LLP

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

    1. 2. CA. Kalyan Chakravarthy Vennety Presentation on LIMITED LIABILITY PARTNERSHIP 3 rd January, 2009 Source: Article published in ICAI Journal Dec ’08 issue
    2. 3. Journey so far…
    3. 4. Reasons for change…
    4. 5. Formation… Ltd. Co. LLP Non- Resident Foreign Ltd.co Foreign LLP HUF Karta Co-operative Society Corporation Sole
    5. 6. Dis-Qualifications… <ul><li>A Person with Unsound Mind </li></ul><ul><li>An Undischarged Insolvent </li></ul><ul><li>Person who has Applied to be adjudged as Undischarged Insolvent & application pending </li></ul><ul><li>Minor : No mention in Act. Answer = General Law. </li></ul><ul><li>(A Minor can be admitted to the benefits of Partnership) </li></ul>
    6. 7. Registration… <ul><li>ROC </li></ul><ul><li>File Incorporation Document with ROC office of the state </li></ul><ul><li>Form & Prescribed Particulars (Name, address etc.) </li></ul><ul><li>Inc-Doc to be signed by 2 or more Partners </li></ul><ul><li>File with a Compliance Statement signed by : </li></ul><ul><ul><li>Advocate or CA or CS or CWA engaged in formation, </li></ul></ul><ul><ul><li>One of the Partners who has signed the Inc-Doc </li></ul></ul><ul><li>Compliance Statement should state whether LLP Act, Rules complied with or not. </li></ul><ul><li>Fees </li></ul><ul><li>Registrar Reg’n Certificate issued within 14 days </li></ul>
    7. 8. Status of Existence…
    8. 9. Changes during Existence… <ul><li>Possible to change Name, Regd.Office, Partners via Supplementary Agreement & ROC Filing </li></ul><ul><li>Procedure for change in Name: </li></ul><ul><li>1. Apply to ROC with Fees </li></ul><ul><li>2. ROC ensures name not identical or near resemblance </li></ul><ul><li>3. No Central Database of Partnership Firm names </li></ul><ul><li> (reason being Administration is done by States) </li></ul><ul><li>4. Other entity with similar name can object to ROC </li></ul><ul><li>5. Time Limit=within 24months − ROC satisfied − Direct to LLP to change it’s name after opportunity of Hearing </li></ul>
    9. 10. 20 Partners Condition…
    10. 11. Relationship of Partners… <ul><li>Agreement in Writing </li></ul><ul><li>Determine Rights & Duties in respect to LLP </li></ul><ul><li>Who can sign Agreement? </li></ul><ul><li>ROC Filing of Agreement with Fees </li></ul><ul><li>ROC Filing of Details of Changes if any later in Agreement </li></ul><ul><li>Agreement exists before Reg’n of LLP? </li></ul><ul><li>Change in name & address of Partners </li></ul>
    11. 12. SCHEDULE I of LLP Act… <ul><li>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. </li></ul><ul><li>All Partners entitled to share </li></ul><ul><li>LLP to indemnify each Partner in respect of payments & liabilities </li></ul><ul><li>Every Partner to indemnify LLP for Losses caused by his fraud in conduct </li></ul><ul><li>Every Partner to take part in management of the LLP </li></ul><ul><li>No Partner shall be entitled to Remuneration for acting in business/mgt. </li></ul><ul><li>No person to be introduced as a Partner without consent of all Partners </li></ul><ul><li>Any Matter/issue Resolve by Majority One Vote Each </li></ul><ul><li>(For change of business Unanimous Majority) </li></ul><ul><li>Record Decisions 30days Minute Book Keep at Regd.Office </li></ul><ul><li>Each Partner render True Accounts, Full info about things affecting LLP, other partners or his Legal Representatives. </li></ul>
    12. 13. SCHEDULE I of LLP Act contd… <ul><li>If Partner carries on without consent of LLP, any business in the same nature of & competing with LLP, </li></ul><ul><li>Partner </li></ul><ul><li>Every Partner shall account to the LLP for any benefit derived by him without consent of LLP from </li></ul><ul><li>No Partner can expel any Partner Unless Power conferred by express Agreement </li></ul><ul><li>Unresolved Disputes Arbitration and Conciliation Act, 1996 </li></ul>
    13. 14. Joining, Retirement, Cessation… <ul><li>A person may join as Partner if all Partners agree to admit </li></ul><ul><li>Cessation on Death, Retirement, W/up of Co., or LLP which he is representing </li></ul><ul><li>If a Partner declared </li></ul><ul><li>Execute Fresh Agreement Record new Terms & Conditions of Revised Constitution </li></ul><ul><li>Intimate ROC 30days </li></ul>
