LIMITED LIABILITY PARTNERSHIP 1 2 Prominent Drivers Bhat

LIMITED LIABILITY PARTNERSHIP 1

2. Prominent Drivers Ø Bhat Committee (1972), Naik Committee (1992) Ø Expert Committee on development of Small Sector Enterprises headed by Shri Abid Hussain (1997) Ø Study Group on development of Small Sector Enterprises headed by Dr. S. P. Gupta (2001) Contd. . 2

Contd. . Ø Committee on regulation of private companies and partnerships headed by Shri Naresh Chandra (2003) Ø Committee on new Company Law Dr. JJ Irani (2005) 3

3. History Based on the recommendations of Expert Committees, draft LLP Bill was formulated Ø Introduced in Rajya Sabha on 15 -122006 as LLP Bill 2006 Ø Referred to the Department Related Parliamentary Standing Committee on Finance for exmination and report Contd. . 4

Contd. . Ø Committee submitted its recommendations to the House of Parliament on 27 -11 -2007 Ø The Government redrafted and finalized LLP Bill 2008 and introduced revised LLP Bill 2008 in Rajya Sabha on 21 -10 -2008 Ø Bill was passed by Rajya Sabha on 24 -10 -2008 Contd. . 5

Contd. . Ø The Bill was passed by Lok Sabha on 12 -12 -2008 Ø The President gave consent to the Bill on 7 -1 -2009 Ø LLP Rules, 2009 was notified in the Gazette on 1 -4 -2009. All rules notified except, Rules 32, 33 and 38 to 40 relating to conversion of Firm/ Private company/ Unlisted public company 6

4. Pre-condition for registering LLP Object to do lawful business for profit ( no nonprofit organization can be registered under LLP ) Permissible name Minimum two partners LLP Agreement if not available – Schedule I to apply Contd. . 7

Contd. . Minimum two designated partners having DPIN and given consent Consent of all partners Submission of prescribed incorporation documents 8

5. Structure of LLP Act Chapter 1 -- Definition Ø Entity includes firm set up under Indian Partnership Act, 1932 Ø Financial Year stipulated from 1 st April to 31 st March except first Financial Year can be 18 months if incorporated after 30 th September 9

Chapter 2 -- Nature of LLP Ø Legal entity Ø Perpetual succession Ø Indian Partnership Act, 1932 shall not apply to LLP 10

Contd. . Ø Body Corporate may be partner in LLP Ø Disqualification for partners Ø Minimum two partners, no maximum number Ø Minimum two designated partners who are liable for compliance of the 11

Contd. . > In the absence of minimum required designated partner, every partner shall be designated partner 12

3. Incorporation and Incidental matters Ø Documents prescribed under LLP Rules to be filed Ø Declaration of compliance to be filed by Company Secretary/ Chartered Accountant/ Cost Accountant/ Advocate and by one of the subscribers Ø Incorporation document include all details like Objects, names of partners etc. 13

Contd. . Ø On compliance, ROC to register LLP within 14 days Ø LLP has privilege to give an address other than registered office for communication Ø Acronym LLP to be added to the name Ø Name registration as applicable to company and similar name to 14

Contd. . > LLP registered with undesirable name can be directed to change its name without any time limit, however, any interested party can apply to ROC for issue of direction within 24 months from the date of registration for change of name 15

Chapter 4 -- Partners and their relations The mutual rights and duties determined as per Partnership Agreement failing which Schedule I will apply Change to be intimated to ROC Any partner can resign in terms of LLP Agreement 16

Contd. . Cessation of partner does not exonerate past liability Resigned or ceased partner entitled for share of profits, return of capital contribution after deduction of accumulated losses Similar right available to the legal heir 17

Contd. . A ceased partner can directly intimate ROC, his cessation if he believes that LLP will not intimate ROC. In such cases, ROC shall obtain confirmation from LLP within 15 days and register thereof. 18

Chapter 5 -- Extent and Limitation of Liability of LLP and Partners Every partner liable to the agreed contribution LLP not bound by acts of any partner contrary to LLP Agreement Liability of LLP to be met out of property of LLP A wrongful credit to LLP on account of misrepresentation by partner is acccountable by LLP 19

Contd. . Act of fraud on the part of partner will make the liability unlimited 20

Chapter 6 -- Contribution can be either tangible or intangible Intangible contributions to be accountable in monetary value as per valuation of Chartered Accountant Contribution as per LLP 21

Chapter 7 -- Financial disclosures Appropriate books of accounts to be maintained on cash or accrual basis according to Double Entry System Within 6 months from the end of financial year, statement of account and solvency to be signed by designated partners only and filed with ROC LLP Accounts to be audited as per Rules ( small companies exempted 22

Contd. . Certification by Statutory Auditor “It is hereby certified that I have verified the particulars contained in the statement of account and insolvency including the statement of assets and liabilities as at _____ and the income and expenditure for the period ended ______ from the 23

Contd. . LLP to file Annual Return within 60 days of closure of Financial Year LLP documents are available for public inspection Any false statement in financial statements or other documents will attract two years 24

Contd. . ROC has power to call for information both from existing partners/ employees and past partners/ employees 25

