee does not have right to participate in management [S. 42 (3)] ransferee / assignee has no right to obtain any information of transactions of LLP [S. 42 (3)] CA. Kamlesh Vikamsey
  28. 28. Investigation (Ch. IX) • [S. 43 (1) & (3)]: Central Government (CG) may appoint one or more inspector(s) to investigate into affairs of LLP & report thereon, if-  Not less than 1/5 th of partners apply for investigation on payment of prescribed security to Central Government  LLP applies for investigation  CG is of opinion that- 3 Business of LLP is with intent to defraud its Creditors, Partners or any other Person 3 Affairs of LLP are not being conducted in accordance with provisions of this Act 3 On receipt of Report of Registrar or any other Regulatory Agency, there exist sufficient reasons that affairs of LLP ought to be investigated • Inspector cannot be partnership firm, body corporate or other association [S. 45] • Investigator has power to investigate in matters of any entity which has been associated, or is associated, to LLP unless it is irrelevant to do so [S. 46 (1)]  Investigator must obtain prior approval of CG [S. 46 (2)] CA. Kamlesh Vikamsey
  29. 29. Investigation (Ch. IX) • [S. 47 (1)]: It shall be duty of DPs & Partners to-  Preserve & produce before investigator all documents relating to LLP or, as case may be, any other entity  Give assistance to investigator in connection to investigation • Investigator has power to keep such documents in custody upto 30 days [S. 47 (3)] • Failure to comply with requirements as above will result in punishment of person in default with fine upto Rs. 25,000 but not less than Rs. 2,000 & further fine of upto Rs. 500 but not less than Rs. 50 for everyday of default [S. 47 (5)] CA. Kamlesh Vikamsey
  30. 30. Investigation (Ch. IX) • [S. 48]: Investigator has power to seize documents relating to LLP, if he believes that such documents may be-  Destroyed  Mutilated  Altered  Falsified or  Secreted • Investigator shall make reports (Interim & Final) to CG & such report such act as evidence in any legal proceeding [S. 49 & 54] • Application by CG for Winding-up of LLP pursuant to investigation [S. 51] • Expenses of Investigation [S. 53] CA. Kamlesh Vikamsey
  31. 31. Conversion of Firm to LLP (Ch. X) This part is governed by Section 55 & Second Schedule & is notified vide notification no. S.O. 1323(E) w.e.f May 31st, 2009 •All partners of LLP must be partners of original firm & no one else •On such conversion-  All assets & liabilities of firm would get vested in LLP  Firm stands dissolved  Will be removed from records of Registrar of Firms  Every partner will continue to be personally liable jointly & severally with LLP, for liabilities prior to conversion / arising out of contract entered prior to conversion  Partner to be indemnified by LLP in respect of such liability subject to anything contrary in LLP Agreement •Every official correspondence of LLP for 1 year, must bear a statement that it was, from the date of registration converted from a firm into an LLP alongwith name & registration, if applicable, of firm from which it was converted CA. Kamlesh Vikamsey
  32. 32. Conversion of Firm to LLP (Ch. X) • Partnership Firm proposing to convert to LLP must apply to ROC in prescribed ‘Form-17 (Part A)’ alongwith Statement of Partners in ‘Form-17 (Part B)’ [R. 38 (1)] • ROC must issue certificate of registration in ‘Form-19’ [R. 32 (1)] • Upon receipt of ‘Form-19’, LLP must apply, within 15 days of registration, to Registrar of Firms to strike-out name of Firm in prescribed ‘Form-14’ [R. 33 & 38 (3)] For ‘Conversion of Firm to LLP’, the relevant Rule 38 is notified vide Notification no. S.O. 1324(E) dated May 22nd, 2009 w.e.f May 31st, 2009 CA. Kamlesh Vikamsey
