Limited Liability Partnership Act 2008

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This is a presentation made by me at Kannur CPE Chapter on 29th May 2009

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Limited Liability Partnership Act 2008

  1. 1. LIMITED LIABILITY PARTNERSHIP ACT 2008 & RULES 2009 Priya Bhansali KUMBHAT & Co., Chartered Accountants www.bhansali.in
  2. 2. Agenda  Genesis  Salient Features  Comparison between Partnership/LLP/Private Limited Co.  Chapters under LLP Act  Rules  LLP in Other Countries  Certain Issues KUMBHAT & CO.,
  3. 3. GENESIS OF LLP  LLP – 1991 in Texas – Loan and savings failures  Uniform Partnership Act 1996 - USA  LLP Act 2000 – UK  Abid Hussain Committee -1997  Naresh Chandra Committee – 2003  JJ Irani Expert Committee – 2005  Naresh Chandra 2nd Committee – July 2005 KUMBHAT & CO.,
  4. 4. Concept Paper  Role of service sector  Limitation of Multi-disciplinary partnership  Limitation of no. of Partners  Litigation – joint liabilities in case of partnership  Hybrid between a Company and Partnership  Profession as well as SME KUMBHAT & CO.,
  5. 5. What is LLP  LLP – separate legal entity with unlimited capacity to do anything a natural person can do – UK  Partnership formed under LLP Act 2008 KUMBHAT & CO.,
  6. 6. Salient Features  LLP for all kinds of business  Limited Liability  Simple when compared to a Company  Minimum Partners 2 ; no limit for maximum  Legal Entity – Artificial Juridical Person  Members & Mutual Rights  Designated Partners  Unlimited Capacity – no main objects  Conversion KUMBHAT & CO.,
  7. 7. Salient Features  Cannot be listed  Incorporation Document  Flexibility on internal structure – No BOD etc  Mergers  Winding up KUMBHAT & CO.,
  8. 8. Formation of LLP  Similar to that of formation of Company  Acquire – DSC and DPIN  Register DSC and DPIN with LLP  Check name availability  Download Forms  File Electronically  Track Status  Receive Certificate  Start Business KUMBHAT & CO.,
  9. 9. Advantages  Limited Liability  Members cannot be responsible for the act of any other member – inter se agreement between members  No Maximum No. of Partners  Easier Operations – Perpetual  Compliances – Succession  No BOD, meetings/minutes  Remuneration KUMBHAT & CO.,
  10. 10. Disadvantages  Compliance – Annual Filings, Solvency, Duplication  One person LLP concept absent  Limitation of 2 member LLP – result in closure  Documents available for public scrutiny  Penalty for non compliance  Silent about Taxation KUMBHAT & CO.,
  11. 11. Regulatory Frame Work  Legal  Administration  Taxation KUMBHAT & CO.,
  12. 12. Regulatory Framework  Legal –  Administration LLP Act 2008 - MCA - Companies Act 1956 - ROC - IT Act 2000 - Tribunal - Indian Partnership Act 1932 - Official Liquidator - General Clauses Act 1897 - SEBI Act 1972 - CPC 1908 - Other Acts - Professionals - Advocate Act 1961 - CA Act 1949 - CS Act 1980 - CWA Act 1959 KUMBHAT & CO.,
  13. 13. Comparison  Applicable Law  Liability  Perpetual Existence  Separate Legal Entity  Minimum Number  Maximum Members  Documents defining activities KUMBHAT & CO.,
  14. 14. Comparison  Document providing procedure  Management  Compliance/Accounts/Audit  Minimum No. of Directors  Transferability of shares  Conversion  Common Seal  Change of Regd Office  Change of Name KUMBHAT & CO.,
  15. 15. Comparison  Oppression & Mis-management  Annual Filing  E –filing KUMBHAT & CO.,
  16. 16. Chapters under the Act  Preliminary  Nature of LLP  Incorporation of LLP and matters incidental thereto  Partners and their relations  Extent & Limitation of LLP and partners  Contributions  Financial Disclosures KUMBHAT & CO.,
