Limited Liability Partnership (Amendment) Act, 2021

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Limited Liability Partnership (Amendment) Act, 2021

Recently, on 13th August 2021, the President approved the Limited Liability Partnership (Amendment) Bill, 2021. Accordingly, post receipt of the assent, the same became the Limited Liability Partnership (Amendment) Act, 2021. The key points of the same are highlighted in the present article.

Introduction of a new concept of ‘Small Limited Liability Partnership’-

A new clause (ta) is inserted under section 2 which defines the term ‘Small Limited Liability Partnership’. Accordingly, LLP will be termed as ‘Small Limited Liability Partnership’ if it satisfies all of the below criteria-

  1. The contribution of the LLP is up to INR 25 Lakhs or such higher prescribed amount (not exceeding INR 5 Crores),
  2. The turnover of the LLP is up to INR 40 Lakhs or such a higher prescribed amount (not exceeding INR 50 Crores) or the LLP meets other prescribed requirements and fulfils prescribed terms and conditions.

Meaning of ‘Resident of India’ vis-à-vis designated partner-

As per the amendment, now, the term Resident of India for designated partner means a person who has stayed in India for a period of not less than 20 days during the Financial Year (earlier it was 80 days during the immediately preceding one year).

Accordingly, the person who stays in India for 20 days during the Financial Year can now be appointed as a designated partner.

Change of name of LLP-

Provisions of section 17 are entirely substituted and section 18 is omitted. The gist of new section 17 is-

  • LLP is required to change the name within a period of 3 months from the date of issue of direction if its name is identical with/ resembles-
    • The name of any other LLP; or
    • A registered trademark.
  • Notice of the name change is to be filed with the Registrar within a period of 15 days.
  • Registrar will carry out the change in the certificate of incorporation of LLP.
  • LLP needs to change the name in the LLP agreement within 30 days of the change in the certificate of incorporation.

Compounding of offences-

Entire section 39 covering the provisions of compounding of offences is substituted. The gist of the new provisions is summarized hereunder-

  • The authorized Regional Director or any other officer (not below the rank of Regional Director) may compound any offence which is punishable with a fine only.
  • The procedure of compounding of offence-
    • An application for compounding of offences will first be made to the Registrar.
    • After commenting, the registrar will forward the application to the authorized Regional Director or any other officer.
    • The Regional Director can order any partner/ designated partner/ other employees of the LLP to file/ register specified return, account or other document or pay a specified fee/ additional fee.
    • Intimation for the offence compounded (before/ after the institution of any prosecution) shall be given to the Registrar within 7 days.
    • No prosecution will be instituted in respect of the offence which is compounded before the institution of the prosecution.
    • In case of compounding of offence after institution of any prosecution. The compounding is to be brought to the notice of the court by the Registrar.

Amendment in penalty provisions-

New penalty provisions are highlighted hereunder-

Section Particulars Penalty
Section 10(1) Contravention of provisions of section 7(1) · A penalty of INR 10,000 is payable by LLP and all the partners. However, in case of continuous contravention, the further penalty is payable at INR 100 for each day till the contravention continuous up to a maximum of INR 1 Lakhs for LLP and INR 50,000 for every partner of LLP
Section 10(2) Contravention of provisions of section 7(4) The penalty of INR 5,000 is payable by LLP and all the designated partners. However, in case of continuous contravention, a further penalty is payable at INR 100 for each day till the contravention continuous up to a maximum of INR 50,000 for LLP and INR 25,000 for every designated partner
Section 10(3) Contravention of provisions of section 7(5) or section 9 A penalty of INR 10,000 is payable by LLP and all the partners. However, in case of continuous contravention, the further penalty is payable at INR 100 for each day till the contravention continuous up to a maximum of INR 1 Lakhs for LLP and INR 50,000 for every partner.
Section 13(4) Contravention of provisions of section 13 A penalty of INR 500 per day payable by LLP and all the partners up to a maximum of INR 50,000 for LLP and every partner
Section 21(2) Contravention of provisions of section 21 The penalty of INR 10,000 payable by LLP.
Section 25(4) Contravention of provisions of section 25(2) A penalty of INR 10,000 is payable by LLP and every designated partner.
Section 25(5) Contravention of provisions of section 25(1) The penalty of INR 10,000 is payable by a specific partner who contravenes the provisions of section 25(1).
Section 34(5) Fails to comply with provisions of section 34(3) A penalty of INR 100 per day is payable by LLP and its designated partner up to a maximum of INR 1 Lakhs for LLP and INR 50,000 for every designated partner.
Section 34(6) Fails to comply with provisions of sections 34(1), 34(2) and 34(4)

· Penalty payable by LLP – Minimum INR 25,000 and Maximum INR 5 Lakhs; and

· Penalty payable by every designated partner – Minimum INR 10,000 and Maximum INR 1 Lakhs.

Section 60(4) Default in complying with the provisions of section 60(3) The penalty of INR 10,000 is payable by LLP and every designated partner. However, in case of continuous contravention, the further penalty is payable at INR 100 for each day till the contravention continuous up to a maximum of INR 1 Lakhs for LLP and INR 50,000 for every designated partner.
Section 62(4) Default in complying with the provisions of section 62(3) A penalty of INR 10,000 is payable by LLP and every designated partner. However, in case of continuous contravention, a further penalty is payable at INR 100 for each day till the contravention continuous up to a maximum of INR 1 Lakhs for LLP and INR 50,000 for every designated partner.
Section 74 General penalty The penalty of INR 5,000 is payable by LLP or defaulting partner/ designated partner/ any other person. In case of continuous contravention, a further penalty of INR 100 per day is payable up to a maximum of INR 1 Lakhs.

Other provisions-

  1. Section 67A, Section 67B and Section 67C are inserted covering provisions relating to the establishment of a special court.
  2. Section 68A is inserted which states that Central Government may establish such a number of registration offices as it thinks fit. Accordingly, the Central Government can appoint Registrars/ Additional Registrars/ Joint Registrars/ Deputy Registrars/ Assistant Registrars.
  3. Provisions of section 69 covering payment of additional fees are substituted. The new section states that prescribed additional fees is to be paid for filing of any document/ return post completion of the due date.
  4. Provisions of section 72(2) relating to the jurisdiction of tribunal and appellate tribunal is substituted. The gist of new provisions is stated hereunder-
    1. The person aggrieved by an order of Tribunal can prefer an appeal to the Appellate Tribunal within a period of 60 days.
    2. The Appellate Tribunal will pass appropriate order only after giving an opportunity of being heard.
    3. Copy of Appellate Tribunal order is to be made to Tribunal and parties to the appeal.
  5. Section 76A is newly inserted which contains the provisions relating to the adjudication of penalties.

 

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CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.