The Limited Liability Partnership Act, 2008 28.2.2009

The Limited Liability Partnership Act, 2008

28.2.2009

Introduction

Choosing the type of organisation structure for SMEs is a challenge

Selection of orgnisation structure is influenced by many factors

Type of organisation structure determines personal liability of owners

The owners of SMEs are personally liable for business failure occurring in the normal course unless operating as a Limited Liability Company

Large number of SMEs operate as Partnerships for operational felxibility

SMEs registered as private companies are subject to rigours of compliance under the Companies Act, 1956

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Introduction

There has been long felt need for a simple legislation for SMEs to carry on business as a body corporate with limited liability obligation

The LLP Act 2008 has addressed this need

A Snapshot of characteristic features of Partnership Firm, LLP, Private Company and Public Company are given in the following tables

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Introduction

Partnership Firm Limited Liability Partnership

Private Company Public Company

Registration-Optional

Registration - Mandatory



Registering Authority-Registrar of Firms

Registering Authority- Registrar of Companies



Partnership Firm is not a Body Corporate

LLP is a Body Corporate

Private Company is a Body Corporate

Public Company is a Body Corporate

Not an Independent legal entity

Is an Independent legal entity distinct from partners

Is an Independent legal entity distinct from shareholders

Is an Independent legal entity distinct from shareholders

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Introduction



Partnership firm can commence Business immediately on implied or written agreement between partners

LLP can commence Business immediately after issue of Certificate of Incorporation by the Registrar

Private Company can commence Business immediately after issue of Certificate of Incorporation by the Registrar

Public Company should obtain Certificate of Commencement of Business before commencement of Business

There is no concept of issue of ownership Certificate for capital contribution

There is no concept of issue of ownership Certificate for Contribution

Share Certificate will have to issued within 3 months of issue/allotment of shares

Share Certificate will have to issued within 3 months of issue/allotment of shares

There is no concept of capital contribution at premium

There is no concept of contribution at premium

Shares can be issued at a premium

Shares can be issued at a premium

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Introduction



An Unregistered Partnership Firm can be sued by third party but it cannot sue third parties

LLP can sue and be sued in its name

Private Company can sue and be sued in its name

Public Company can sue and be sued in its name

Existence of Partnership Firm is determined by Facts

Existence is determined by Registration Certificate



Partnership Firm has no perpetual succession

LLP has perpetual succession

Private Company has perpetual succession

Public Company has perpetual succession

Min. no. of partners - 2

Min. no. of partners - 2

Min. no. of Shareholders - 2

Min. no. of Shareholders - 7

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Introduction

Partnership Firm Limited Liability

PartnershipPrivate Company Public Company

Max. no. of Partners:

Banking - 10

Non-Banking - 20

Max. no. of Partners - No Limit

Max. no. of Shareholders - 50

Max. no. of Shareholders - No Limit

Partnership in writing is evidenced by Partnership Deed

Limited Liability Partnership Agreement

Memorandum and Articles of Association

Memorandum and Articles of Association

Voting Rights not applicable

One vote per Partner

One vote per member on show of hands

One vote per member on show of hands

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Introduction



Liability of Partners is unlimited - joint and several

Liability of Partners is limited to the extent of Contribution made except under certain circumstances

Liability of shareholders is limited to the extent of shares held

Liability of shareholders is limited to the extent of shares held

A guarantee given by a Partnership Firm to a third party in the absence of agreement to the contrary stands revoked in respect of future transactions

A guarantee given by a LLP to third party shall continue and be binding on the LLP for future transactions even after the death of a partner

A guarantee given by a private company to third party shall continue and be binding on the company for future transactions even after the death of a shareholder

A guarantee given by a public company to third party shall continue and be binding on the company for future transactions even after the death of a shareholder

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Introduction



A Minor cannot become a Partner but can be admitted to the benefits of Partnership with the consent of all the partners as per Section 30 of the Partnership Act 1932

A Minor cannot become a Partner nor admitted to the benefits of LLP since there is no provision in the LLP Act 2008 to this effect

A Minor can become a fully paid up shareholder. Share Certificate shall be issued in the Gaurdian’s name

A Minor can become a fully paid up shareholder. Share Certificate shall be issued in the Gaurdian’s name

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Introduction



No person can be inducted into partnership firm without the consent of all the existing partners

A person can become a partner as per the LLP Agreement and if the LLP Agreement is silent then with the consent of all the existing partners

A person can become a shareholder in accordance with the Articles of Association. There is restriction on free transfer of shares

A person can become a shareholder subject to Memorandum and Articles of Association. There is no restriction on free transfer of shares

A Partner is an Agent of another Partner and of the Firm

A Partner is not an Agent of another Partner but is an Agent of the LLP

A Shareholder is not an Agent of another Shareholder or of the Private Company

A Shareholder is not an Agent of another Shareholder or of the Public Company

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Introduction



Every Partner has right to take part in the conduct of business

Only Designated Partners can take part in the conduct of business. If LLP agreement is silent then all the partners have right to take part in the conduct of business

Only Board of Directors can collectively manage the affairs of the Private Company

Only Board of Directors can collectively manage the affairs of the Public Company

Partnership Agreement may provide for Managing Partners appointment

Appointment of two Designated Partners is mandatory

Appointment of Managing Director is optional

Appointment of Managing Director is optional unless the Public Company has minimum paid up capital of Rs.5 crores