    14. 15. Payments to Partners… <ul><li>Agreement May provide for Interest on capital, Rem’n. </li></ul><ul><li>It Will have to provide share of each in Profits/Losses </li></ul><ul><li>These conditions can be changed via amendment to Agreement </li></ul><ul><li>Rights of the Partner to Share of Profits/Losses is Transferable in whole or part. </li></ul><ul><li>Implications of Transfer: </li></ul><ul><ul><li>Does not cease to be Partner </li></ul></ul><ul><ul><li>Does Not Entitle the Transferee to participate in management or conduct of activities of LLP </li></ul></ul><ul><ul><li>Does Not Entitle the transferee any RTI on Tr’ns of LLP </li></ul></ul>
    15. 16. Limited Liability… <ul><li>Partner not Personally Liable LLP </li></ul><ul><li>If Liability arises out of own </li></ul><ul><li>If Liability arises out of one Partner’s </li></ul>
    16. 17. Agency & Contribution… <ul><li>Partner is Agent of LLP but not of other Partners </li></ul><ul><li>LLP not bound by anything done by Partner with 3 rd Party </li></ul><ul><ul><li>If the Partner is not Authorised to act & </li></ul></ul><ul><ul><li>The 3 rd Party is aware of this fact </li></ul></ul><ul><li>LLP is liable to meet during the course of business, Trade, profession or service </li></ul><ul><li>Contribution As per Agreement </li></ul><ul><li>Liability To the Extent specified in Agreement </li></ul>
    17. 18. DESIGNATED PARTNERS… <ul><li>At Least 2 Individuals </li></ul><ul><li>Appointment governed by Agreement </li></ul><ul><li>Vacancy due to Death, Retirement or otherwise </li></ul><ul><li>Appoint Another Designated Partner 30 days </li></ul><ul><li>ROC Filing Particulars, changes etc. </li></ul><ul><li>Consent: DP LLP in 30 days ROC in 30 days </li></ul>
    18. 19. Obligations of Designated Partner… <ul><li>Responsible for compliance of LLP Act & Rules </li></ul><ul><li>Liable for all penalties of Contravention of LLP Act & Rules </li></ul><ul><li>Every DP to sign Annual Fin.Stmts, Annual Solvency Stmt </li></ul><ul><li>Every DP obtain DPIN like DIN in case of companies </li></ul><ul><li>In case of </li></ul>
    19. 20. Accounts & Audit… <ul><li>Maintain books as prescribed </li></ul><ul><li>Cash/Accrual </li></ul><ul><li>Prepare </li></ul><ul><li>Signed by the Designated Partners </li></ul><ul><li>Audit as per Rules framed under the LLP Act </li></ul><ul><li>Exemption Central Government has power </li></ul><ul><li>ROC Filing of Statement in prescribed Form, Time, Fees </li></ul><ul><li>ROC Filing of Annual Return 60 Days from end of FY </li></ul>
    20. 21. Conversion of Firm to LLP… <ul><li>Procedure laid down in SCHEDULE II </li></ul><ul><ul><li>If & Only if All Partners of LLP = All Partners of Firm </li></ul></ul><ul><ul><li>Apply to ROC </li></ul></ul><ul><li>ROC Filing </li></ul><ul><ul><li>Statement by all Partners containing Name & Reg’n no and Date of Reg’n </li></ul></ul><ul><ul><li>Inc-Doc along with Compliance Statement </li></ul></ul><ul><li>ROC </li></ul>
    21. 22. Conversion of Firm to LLP… <ul><li>On Certificate of Registration </li></ul><ul><ul><li>LLP comes into existence </li></ul></ul><ul><ul><li>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 </li></ul></ul><ul><ul><li>Firm deemed to be dissolved. Removed from Register </li></ul></ul><ul><ul><li>Inform ROC within 15 days </li></ul></ul><ul><li>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 </li></ul>
    22. 23. Conversion of Firm to LLP… <ul><li>Pending Proceedings of Firm in Court/Tribunal etc. to be continued, completed or enforced by/against LLP </li></ul><ul><li>Conviction/Ruling/Order/ Judgement of Firm by any Court/Tribunal etc. to be ruled in favour or against LLP </li></ul><ul><li>Every Agreement which Firm was party shall have effect as if </li></ul><ul><ul><li>LLP was party instead of Firm </li></ul></ul><ul><ul><li>Reference to Firm would mean Reference to LLP </li></ul></ul><ul><li>All </li></ul>
