LLP may soon have Reduced Additional Fee , MCA initiates process of De-criminalisation of compoundable offences under Limited Liability Act, 2008

With the object of unleashing the entrepreneurial spirits of our youth and to remove the fear of criminal prosecutions for non- substantive minor and procedural omissions and commissions in the normal course of their business transactions, the Government of India in the Ministry of Corporate Affairs (MCA) decided to initiate the process of decriminalization of compoundable offences under the limited liability partnership (LLP) Act, 2008, for greater ease of doing business for law abiding LLPs.

The Government treats Honest and Ethical Corporate entrepreneurs as wealth creators and nation builders. The objective of the De-criminalization exercise is to remove criminality of offences from business laws where no malafide intentions are involved. In furtherance of the said objective, an exercise was undertaken to identify those provisions of the Limited Liability Partnership Act, violations of which do not result in injury to public interest but are presently criminal in nature with fine as well as punishment after conviction being provided for in the Act.

Principles adopted for Decriminalization of Compoundable Offences:

  1. Principle 1Offences that relate to minor/ less serious compliance issues, involving predominantly objective determinations, are proposed to be shifted to the In-house Adjudication Mechanism (IAM) framework instead of being treated as criminal offences.
  1. Principle 2: Offences that are more appropriate to be dealt with under other laws, are proposed to be omitted from the LLP Act, 2008.
  1. Principle 3For non-Compoundable offences that are very serious violations entailing an element of fraud, intent to deceive and caused injury to public interest or non- compliance of order of statutory authorities impinging on effective regulation, Status Quo would be maintained.

In all, twelve (12) offences are proposed to be decriminalized and one (1) provision (Section 73) entailing criminal liability is proposed to be omitted. The 12 de-criminalized offences would then get shifted to IAM thereby de-clogging the criminal courts from routine cases.

In addition to the De-criminalization of the Act the Government also proposes Introduction of certain new concepts into the Act for greater Ease of Doing Business:

  1. Small LLP: It is proposed to create a class of LLP called as “Small LLP” in line with the concept of Small Companies. Such Small LLPs would be subject to lesser compliances, lesser fee or additional fee and lesser penalties in the event of default. Thus, lower cost of compliance would incentivize unincorporated micro and small partnerships to convert into the organized structure of an LLP and derive its benefits.
  1. Non-convertible Debentures (NCDs):  It is proposed to allow LLPs to raise capital through issue of fully secured Non-Convertible Debentures (NCDs) (as an alternative to equity participation) from investors who are regulated by SEBI or RBI. This will help deepen the Debt Market and enhance the capitalization of LLPs.

Reduction of Additional Fee: It is also proposed to amend Section 69 of the Act with a view to reduce the additional fee of Rs. 100 per day which is presently applicable for the delayed filing of forms, documents. A reduced additional fee is expected to incentivize smooth filing of records and returns of LLPs and consequently result in an updated registry for proper regulation and policy making.

Source: PIB


Things You Must Know About Limited Liability Partnership (LLP)

Limited Liability Partnership (LLP) being the new form of Business Structure in India,  Here are the things you should  know about LLP

  1. Separate Legal Entity and Body Corporate:   LLP has its own Name, Own Structure, Own Style, It is different from its partners, can sue or be sued in its name.
  2. Decision Makers: Minimum number of two Designated Partners are required all the time in LLP, who takes decisions in the day-to-day working of LLP, DP’s are responsible for compliance with statutory laws applicable to LLP.
  3. Capital Contribution: LLP can have any number of Partners, Partners contribute in the capital of the LLP and share profits and losses of LLP at an agreed ratio.
  4. Flexible: LLP structure is flexible in its nature, LLP agreement is its charter document, Business of LLP is run out in accordance with LLP agreement, partners agree to an agreement that how the business of LLP will be carried out.
  5. Easy Compliance: You Don’t need to give any disclosures, do not need to issue or allot shares, have an audit of account till certain limit, have statutory registers, have deadlines for meetings, take approvals for Change in name, registered office and much more.

  6. Less Tax: Distribution of Profits to partners attracts no taxes, if you distribute profits in a company it will attract Dividend Distribution Tax, Income arising to Partners as a profit shared is also exempt.
  7. Limited Liability: Liability of partners is limited to their agreed contribution, in bad times it saves you from your personal property.