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Introduction



Only Resident Indians can be Managing Partners

Out of 2 Designated Partners, one of them can be a Foreign National not resident in India

A Foreign National resident in India can be appointed as a Managing Director

A Foreign National resident in India can be appointed as a Managing Director

There is no requirement of obtaining a Identification Number

Designated Partner should obtain DPIN for appointment as such if he does not posses Director Identification Number (DIN)

Director Identification Number is mandatory before a person is appointed as a Director

Director Identification Number is mandatory before a person is appointed as a Director

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Introduction



On the death of a partner the legal heirs will be paid the share of the deceased partner based on accounts drawn up as on the date of death of the partner

On the death of a partner the legal heirs will be paid based on accounts drawn up as on the date of death of the partner

On the death of a shareholder, the legal heir can ask for transmission of shares in his name. Can sell the shares at mutually agreed value to another person subject to Articles of Association

On the death of a shareholder, the legal heir can ask for transmission of shares in his name. Can sell the shares at mutually agreed value to another person freely

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Introduction



Mutual rights and duties of Partners are determined by express or implied agreement between partners

Mutual rights and duties of Partners of LLP is determined as per LLP Agreement in writing. In the absence, provisions of First Schedule shall be applicable

The rights and duties of Shareholders are subject to Companies Act provisions and Articles of Association

The rights and duties of Shareholders are subject to Companies Act provisions

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Introduction



Partnership Agreement - written or oral can put restrictions on partners not to carry on similar business that of partnership firm while he is a partner

LLP Agreement may put restrictions on partners not to carry on similar business that of LLP while he is a partner. In the absence of specific provision, the First Schedule is applicable and Paragraph 11 contains this restrictive clause

A shareholder can carry on similar business that of the Private Company

A shareholder can carry on similar business that of the Public Company

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Introduction



A Partner is not entitled to receive remuneration for taking part in the conduct of business unless the contract provides otherwise

A Partner of a LLP is not entitled to receive remuneration

A director can draw remuneration from the private company subject to Provisions of Section 314. The provisions of Section198, 269, 309 and Schedule XIII of the Companies Act, 1956 are not applicable to a Private Company

A director can draw remuneration from the Public Company. The amount of remuneration paid to Managerial Personnel shall be subject to provisions of Section 198, 269, 309 and Schedule XIII of the Companies Act, 1956

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Introduction



A partnership firm can enter into sale & purchase of materials and service contracts with other firm in which a partner of the firm is also a partner

A LLP can enter into sale & purchase of materials, service, and other contracts with other LLP in which a partner of the LLP is also a partner.Restrictions may be imposed by a notification under Section 67 of the LLP Act, 2008 after getting approval of the Parliament for such notification

Contract for sale & Purchase of materials and service in respect of interested parties are governed by provisions of Section 297 of the Companies Act, 1956

Provisions of Section 297 are applicable a public companies also but contracts between two public companies do not attract provisions of Section 297

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Introduction



A partner or relative of a partner can be employed in the partnership firm without any restriction

A partner or relative of a partner can be employed in the LLP without any restriction. However, restrictions may be imposed by notification under Section 67 of the LLP Act, 2008 after getting approval of the Parliament for such notification

Appointment to office of profit of a director, relative of director, partnership firm, private company in which a director of the private company etc. is interested shall be subject to Section 314 of the Companies Act, 1956

Appointment to office of profit of a director, relative of director, partnership firm, private company in which a director of the public company etc. is interested shall be subject to Section 314 of the Companies Act, 1956

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Introduction



Concept of Audit Committee is not in the Partnership Act, 1932

Concept of Audit Committee is not in the LLP Act 2008

Appointment of Audit Committee is not applicable to Private Company

Appointment of Audit Committee is mandatory for companies having paid up capital of Rs.5 Crores and above

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Introduction



There is no concept of Annual General Meeting of partners of a firm

There is no concept of Annual General Meeting of partners of an LLP

Annual General Meeting should be held every year except in the year of incorporation and year following that

Annual General Meeting should be held every year except in the year of incorporation and year following that

Concept of voting and maintenance of minutes is not provided for in the Partnership Act 1932

Voting and maintenance of minutes is recognised under the LLP Act 2008 but procedure for the same is not spelt out in the Act. LLP Agreement should spell out

Concept of voting and maintenance of minutes as well as procedure for the same is prescribed in the Companies Act, 1956

Concept of voting and maintenance of minutes as well as procedure for the same is prescribed in the Companies Act, 1956

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Introduction



Borrowing from public is not permitted except from Banks, Financial Institutions etc.

Borrowing from public including from Banks, Financial Institutions etc. at present is permitted unless restrictions are imposed for borrowing from public under Section 67 of the LLP Act, 2008 after getting approval of the Parliament for such notification

Borrowing from public is not permitted except from Banks, Financial Institutions etc. as per provisions of Companies Act, 1956

Borrowing from public is permitted subject to provisions of Companies Act, 1956

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Introduction



Requirement of registration of charge created over the assets of the firm for borrowings from a Bank or Financial Institution is not there

LLP Act, 2008 does not provide for charge registration with the Registrar at present but can be introduced by a notification in the Official Gazette by the Central Government as per provisions of Section 67 after getting approval of the Parliament for such notification

Registration of charge created on the specified assets of a Private Company is mandatory as per provisions of Companies Act, 1956

Registration of charge created on the specified assets of a Public Company is mandatory as per provisions of Companies Act, 1956