    23. 24. Conversion of Firm to LLP… <ul><li>Any Contract of Employment continue in force as if LLP was Employer instead of Firm </li></ul><ul><li>Any appointment in any role/capacity take effect & operate as if LLP was appointed </li></ul><ul><li>Any Authority/Power continue as if LLP was conferred with </li></ul><ul><li>Any Approval/License/Permit continue in name of LLP(subject to relevant Law) </li></ul><ul><li>Every Partner of Firm continue to be Jointly & Personally Liable for prior liabilities & obligations </li></ul><ul><li>In case of discharge of above liabilities by any Partner, he shall be entitled to be fully indemnified by LLP </li></ul>
    24. 25. Conversion of Firm to LLP… <ul><li>Every official correspondence for a period of 12 months by LLP shall bear: </li></ul><ul><ul><li>A statement that it was w.e.f. the date of Reg’n converted from a Firm to LLP </li></ul></ul><ul><ul><li>Name & Registration no. of erstwhile Firm </li></ul></ul>
    25. 26. Conversion of Company to LLP… <ul><li>Pvt. Ltd. Co. Section 56 & Third SCH of LLP Act </li></ul><ul><li>Public Ltd. Co. Section 57 & Fourth SCH of LLP Act </li></ul><ul><li>Procedure is more or less identical to conversion of Firm to LLP </li></ul><ul><li>One Extra condition: </li></ul>
    26. 27. Conversion of Co. to LLP… <ul><li>What happens to Share Capital? </li></ul><ul><li>View= Credit to capital accounts in the ratio of shareholding (both Equity & Preference capital) </li></ul><ul><li>General & other Reserves: </li></ul><ul><li>After conversion, Firm & Co., need not follow Partnership Act & Companies Act respectively </li></ul>
    27. 28. Winding up… <ul><li>Voluntary or by NCLT </li></ul><ul><li>By NCLT if: </li></ul><ul><ul><li>LLP decides that it be wound up by the Tribunal </li></ul></ul><ul><ul><li>Min. no. of Partners remains < 2 for a period > 6 months </li></ul></ul><ul><ul><li>LLP unable to pay it’s debts </li></ul></ul><ul><ul><li>LLP acted against interest of Sovereignty, Integrity of India or Security of the state or Public Order </li></ul></ul><ul><ul><li>Default in ROC Filing: Stmt of A/c, Stmt of Solvency, Annual Return for 5 consecutive FYs </li></ul></ul><ul><ul><li>Tribunal Opines that it is Just & Equitable for LLP to be wound up </li></ul></ul>
    28. 29. Procedural Points… <ul><li>ROC can inspect Documents </li></ul><ul><li>ROC can call for information </li></ul><ul><li>ROC can conduct Investigation </li></ul><ul><li>Central Government make rules for Foreign LLP </li></ul><ul><li>Central Government notify Companies Act Applicability </li></ul><ul><li>Central Government make rules for E-Filing </li></ul><ul><li>Fine for Delay in Filing of Documents, Statements, Annual Returns Rs.100 per day </li></ul><ul><li>Reference to Tribunal: Companies Act provisions Apply </li></ul><ul><li>Fine for Default in Filing of Documents, Statements, Annual Returns Rs. 10,000 to Rs.50,000 </li></ul>
    29. 30. Procedural Points… <ul><li>ROC can strike off name of LLP for not carrying on business as per Act </li></ul><ul><li>The Act provides for Prosecution of Partners and Designated Partners for offences commited </li></ul><ul><li>Central Government make Rules </li></ul><ul><li>Tribunal has powers sanction Compromise, Arrangements, Reconstruction incl. Merger & Demerger and Compromise with creditors </li></ul><ul><li>Central Government can alter the contents of Schedules </li></ul><ul><li>Till the time Tribunal/Appellate Tribunal is constituted, Tribunal = CLB and Appellate Tribunal = High Court </li></ul>
    30. 31. To Sum up… <ul><li>LLP enables small & medium org’ns & Family Partnerships to expand by admitting outsiders with capital & Skill </li></ul><ul><li>Financial Liability is Limited. Therefore there is no danger of Promoter Partner saddled with Personal Liability </li></ul><ul><li>No Danger of stoppage of business due to non-co-operative attitude of Partners </li></ul><ul><li>Advantage: In preference to companies, LLP has flexibility in operation. No need to comply complicated provisions of Companies Act </li></ul><ul><li>Any Outsider cannot attach personal property of Partners for Debts pertaining to LLP </li></ul>
    31. 32. To Sum up…
    32. 33. End of Presentation. <ul><li>Thank you… </li></ul>

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