Chapter 8 -- Assignment and transfer of partnership rights Economic rights are transferable such as share in profit, right to receive distribution Transfer of economic right itself does not result in cessation of partnership 26

Chapter 9 Investigation Central Government can appoint inspectors on directions of NCLT On directions of Court having jurisdiction on the company Based upon report of ROC 27

Contd. . Application to be made by partners having 1/5 th of the total partners Investigation of related entities Inspector has powers similar to that of Companies Act Provisions for recovery of damages from partners in respect of fraud, 28

Chapter 10 -Conversion into LLP A Partnership firm under the Indian Partnership Act, 1932, may be converted into LLP as per IInd Schedule (a) Properties, assets etc. vest in the LLP without further act, assurance or deed Ø A firm may be a registered one under the Indian Partnership Act, 1932 or may not be registered 29

Contd. . Ø If registered under the Indian Partnership Act, 1932, give intimation to Registrar of Firms/ ROC within 15 days after the date of registration Ø Registrar’s CLB/NCLT Ø All pending proceedings against the firm shall continue against LLP Ø All licenses, approvals granted partnership firm will continue with LLP refusal is appelable to to 30

Contd. . Ø If any partner of the erstwhile firm discharges any liability, he is liable to be fully indemnified in terms of LLP Agreement Ø LLP shall ensure for 12 months disclosing on letter head and documents that it was converted Ø All existing partners of the firm should also be partners of LLP 31

Contd. . (b) Private company can convert into LLP as per IIIrd Schedule Ø No subsisting security interest in assets at the time of application Ø All existing shareholders should also be partners of LLP Ø On incorporation as LLP, intimate to the concerned ROC within 15 days. The company shall be deemed to be dissolved from the records of ROC on the date of registration of LLP 32

Contd. . Ø All tangible and intangible assets will vest in LLP without any act, assurance or deed Ø All proceedings, contracts, agreements, deeds in relation to erstwhile private company to continue with LLP Ø LLP shall ensure for a period of 12 months to disclose in all 33

Contd. . © An unlisted public company may convert into LLP as per Schedule IV Ø No subsisting security interest in any asset of public limited company Ø All shareholders of Unlisted Public Limited company continue as partners Ø The concerned ROC to be informed within 15 days about the conversion Contd. . 34

Contd. . Ø The Unlisted Public Limited company shall stand dissolved on the date of registration of LLP Ø All tangible and intangible assets will be vested in LLP Ø All proceedings, contracts etc. of the erstwhile Unlisted Public Limited company shall continue with LLP including approvals, licenses etc. 35

Contd. . > The LLP shall ensure for a period of 12 months from the date of registration to disclose the intimation of erstwhile Unlisted Public Limited Company in all correspondence etc. 36

Chapter 11 -- Foreign LLP Same as in the Companies Act, 1956 37

Chapter 12 - Compromise, Arrangement and Reconstruction of LLP Similar to Companies Act, 1956 38

Chapter 13 -- Winding up and Dissolution Similar to Companies Act, 1956 Separate Rules will be framed for dissolution of LLP 39

Chapter 14 -Miscellaneous A partner can have transaction with LLP and no restriction regarding Related Party transactions Central Government can give special exemptions to LLP Information Technology Act incorporated in LLP -- digitally signed documents and 40

Contd. . Any document can be filed up to a period of 300 days delay with prescribed additional fee -- after 300 days liable for prosecution in addition to additional fee Until constitution of NCLT, CLB shall exercise powers except relating to winding up, compromises and arrangement etc. which shall be exercised by High Court 41

Contd. . Partner other than designated partner also liable if connivance is proved or negligence established A Metropolitan Magistrate, Judicial/ Ist Class Magistrate have jurisdiction regarding LLP Litigation 42

LLP Rules DPIN to be obtained for each designated partner. -- Provisional DIN valid for 60 days The fee payable to ROC can be paid by cash or directly into Public Account of India maintained by RBI or any authorized bank Provided -- where the e-forms are filed electronically, payment of fees shall be through credit card or 43

Contd. . Following persons are not eligible for terming as designated partners : (i) Undischarged Insolvent (ii) Adjudged insolvent at any time within preceding 5 years (iii) Suspended payment to creditors within preceding 5 years (iv) Is or has been affected by the Court of Law in any business involving moral turpitude and sentenced to imprisonment for not 44

Contd. . Document can be served on LLP or Partner either electronically or through courier LLP can give an address other than registered office for communication/ service of documents LLP can shift its registered office from one place to another as per partnership agreement, in the absence of any such agreement – 45

Contd. . If the shifting of registered office is from one State to another, not less than one month before filing any notice with ROC, LLP to publish general notice in English and Vernacular language in the District in which the registered office is situated The guidelines similar to those stated u/s 20 of the Companies Act, 1956 have been incorporated in LLP Rules for availability of name with the addition that there should not be 46

Contd. . If the proposed name includes Company Secretary, Chartered Accountant or Advocate or any other profession, NOC from the Council governing the Institute or such authority should be submitted. Foreign LLP can reserve its name in India for 3 years and may also renew 47