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Introduction



Dissolution:

If constituted for fixed term-on expiry of the term

On death of a Partner

Adjudication of a Partner as Insolvent

If Partnership is at Will-By giving notice to other partners

With consent of all Partners by Court Order

Winding up as per provisions contained in this regard in the LLP Act, 2008

Winding up as per provisions contained in the Companies Act, 1956

Winding up as per provisions contained in the Companies Act, 1956

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History

• The concept of LLP was first introduced informally in Italy in the 7th Century

• France was the first country to enact LLP legislation in the year 1673

• In UK the LLP Act was passed in the year 1867.It was replaced in the year 1907 and a comprehensive LLP legislation was passed with a new Act in the year 2000

• In Singapore the concept of LLP is very recent and LLP Act was passed on 25th January 2005

• Impetus for enacting LLP Act in India was due to pressure from WTO for opening up of multi-disciplinary professional services to the multinational professional firms

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History

• CG first brought out a Concept Paper on LLP and placed it in the public domain in November 2005 for comments and suggestions

• The LLP Bill 2006 was introduced in Rajyasabha on 15th December 2006 and was referred to Standing Committee on Finance.

• Based on the recommendations the Bill was withdrawn for further improvements

• A new LLP Bill 2008 was introduced by the CG in the year 2007 with over 35 major changes and insertion of 8 new sections and other modifications

• Finally, the LLP Bill 2008 has culminated into ‘The Limited Liability Partnership Act, 2008’ with gazette notification on 9th January 2009

• The LLP Act 2008 is divided into 14 Chapters containing 81 Sections and Four Schedules

• The concept Rules numbering 40 have been put on public domain for comments

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Chapter I

Chapter I titled “Preliminary”

Contains 2 Sections

• Section 1: Describes the title, jurisdiction and effective date of the Act

• Section 2: Contains definitions of terms used in the Act

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Chapter II

Chapter II titled “Nature of Limited Liability Partnership” Contains 8 Sections

• Section 3: LLP is a separate legal entity and it is a body corporate

• Section 4: Partnership Act 1932 is not applicable to LLPs except as provided

• Section 5: Who can and who cannot be partners of an LLP

• Section 6: Min. no. of Partners and Personal Liability if the number falls below 2

• Section 7: Designated Partners – Requirements for appointment etc

• Section 8: Responsibilities and Obligations of Designated Partners

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Chapter II

Chapter II titled “Nature of Limited Liability Partnership” contd….

• Section 9 : Filling up of vacancy in Designated Partners and consequences of failure

• Section 10: Penalty for contravention of provisions of Section 7 (1), (4), (5), Section 8 and Section 9

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Chapter III

Chapter III titled “Incorporation of LLP and Matters Incidental thereto”

Contains 11 Sections

• Section 11: Incorporation of LLP, procedure for incorporation and penalty

• Section 12: Registration of LLP by Registrar and Certificate of Incorporation

• Section 13: Registered Office and other office of LLP and changes thereof

• Section 14: Effect of Registration and Powers of LLP

• Section 15: Use of words Limited Liability Partnership or acronym ‘LLP’ as last words in the name

• Section 16: Application for approval and reservation of name of LLP

• Section 17: CG’s power to direct change of name by a LLP already registered

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Chapter III

Chapter III titled “Incorporation of LLP and Matters Incidental thereto” contd….

• Section 18: Application by a Company, LLP or Entity to Registrar for directing change of name of LLP registered with similar name

• Section 19: Change of name by LLP on own volition

• Section 20: Penalty for misuse of words LLP in the name

• Section 21: Publishing of name, address and registered number in invoices etc.

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Chapter IV

Chapter IV titled “Partners and their Relations”

Contains 4 Sections

• Section 22:How to become partners of a LLP

• Section 23:Mutual Rights & Duties of Partners inter-se partners and LLP and its partners etc.

• Section 24:Cessation/Resignation of a partner

• Section 25:Partner to report change in name and address to LLP etc.

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Chapter V

Chapter V titled “Extent and Limitation of Liability of LLP and Partners”

Contains 6 Sections

• Section 26: Partner is an Agent of LLP and not of other partners

• Section 27: Liability of LLP when and how much

• Section 28: Partner’s liabilities and extent of liability

• Section 29: Person holding out to be a partner shall be liable to creditors

• Section 30: Unlimited liability of partners and LLP under certain circumstances

• Section 31: Whistle Blowing benefits to a partner and an employee

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Chapter VI

Chapter VI titled “Contributions”

Contains 2 Sections

• Section 32: Contributions by partners - by way of money, tangible and intangible assets etc.

• Section 33: Obligation of partners to contribute money or property or other benefit shall be as per LLP Agreement

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Chapter VII

Chapter VII titled “Financial Disclosures”

Contains 8 Sections

• Section 34: Maintenance of Books, preparation and filing of Statement of Account and Solvency with the Registrar

• Section 35: LLP to file Annual Return with the Registrar

• Section 36: Public Inspection of documents filed by LLP with the Registrar

• Section 37: Penalty for false return, statement or document required under the Act • Section 38: Registrar right to call for information, statement, document etc

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Chapter VII

Chapter VII titled “Financial Disclosures” contd….

• Section 39: Compounding of Offence committed - where punishable with fine • Section 40: Registrar to destroy documents filed in accordance with Rules

• Section 41: Registrar may require filing of corrected or amended document etc.