  33. 33. Conversion of Companies to LLP (Ch. X) This part is governed by Section 56 (for private companies) & Section 57 (for unlisted public companies) •Governed by Third Schedule in respect of Private Companies •Governed by Fourth Schedule in respect of Unlisted Public Companies •Company can be converted into LLP provided-  All partners of LLP must be shareholders of that company & no one else  There is no security interest in its assets •Upon conversion, all assets & liabilities get vested in LLP and principally all other provisions are similar as that for firms •Listed Public Company cannot be converted into LLP •Application for conversion to be made to ROC in prescribed ‘Form-18 (Part A)’ alongwith Statement of Shareholders in ‘Form-18 (Part B)’ [R. 39(1) & 40(1)] •Same procedures as regards conversion of Firms Above referred Sections & Relevant Schedules are notified vide notification no. S.O. 1323 (E) w.e.f May 31st, 2009 For ‘Conversion of Companies to LLP’, the relevant Rules 39 & 40 are notified vide Notification no. S.O. 1324(E) dated May 22nd, 2009 w.e.f May 31st, 2009 CA. Kamlesh Vikamsey
  34. 34. Foreign LLPs (Ch. XI) • Foreign Limited Liability Partnerships [S. 59]  LLP Act gives power to CG to make rules for establishment of place of business of Foreign LLPs & conduct of business  Rules regarding setting up of Foreign LLPs in India is provided in Chapter XI of LLP Rules, 2009 • R. 18 (3) provides that Foreign LLPs may reserve name by which they are known in their country by application in ‘Form-25’  This reservation will be valid for 3 years & must be renewed • R. 34 (1) provides for application to be filed with ROC alongwith prescribed documents in prescribed ‘Form-27’ within 30 days from establishment of business in India • Every Foreign LLP must file Statement of Accounts & Solvency in ‘Form-8’ within 30 days from end of 6 months of FY [R. 34 (4)] CA. Kamlesh Vikamsey
  35. 35. Compromise, Arrangement or Reconstruction of LLPs (Ch. XII) • Compromise or Arrangement of LLPs [S. 60] • Power of Tribunal to enforce Compromise or Arrangement [S. 61] • Provisions for Reconstruction or Amalgamation of LLPs [S. 62] CA. Kamlesh Vikamsey
  36. 36. Winding Up and Dissolution (Ch. XIII) This Chapter has not been notified as yet • Winding Up and Dissolution [S. 63] • Circumstances of Winding Up [S. 64] • Rules relating therein [S. 65] CA. Kamlesh Vikamsey
  37. 37. Miscellaneous (Ch. XIV) • Transactions of Partner with LLP [S. 66]  Partner who transacts or lends money to LLP has same rights &obligations as a person who is not partner • Application of provisions of Companies Act [S. 67 & Q. 55 of FAQs] • E-Filing of Documents [S. 68] • Payment of Additional Fee [S. 69] • Enhanced Punishment [S. 70] • Application of Other Laws not barred [S. 71] • Jurisdiction of Tribunal & Appellate Tribunal [S. 72] • Offences & Penalties [Ss. 73, 74 & 76] • Powers of Registrar to Strike-off names of Defunct LLPs [S. 75 & Q. 53 of FAQs] • Jurisdiction of Courts [S. 77] • Miscellaneous Powers to make Rules, amend Schedules & remove difficulties [Ss. 78, 79 & 80] • Transitional Provisions [S. 81] CA. Kamlesh Vikamsey
  38. 38. Some Issues • Companies can apply for conversion only if there is no Security Interest on its assets • Why introduce a restrictive clause in case of Companies? CA. Kamlesh Vikamsey
  39. 39. Some Issues • According to S. 71, provisions of LLP Act will not be in derogation to provisions of other Acts • The question which arises is as to whether CAs are allowed to form LLPs or convert their firms into LLPs? • As per Chartered Accountants Act & Regulations, at various places, the words ‘partnership’ & ‘firm’ are used without assigning any particular meaning to it • Will a LLP meet the requirements of CA Act & Regulations? • This would require amendments to certain Acts which are relevant to professional services [Q. 56 of FAQs] CA. Kamlesh Vikamsey
  40. 40. Some Issues • If firm of CAs convert into LLP, what will be auditee’s stand? • Does conversion amount to ‘Casual Vacancy’ as per Companies Act? • Would another resolution be required to appoint an LLP as auditors? • As per Clause 14 of Second Schedule, appointment of firm in any role or capacity shall operate as if LLP was appointed  Effect of such Clause? • Some clarifications / amendments are required in the Companies Act CA. Kamlesh Vikamsey
  41. 41. Some Issues • S. 36 of LLP Act provides for inspection of all documents including Statement of Accounts & Solvency filed by LLP with ROC, by any person • Question arises as to whether this is acceptable to Professional Firms like lawyers, CAs, CWAs, etc? CA. Kamlesh Vikamsey