  17. 17. Chapters  Assignment & Transfer of partnership rights  Investigation  Conversion to LLP  Foreign LLP  Compromise, arrangement or reconstruction  Winding up and dissolution  Miscellaneous KUMBHAT & CO.,
  18. 18. Schedules  First Schedule - matters relating to mutual rights and duties -like Table A  Second Schedule – Conversion of firm into LLP  Third Schedule – Conversion of Private Ltd Co into LLP  Fourth Schedule – Conversion of Unlisted Public Co. into LLP KUMBHAT & CO.,
  19. 19. LLP Rules  LLP Rules 2009 is notified, additions as and when need arises  18 chapters, 41 Rules, 4 Annexures, 30 forms  Covers all the sections – Definitions to Winding up, Compounding , Destruction of old records etc  Concept LLP (Winding up and Dissolutions) Rules 200… KUMBHAT & CO.,
  20. 20. Designated Partner  To be specified in Agreement  One must be a Resident of India  Responsible for all compliance  Body corporate KUMBHAT & CO.,
  21. 21. Audit and Accounts  Proper Books of Accounts  Cash or accrual basis  Statement of Account and Solvency  Audit – Not compulsory unless Turnover is > Rs.40 lacs or Contribution > Rs.25.00 lacs, conditions of R 24  Appointment by DP, 30 days before closure of FY  Financial year defined as April - March  Penalty – LLP – Rs.25K – Rs.5.00 lacs & DP – Rs.10K - Rs.1.00 lac KUMBHAT & CO.,
  22. 22. Accounts & Annual Returns  Statement of Account and Solvency Statement to be prepared within 6 m of end of FY and file Form 8 within 30 days of end of 6 m period  Authenticated by DP  Penalty for non- compliance – Rs.10K to Rs 1.00 lac for each DP and LLP – Rs.25K to Rs.5.00 lacs.  Annual Return duly authenticated KUMBHAT & CO.,
  23. 23. Auditors  Section 34(4) & Rule 24(8) to 24 (19)  Authority - Designated Partners – other partners ?  When the appointment to be made – 30 days before the end of each Financial year  Term of appointment – till the next period  Audit exempted – if turnover < Rs.40 lacs or contribution does < Rs. 25 lacs KUMBHAT & CO.,
  24. 24. Auditors (contd.)  Re-appointment  Remuneration  Removal of an Auditor KUMBHAT & CO.,
  25. 25. Other Countries  USA  UK  Japan  Canada  China  Singapore KUMBHAT & CO.,
  26. 26. TAXATION  Expect to be cleared in the Budget of 2009 – Probable date is 31.7.09  LLP or members will be taxed  Capital Gains on sale of LLP assets  Receiving Share of accumulated profits?  Transfer of Shares KUMBHAT & CO.,
  27. 27. Taxation (contd.)  UK – Income taxed in hands of partners  UK – Capital Gains on transfer of assets of LLP is also taxed in the hands of partners as if they own the same  US - reported in individual returns of the partners  Japan – Each member is directly subject to tax  Singapore – Personally taxed, taxed as self employed  China – passed through and attributed to partners KUMBHAT & CO.,
  28. 28. Issues  Minors, HUF can they be partners?  Act is very small when compared to Co’s Act 1956 – but looks as if the Rules/Notifications will rule the Act –  General Names? Small Names ? Disclosure of Business in Name/ Objection KUMBHAT & CO.,
  29. 29. Foreign LLP  Section 59  Establishment of place of Business in India  Business activity carried on in India  Permission from RBI may be required under FEMA  FLLP has to file certain documents, Accounts and Solvency Statement in English  Notice of cessation  Certification and Authentication from Notary Public/Commissioner of Oaths in the Company it is incorporated KUMBHAT & CO.,
  30. 30. Lots to examine and explore !! www.llp.gov.in THANK YOU www.bhansali.in KUMBHAT & CO.,

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