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Chapter VIII

Chapter VIII titled “Assignment and Transfer of Partnership Rights”

Contains 1 Section • Section 42: A Partner can transfer his rights to share in profits or receive contributions and still continue to be a partner in a LLP etc.

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Chapter IX

Chapter IX titled “Investigation”


• Section 43: CG to appoint Inspectors under certain circumstances

• Section 44: Partners application for ordering inspection by Tribunal should be supported by evidence and deposit of security amount

• Section 45: No Firm, Body Corporate or other Association can be appointed as an Inspector

• Section 46: Inspector can inspect the affairs of an associated entity also

• Section 47: Duty of Designated Partners or partners to produce documents

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Chapter IX

Chapter IX titled “Investigation” contd….

• Section 48: Inspector to approach First Class Magistrate or Judicial Magistrate for order for confiscation of records or documents

• Section 49: Inspector to make interim if required by CG and also make final report to the CG

Section 50: CG may prosecute a person in relation to LLP or any other entity whose affairs are investigated found to be guilty after conducting inspection

• Section 51: If it is that it is expedient to wind up as per the Order, the LLP shall be wound up by order of Tribunal

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Chapter IX

Chapter IX titled “Investigation” contd….

• Section 52: CG may bring proceedings for recovery of damages or property

• Section 53: Initial expenses of investigation will be borne by CG but upon conviction the person convicted shall bear the expenses

• Section 54: The Inspectors Report will be will be admissible as evidence in any legal proceeding

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Chapter X

Chapter X titled “Conversion into Limited Liability Partnership”

Contains 4 Sections

• Section 55: A Partnership Firm may convert itself into LLP

• Section 56: A private company may convert itself into LLP

• Section 57: An unlisted public company may convert itself into LLP

• Section 58: Registration of LLP on conversion and duty of Partnership Firm/Private Company/Unlisted Company to intimate the Registrar of Firms/Companies etc.

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Chapter XI

Chapter XI titled “Foreign LLPs”

Contains 1 Section

Section 59: Central Government’s power to formulate rules applicable to foreign LLPs establishing place of business in India

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Chapter XII

Chapter XII titled “Compromise, Arrangement or Reconstruction (CAR) of LLPs”

Contains 3 Sections

• Section 60: Procedure for C or A and Order of Tribunal for C or A

• Section 61: Tribunal shall have power to supervise carrying out of C or A

• Section 62: Tribunal may approve C or A proposal and order the scheme for R or amalgamation of 2 or more LLPs

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Chapter XIII

Chapter XIII titled “Winding Up and Dissolution”

Contains 3 Sections

• Section 63: Voluntary Winding up and/or through Order of the Tribunal

• Section 64: Circumstances under which Tribunal may order winding up

• Section 65: CG may make rules in relation to winding up of LLPs

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Chapter XIV

Chapter XIV titled “Miscellaneous”


• Section 66: A partner may lend money or transact business with LLP

• Section 67: CG’s power to notify that provisions of Companies Act, 1956 may apply with or without modifications to LLPs

• Section 68: Filing of documents in Electronic Form, copy of any document or extract of any document filed with Registrar shall be admissible as evidence etc.

• Section 69: Document required to be filed with Registrar if not filed within due date can be filed within 300 days on payment of additional fees and beyond 300 days also

• Section 70: Imprisonment of partner or designated partner for 2nd and subsequent offences and levy of fine upto twice the amount

prescribed

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Chapter XIV

Chapter XIV titled “Miscellaneous” contd….

• Section 71: Provisions of this Act shall be in addition and not in derogation of provisions of any other law

• Section 72: Tribunal may exercise such powers conferred on it by this Act or any other Law in force

• Section 73: Failing to comply with order of the Tribunal shall attract imprisonment upto 6 months and shall also be liable to fine of not less than Rs.50,000/-

• Section 74: If the Act is silent on fines, the person can be punishable with fine with Min. of Rs.5,000/- and Max. of Rs.50/- per day of default (subject to Maximum amount of Rs.5,00,000/-)

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Chapter XIV


• Section 75: Registrar’s power strike off name of LLP if LLP is not carrying on business

• Section 76: Punishment of Partners/Designated Partners/LLP for Offences committed

• Section 77: Jurisdiction of Courts

• Section 78: CG’s power to alter the provisions of Schedules to the Act

• Section 79: CG’s power to make Rules for carrying out provisions of this Act

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Chapter XIV


• Section 80: CG’s power to make provisions to remove difficulties but the power cannot be exercised after 2 years from the date of commencement of the Act

• Section 81: Transitionary provisions until Tribunal is constituted under Companies Act, 1956

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Issues under a few important Enactments

Implications under Stamp Duty

What should be stamp duty for LLP Agreement?

• LLP Agreement attracts stamp duty as per State Stamp Act.

• For clarity on stamp duty payable for LLP Agreement State Stamp Act needs amendment

Implications under Income Tax Act 1961

Whether capital gains tax under Section 45 is attracted on conversion of Partnership Firm/Private Company/Unlisted Public Company into LLP?

• On conversion of Partnership firm/private company/unlisted public company into LLP as per Second/Third/Fourth Schedule all the assets etc. of the firm shall be transferred to and vest in the LLP

• The word ‘convert’ in relation to firm/private company/unlisted public company means transfer of property

• The above situation is different from that of registration of a partnership firm as a company under part IX of the Companies Act, 1956.