  42. 42. Some Issues • The LLP Act has incorporated procedures for conversion of companies to LLP by way of Third & Fourth Schedules • However, there is no procedure for LLPs to be converted to companies • Amendments required to be made in this regard in Companies Act [Q. 46 of FAQs] CA. Kamlesh Vikamsey
  43. 43. Some Issues • As per Clause 5 of Second Schedule, LLP, upon receipt of ‘Form-19’ from ROC must submit an application to concerned Registrar of Firms in prescribed ‘Form-14’ for striking-out name of Firm from its Records • Is this required in case of Unregistered Firms? CA. Kamlesh Vikamsey
  44. 44. Some Issues • Tax treatment not specified in Finance Bill, 2009 • It is expected to be specified in next Finance Bill which the New Government will introduce in the Parliament • Till then tax treatment is not known, i.e,-  Whether it will be taxed like a firm or pass through structure in the hands of partners?  Will remuneration paid to partners / interest on capital be allowed as a deduction in the hands of LLP?  For Conversion of firm or Company to LLP?  On amalgamation of LLPs? CA. Kamlesh Vikamsey
  45. 45. Some Issues • Whether Stamp Duty is payable on Incorporation of LLPs? • If so, how much? • Whether Companies & Firms will be exempt from Stamp Duties upon conversion to LLPs? • It must be noted that Stamp Duties are legislations of respective States & therefore clarity is needed from them [Q. 47 of FAQs] CA. Kamlesh Vikamsey
  46. 46. Comparison with Companies Basis Company LLP Governing Law Companies Act, 1956 Limited Liability Partnership Act, 2008 Name Must contain suffix ‘Ltd’ or ‘Pvt Must contain suffix ‘LLP’ Ltd’ Common Seal Common Seal is compulsory Common Seal is optional Organizational Rigid & governed by Companies Flexible & governed by LLP Structure Act Agreement Appointment of Specific Resolution required for Auditors shall be deemed to be re- Auditors appointment of auditors at every appointed in case no specific AGM appointment is made (unless otherwise decided) Audit All companies are subject to audit Only LLPs having turnover of more of accounts than Rs. 40 Lacs or contribution of more than Rs. 25 Lacs are subject to audit of accounts CA. Kamlesh Vikamsey
  47. 47. Comparison with Partnership Firms Basis Partnership Firms LLP Governing Law Partnership Act, 1932 Limited Liability Partnership Act, 2008 Registration Not Compulsory; but is preferred Compulsory Creation By partnership Agreement By Law Legal Status Partners collectively known as LLP has separate legal status apart ‘Firm’; no separate legal status from partners Succession Firm would cease to exist on LLP would not be affected on change change in partnership, unless in partnership (Perpetual otherwise provided in agreement Succession) Ownership of Partnership cannot own assets in LLP can own assets in its own name Assets its name; assets must be in name of Partners Liability of Unlimited Limited Partners Minor’s Position Minor can be admitted to benefits Law silent on position of Minors of Partnership CA. Kamlesh Vikamsey
  48. 48. Tax Proposals in the Finance Bill (No. 2), 2009 • Tax treatment of LLPs to be same as that of ‘Partnership Firms’ • S. 2 (23) of Income Tax Act, 1961 (IT Act) to include ‘LLP’ & its ‘Partners’ • Partner’s share of profit will be exempt [S.10 (2A) of IT Act] • Partner’s remuneration will be subject to newly proposed limits- Slab of Book Profit Remuneration Allowable On first Rs. 3 lacs or in case of loss Rs. 1.5 lacs or 90% of book profits, whichever is higher On balance of book profit 60% of book profits • DPs must verify & sign on Income Tax Returns. In absence of DPs, any partner must sign & verify [S. 140 of IT Act] • In case LLP is wound up, every partner will be liable for payment of taxes due unless he can prove that non-recovery cannot be attributed to his acts [S. 167C of IT Act] • Capital Gains not to be attracted if mutual rights & obligations of partners remain same & if there is no transfer of Asset / Liability after conversion. Otherwise, ‘Capital Gains’ provisions will be attracted CA. Kamlesh Vikamsey
  49. 49. In case of any difficulty… Office of the Registrar Limited Liability Partnerships Ministry of Corporate Affairs, 3rd Floor, “Paryavaran Bhawan”, CGO Complex, Lodhi Road, New Delhi (India)- 110003 Phone - +91-11-24362189 , CA. Kamlesh Vikamsey
  50. 50. Thank you… CA. Kamlesh Vikamsey