Contd. In other circumstances, the availed name will be reserved for 3 months from the date of availability of name Aggrieved entity can apply ROC for issue of direction the existing LLP to change name with the details grounds to to its of 48

Contd. . LLP can change its name as per terms of partnership agreement, failing which, consent of all partners is required Contribution of a partner can be tangible, cash, movable or immovable or intangible property in which case, valuation shall be done by practicing Chartered Accountant or practicing Cost Accountant or approved valuer -Intangible assets can be quantified in monitory 49

Contd. . LLP to maintain books of accounts to disclose true and correct state of affairs of LLP Statement of Account and Solvency to be signed by designated partners Books of accounts to be 50

Contd. . Statement of Account and Solvency to be filed within 30 days from the end of 6 months of the Financial Year Accounts to be audited by Chartered Accountant. Statutory Audit not required if the turnover does not exceed Rs. 40 lakhs or Contribution does not exceed Rs. 25 lakhs 51

Contd. . Exempted LLPs accounts should be certified by the designated partners Auditors of LLP to be appointed by designated partners within 30 days before the end of Financial Year Auditor to be appointed by partners on failure of 52

Contd. . Remuneration of auditor will be determined by persons appointing auditor Auditor can resign by submitting his resignation along with reasons – if no reasons, the same should be stated The auditor can be removed in terms of partnership agreement -- If silent, with the consent of all the partners 53

Contd. . LLP to file Annual Return duly certified by practicing Company Secretary Every e-form filed by LLP with prescribed fees through the website maintained by MCA ROC to issue certificate electronically unless ROC is unable to issue, physical 54

Contd. . ROC to process e-forms within 120 days of filing Defects pointed out to be rectified within 30 days by LLP If defects not rectified within the stipulated time, e-form will be treated as “Invalid and Not taken on Record” 55

Contd. . The process of examining and registering of e-forms to be done within 120 days Striking off of name of defunct company -- If a company is not carrying on business or in operation for more than one year, the name can be struck off -- however, an opportunity will be given to LLP before 56

Contd. . LLPs covered by special legislation, NOC required from RBI/ such authority Notice of strike off will be placed in the MCA website On expiry of period, LLP will be struck off by a notification in the Official Gazette 57

Contd. . Liability of every designated partner shall continue as if LLP was not dissolved Any person aggrieved by the decision of ROC can appeal to CLB before the expiry of 5 years from the date of publication in the Official Gazette 58

E-forms Form 1 Availability of name with declaration attached digitally signed by applicant Form 2 Form of Incorporation Document 59

Contd. . Form 3 Intimation with regard to Agreement and Changes if any LLP Form 4 Notice of appointment of partner, designated partner and changes among them to be filed by LLP with ROC 60

Contd. . Form 5 Notice of Change of Name Form 6 Intimation of change in partner/ partners to LLP by partner -accompanied by declaration 61

Contd. . Form 7 Application for allotment of DPIN accompanied by declaration Form 8 Filing of statement of accounts and solvency -accompanied by declaration of solvency -- statement of assets and liabilities duly signed by designated partners -- Addendum – intimating charge particulars 62

Contd. . Form 9 Consent to act as designated partner accompanied by declaration Form 10 Intimation of change in particulars of designated partners accompanied by declaration 63

Contd. . Form 11 Form 12 Annual Return of LLP signed by designated partner with verification and certified by practicing Company Secretary --If total turnover exceeds Rs. 5 crore or contribution exceeds Rs. 50 lakhs Intimating address other than registered office for service of documents -- certified by designated partners 64

Contd. . Form 13 Notice of resignation sent to other partners Form 14 Intimation to the Registrar of Firms/ ROC of conversion into LLP 65

Contd. . Form 15 Notice of change of place of registered office accompanied by certificate of designated partner and certified by practicing company secretary Form 16 Certificate of Incorporation 66

Contd. . Form 17 Application by Firm for conversion into LLP -- attachment containing consent of partners -- NOC from Tax Authorities -Consent of all creditors -- approval from any authority accompanied by declaration of designated partner and certificate of practicing Company Secretary Form 18 Application by private company/ unlisted public company for conversion to LLP accompanied by attachments like NOC from Tax Authorities -- consent of all 67

Contd. . Form 19 Certificate of registration on conversion Form 20 Summons for directions to convene meeting approving scheme of arrangement/ amalgamation 68

Contd. . Form 21 Affidavit in support of summons Form 22 Notice of intimation of order of Court/ CLB 69

Contd. . Form 23 Application for direction for change of name of LLP Form 24 Application to ROC for striking off name 70

Contd. . Form 25 Application for reservation/ renewal of name by Foreign LLP/ Foreign company Form 26 Form of Proxy 71

Contd. . Form 27 Form for registration of particulars by Foreign LLP Form 28 Notice of Change in constitution/ registered office, partners details by Foreign LLP 72

Form 29 Alteration in the Certificate of Incorporation of Foreign LLP – alteration in the place of Foreign LLP 73

Form 30 Certificate for establishment of place of business in India by Foreign LLP Form 31 Application for compounding of offences under the Act 74