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Issues under a few important Enactments

• Under Part IX property belonging to or vested in a Registered Partnership Firms shall on registration under Part IX pass to and vest in the company incorporated under the Companies Act, 1956. As per Andhra High Court, on such vesting there is no capital gains tax on the partnership firm.

Whether benefits under Section 72A of the Income Tax Act is available to the Amalgamated LLP in case of Amalgamation of LLPs ?

• As per Section 72A of the Income Tax Act carry forward losses and unabsorbed depreciation of Amalgamating Company is allowed in the hands of Amalgamated Company subject to certain conditions stipulated therein.

• Unless Section 72A is amended to include LLPs also, the benefits will not be available to LLPs in case of Amalgamation.

Implication under Industrial Policy and FEMA regulations for FDI in a LLP

Whether FDI is permitted into a LLP ?

• A foreign LLP or a foreign Company can become a Partner of a Indian LLP. The existing Industrial Policy and FEMA need amendment for making contributions

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Registration Fees Cost Advantage of LLP over a company

Maximum registration fee in the case of a LLP is Rs.5,000/-

Maximum registration fee for a company having share capital is Rs.2 Crores

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Chapter I

Section 1

The Act and commencement

The Act is called as ‘The Limited Liability Partnership Act, 2008’

The Act extends to whole of India The Act shall come into force from the date notified in the Official Gazette by the Central Government Different Provisions of the Act may be given effect from different dates.

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Chapter I

Section 2

Definition of certain terms used, unless context otherwise requires:

‘Address’ in relation to a partner of a LLP means:

in the case of an Individual, his usual Residential Address and

in the case of a body corporate, its Registered Office Address

‘Advocate’ means an Advocate as defined in Section 2 of the Advocates Act, 1961

‘Appellate Tribunal’ means the NCLAT constituted under Section 10FR of the Companies Act, 1956

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Chapter I

Section 2

Body Corporate’ means a company as defined in Section 3 of the Companies Act,1956 and

includes:

o a LLP registered under this Act

o a LLP incorporated outside India and

o a company incorporated outside India

excludes:

o a corporation sole

o a co-operative society registered under any law and

o any other body corporate which the CG may specify in this regard

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Chapter I

Section 2

’Business’ includes every trade, profession, service and occupation

CA, CS and CWA means CA, CS and CWA as defined in respective Acts and who are in practice

‘Court’ with respect to any offence under this Act, means court having jurisdiction as per provisions of Section 77 (viz., First Class Magistrate or Metropolitan Magistrate)

‘Designated Partner’ means any partner designated as such pursuant to Section 7

‘ Entity’ means any body corporate and includes for the purposes of 8 Sections: Section 18, 46, 47, 48, 49, 50, 52 and 53 a firm set up under the Partnership Act, 1932

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Chapter I

Section 2

‘Financial Year’ means the period from:

1st April of a year to 31st March of the following year and

Where, a LLP is incorporated after 30th September, the financial year may be period from the date of registration and ending on 31st March of the year next following that year. (max. of 18 months)

‘Foreign Limited Liability Partnership’ means a LLP formed, incorporated or registered outside India which establishes a place of business within India.

‘Limited Liability Partnership’ means a partnership formed and registered under this Act

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Chapter I

Section 2

‘Limited Liability Partnership Agreement’ means any written agreement between partners of the LLP or between the LLP and its partners which determines the mutual rights and duties intere-se and in relation to that of LLP

‘Name’ in relation to a partner of a LLP means:

in case of a individual, his forename, middle name and surname and

in case of a body corporate, its registered name

‘Partner’ in relation to a LLP, means any person who becomes a partner in the LLP in accordance with the ‘LLP agreement’

‘Prescribed’ means prescribed by Rules made this Act

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Chapter I

Section 2

‘Registrar’ means:

Registrar or

Additional Registrar or

Joint Registrar or

Dy. Registrar or

Assistant Registrar

‘Schedule’ means a Schedule to this Act

‘Tribunal’ means NCLT constituted under Section 10FB of the Companies Act, 1956

As per Sub-Section (2), the words and expressions not defined in this Act shall have meanings as defined under the Companies Act,1956.

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Chapter II

Section 3

Separate Legal Entity

A LLP is a body corporate formed and registered under this Act

• It is a separate legal entity from that of its partners.

• It has perpetual succession.

• Any change in the partners of a LLP shall not affect the existence, rights or liabilities of the LLP.

Section 4

Partnership Act, 1932 not applicable to LLP

Provisions of the Indian Partnership Act, 1932 shall not apply to a LLP save as otherwise provided

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Chapter II

Section 5

Who is eligible to be a Partner:

An ‘Individual’, ‘Company’ registered under Companies Act, 1956 and ‘Body Corporate’ can become a partner in a LLP.

Who is not eligible to be a partner:

• A person of unsound mind (as found by a Court of competent jurisdiction)

• An undischarged Insolvent

• A person who has applied to be adjudicated as an Insolvent

[ A person who suspends or at any time during immediate preceding five years suspended payment to creditors, who at any time during immediate preceding five years made composition with the creditors, who is convicted by a Court for an offence involving moral turpitude & sentenced to imprisonment for a period not less than 6 months cannot be appointed as Designated Partner but he can become a Partner in a LLP?]

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Chapter II

Section 6

Minimum number of Partners – Liability for not complying

A LLP must have at least 2 partners.

If the number falls below 2 and remaining partner knowingly carry on business for more than 6 months shall be personally liable for obligations incurred during that period viz. after 6 months.

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Chapter II

Section 7

Designated Partners – Minimum number and Eligibility

A LLP must have at least 2 (Two) Designated Partners who shall be Individuals

At least 1 (one) Individual Designated Partner shall be a resident in India

Resident means a person who has stayed in India for period of at least 182 days during the immediately preceding one year

Where bodies corporate are partners, then Individual nominees of such bodies corporate shall act as ‘Designated Partners’

An Individual can act as Designated Partner only after giving Prior Consent to the LLP (Rule no.7)

Consent should be given in Form no.9 (Rule no.7)

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Chapter II

Section 7

Designated Partners – Intimation to Registrar

LLP should file Form no.5 (Rule 8) within 30 days of appointment of the Designated Partner with the Registrar along with prescribed fees

Filing Fee is determined by the LLP’s total Contribution Amount

• Filing Fee shall be

Rs.50/- if the contribution is less than Rs.1 Lakh,

Rs.100/- if contribution is above Rs.1 Lakh but not exceeding Rs.5 Lakhs,

Rs.150/- if contribution is above Rs.5 Lakhs but not exceeding Rs.10 Lakhs and

Rs.200/- if contribution is exceeding Rs.10 Lakhs

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Chapter II

Section 7

Designated Partners – Disqualification

Following Individuals are not qualified for appointment: [Rule 9 (1)]:

• who is an undischarged insolvent

• who is adjudged Insolvent at any time in the immediate preceding five years

• who suspends or at any time during immediate preceding five years suspended payment to creditors

• who at any time during immediate preceding five years made composition with the creditors

• who is convicted by a Court for an offence involving moral turpitude & sentenced to imprisonment for a period not less than 6 months

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Chapter II

Section 7

Designated Partners – Manner of becoming or ceasing to be a Designated Partner

CG may by gazette notification remove any of the disqualifications except in case the individual who is punished for moral turpitude [Rule 9 (2)]

The Incorporation Document may specify:

• who shall be Designated Partners. Individuals named therein shall be the Designated Partners from the date of incorporation of the LLP

• Partners who shall from time to time as specified shall be Designated Partners

• any Partner may become or cease to be a Designated Partner by and in accordance with LLP Agreement

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Chapter II

Section 7

Designated Partners – DP Identification Number

Every Designated Partner should obtain a Designated Partner Identification Number (DPIN)

Provisions of Section 266A to 266G of the Companies Act, 1956 shall apply mutatis mutandis with regard to DPIN

The application for allotment of DPIN should be made in Form no.7 in electronic mode [Rule 10 (1)]

DPIN application attracts a fee of Rs.100/- [Rule 10 (8)]

The Provisional DPIN will be valid for 60 days. Application in hard copy should be submitted to CG (similar to procedure followed for getting DIN)

DIN shall be deemed to be DPIN. Person holding DIN should intimate CG in Form no.25 attaching DIN certificate [Rule 10 (4)]

28.2.2009

Chapter II

Section 7

Designated Partners – Changes to be furnished to CG and LLP(s)

A Designated Partner should furnish his DPIN in Form no.26 enclosing DPIN Allotment letter to the LLP [Rule 10 (9)]

A Designated Partner holding DPIN should intimate changes in the particulars furnished in Form no.7 to the CG within 30 days in Form no.10 enclosing necessary documents verified by Public Notary/Gazetted Officer/PCS. [Rule 10 (10 (a)]. There is no fee for intimation in Form no.10 The Designated Partner should also intimate the changes in the particulars furnished in Form no.7 to the LLP or LLPs if he is a Designated Partner in more than one LLP.

A holder of DIN who has submitted Form no.25 to the Central need not furnish changes in Form no.10 to the Government since he is under obligation to furnish changes in DIN 4 under DIN Rules 2006 [Provisio to Rule 10 (10) (a)]

28.2.2009

Chapter II

Section 8

Responsibility and Liabilities of Designated Partners

Unless expressly provided otherwise in the Act, a Designated Partner shall be:

• responsible for all the acts, matters and things as are required to be done by the LLP including filing of any document, return, statement etc.,

> for compliance of the provisions of this Act and

> for matters specified in the LLP Agreement and

• liable for the penalties imposed on the LLP for any contravention of the provisions of this Act.

28.2.2009

Chapter II

Section 8

Penalty for contravention of provisions of Section 8 [as per Section10]:

LLP and every partner of the LLP shall be punishable with fine-Min.Rs.10,000/- and Max. Rs.1 Lakh

(While Section 8 says that Designated Partners are responsible for compliance under various provisions of the Act and for the penalties imposed on LLP for contraventions, Section 10 inter-alia, lays down that LLP and every partner is liable for contravention of provisions of Section 8. Thus both partners as well as Designated Partners are liable for the contravention)

28.2.2009

Chapter II

Section 9

Filling up of vacancy in Designated Partners-consequences of failure

A LLP should appoint a Designated Partner within 30 (thirty) days of arising of vacancy for any reason.

Procedure applicable for appointment of Designated Partner should be followed while filling up vacancy.

If LLP fails to appoint Designated Partner where the number is below 2 or if there is only one Designated Partner then each partner of the LLP shall be deemed to be a Designated Partner. In case body corporate is the remaining partner then it shall nominate an individual as Designated Partner

Penalty for contravention of provisions of Section 9

LLP and every partner shall be punishable with fine-Min. Rs.10,000/- and Max. Rs.1 Lakh for contravention of provisions of Section 9 of the Act as per Section 10.

28.2.2009

Chapter II

Section 10

Penalties for non-compliance of Section 7 (1), 7 (4), 7 (5) Section 8 and Section 9

Section 7 (1) relates to minimum number of Designated Partners

Section 7 (4) relates to requirement of filing particulars of Designated Partners with the Registrar – Form no.5

Section 7 (5) relates to eligibility to be a Designated Partner

Penalty for violation of Section 7 (1)

LLP and every Partner shall be punishable with fine-Min. Rs.10,000/- andMax. Rs.5,00,000/- Penalty for violation of Section 7 (4), Section 8 and Section 9

LLP and every Partner shall be punishable with fine-Min. Rs.10,000/- andMax. Rs.1,00,000/-

28.2.2009

Chapter III

Section 11

Incorporation Document – signing and filing

A LLP can be incorporated:-

• if 2 or more persons come together to carry on a lawful business for profit and

• subscribe their names to the Incorporation Document.

Incorporation document should be filed with the Registrar in Form no.2 [Rule 11 (1)]

Along with Form no.2 a statement in Form no.3 [Rule 12] made by Advocate/PCS or PCA or PCWA or Advocate engaged in the formation of LLP and by any one of the subscribers along with the incorporation document with the Registrar stating that all requirements of the Act and Rules made there under have been complied with in respect of incorporation should be filed

28.2.2009

Chapter III

Section 11

Incorporation Document – Registration Fees

Form no.2 shall be filed along with registration fee as prescribed in Annexure ‘B’ [Rule 11 (2)]

The Registration Fee as per Annexure ‘B’ shall be:

• Where the contribution does not exceed Rs.1 Lakh Rs.500/-

• Where the contribution exceeds Rs.1 Lakh but Rs.2,000/- does not exceed Rs.5 Lakhs

• Where the contribution exceeds Rs.5 Lakhs but Rs.4,000/- does not exceed Rs.10 Lakhs

• Where the contribution exceeds Rs.10 Lakhs Rs.5,000/-

28.2.2009

Chapter III

Section 11

Incorporation Document – Contents

The Incorporation Document should state the following:

• the name of the LLP

• the proposed business of the LLP • the Registered Office address of the LLP • the name and address of each persons who are to be partners of the LLP on incorporation

• name and address of partners who are to be Designated Partners of the LLP on incorporation

• such other information concerning the proposed LLP as may be prescribed

28.2.2009

Chapter III

Section 11

Incorporation Document – Contents

Other information prescribed as per Rule 14 are those contained in Form no.2

• in the case of individual partners – their name, father’s name, nationality, date of birth, occupation, whether resident in India, permanent and present address, If already a partner in partnership firm or LLP or company, the particulars of such firm, LLP and company

• particulars of partners which are foreign LLPs,

• particulars of partners which are foreign companies

• total amount of contribution

28.2.2009

Chapter III

Section 11

Penalty for false statement in Form no.3

Penalty for a person knowingly making a statement in the incorporation document which is a false statement or does not believe the statement to be true shall be:

Imprisonment for a term extending upto 2 years and fine-Min. Rs.10,000/- and Max. Rs.5 Lakhs.

Even Advocate/CA/CS/CWA shall be punishable for the false statements, if anyMade by him

28.2.2009

Chapter III

Section 12

Registration of LLP by the Registrar and issue of Certificate of Incorporation

Registrar shall on compliance of Section 11 (1) (b) and (c) of this Act shall within 14 (fourteen) days :-

• Register the incorporation document

• Issue a certificate stating that the LLP is incorporated by the name specified

• The certificate shall bear his signature and official seal

• The Certificate shall be conclusive evidence that the LLP is incorporated

28.2.2009

Chapter III

Section 13

Registered Office of LLP – Requirement – Serving of Documents

A LLP must have a Registered Office.

Notices and communications shall be served at the Registered Office

A document may be served on

• LLP or

• its Partner or

• its Designated Partner

by sending it through COP or Regd.Post or by any other manner, as may be prescribed (can be through e-mail or courier) as per Rule 15 and any other Address specifically declared in the LLP Agreement or as agreed with the consent of all partners [Rule 16 (2)].

28.2.2009

Chapter III

Section 13

Other Office of LLP – Requirement – Serving of Documents

Consent of all partners for any other address for service of documents should be filed in Form no.12 (along with copy of minutes/resolution/consent of partners and proof of address) with the Registrar within 30 days of such consent [Rule 16 (3)]

Filing of Form no.12 attracts filing fee prescribed in Annexure ‘B’ [Rule 16 (3)]

28.2.2009

Chapter III

Section 13

Registered Office of LLP – Change of Registered Office within State

The Registered Office may be changed from one place to another by following procedure laid down in the LLP Agreement [Rule 17 (1)]

If the LLP Agreement is silent in the matter, then consent of all the partners should be obtained before changing the place of Regd. Office to another place [Rule 17 (1)]

For change in the RO within State, LLP shall file the notice of change with the Registrar in Form no.15 (along with proof of changed address, copy of consent of all/majority of partners, extract of LLP Agreement) [Rule 17 (2)]

Filing of Form no.15 attracts Fee specified in Annexure ‘B’ [Rule 17 (2)]

The change of Registered Office shall take effect only on filing of Form no.15 (Registration of Form no.15 by Registrar is not a pre-condition)

28.2.2009

Chapter III

Section 13

Registered Office of LLP – Change of Registered Office outside the State

At least one month before filing of notice with the Registrar, LLP should give:

• notice in English News paper and Local Language News paper circulated in the district in which the Regd. Office of the LLP is situated [Rule 17 (4)]

The LLP should file the notice in Form no.15 with the Registrars of both states. (Copy shall be filed with the Registrar under whose jurisdiction the Regd. Office is proposed to be shifted) [Rule 17 (5)]

Penalty for contravention of provisions of Section 13

LLP and every Partner shall be punishable with fine-Min.Rs.2,000/- and Max. Rs.25,000/-

28.2.2009

Chapter III

Section 14

Effect of Registration of LLP

On registration, a LLP in its name is capable of:

• suing and being sued

• acquiring, owning, holding, disposing of property-Movable or Immovable, Tangible or Intangible

• having a common seal, if it decides to have one

• doing and suffering all acts and things as bodies corporate are capable of

28.2.2009

Chapter III

Section 15

LLP’s Name

A LLP should have in name as its last words “Limited Liability Partnership” or an acronym “LLP”

A LLP will not be registered by a name which in the opinion of CG is:

• undesirable or

• identical or too similar to other existing:

partnership firm or

LLP or

body corporate or

registered trade mark or application for trade mark registration is pending

28.2.2009

Chapter III

Section 16

Reservation of Name by Residents

Any person may apply to Registrar for reservation of name in Form no.1

Filing of Form no.1 attracts a Fee of Rs.200/- as per Annexure ‘B’ [Rule 18 (6)]

Reservation of name may be for a incorporating a new LLP or for changing name of an existing LLP [Rule 18 (6)]

The name reserved for registration by the Registrar shall be valid for 3 months [Rule 18 (7)]

28.2.2009

Chapter III

Section 16

Reservation of Name by Foreign LLPs/Firm/Companies

A Foreign LLP or Foreign Firm or Foreign Company may apply to the Registrar for reserving its existing name in Form no.27 [Rule 18(4)]

Filing of Form no.27 attracts Fee of Rs.10,000/- prescribed in Annexure ‘B’ [Rule 18(4)]

The name shall be reserved for a period of 3 years and can be renewed on fresh application and payment of fee of Rs.5,000/- [Rule 18(4)]

Reservation of Name for professionals

Where the proposed name of LLP includes words ‘Company Secretary’, ‘Chartered Accountant’, ‘Advocates’ or such similar words, the same shall be allowed only after approval of the Council of the governing Institute or such authority as may be nominated by the Government in this regard [Rule 18 (3)]

28.2.2009

Chapter III

Section 17

Directions to Change of Name of LLP

CG may direct LLP to change the name if it is satisfied that a LLP is registered through inadvertence or otherwise, with a name which is:

• not desirable (Section 15 (2) ) or

• identical with or resembles the name of any existing LLP or body corporate or other name which is likely to be mistaken for it The LLP should comply with the direction of CG within 3 months or such other longer period as the CG may allow

Penalty for not complying with the direction of CG:

LLP shall be punishable with fine-Min.Rs.10,000/- and Max. Rs.5 Lakhs and Every Designated Partner shall be punishable with fine-Min. Rs.10,000/- and Max. Rs.1 Lakh

28.2.2009

Chapter III

Section 18

Any LLP, Bodry Corporate or Entity etc., may approach Registrar for giving directions to a LLP to Change its Name

A LLP or Body Corporate or Entity already having a name which is similar to the name of a LLP which is incorporated subsequently, can make an application to the Registrar for giving directions to the LLP to change the name.

LLP or Body Corporate or Entity should make the application to Registrar in Form no.23 [Rule 19 (1)]

Filing of Form no.23 attracts a Fee of Rs.10,000/- per Annexure ‘B’ [Rule 19 (5)]

The application should state:[Rule 19 (2)]

• LLPIN of LLP or CIN of company or registration number of the entity as the case may be

• name with which the LLP or the company or Entity was incorporated

• grounds of objection to the name of the LLP incorporated subsequently

28.2.2009

Chapter III

Section 18

Form no.23 should be filed with following attachments:

• authority under which he is making the application

• copy of the incorporation certificate of LLP or the company or registration certificate of the Entity as the case may be [Rule 19 (4)]

The application by such LLP or Body Corporate or Entity should be made within 24 months from the date of registration of LLP under identical or similar name

28.2.2009

Chapter III

Section 19

Change of Registered Name by LLP on own volition

A LLP may change its name by following the procedure laid down in the LLP Agreement. [Rule 20 (1)]

If the LLP Agreement is silent, consent of all the partners is required for changing the name of the LLP. [Rule 20 (1)]

Notice of change of name should be given to the Registrar in Form no.28 [Rule 20 (2)] Filing of Form no.28 attracts filing Fee specified in Annexure B [Rule 20 (2)]

The Registrar shall on satisfying that the name is reserved name, issue Fresh Certificate of Incorporation in new name [Rule 20 (3)]

The changed name shall be effective from the date of issue of Fresh Certificate of Incorporation [Rule 20 (3)]

28.2.2009

Chapter III

Section 20

Penalty for improper use of words “Limited Liability Partnership” or “LLP”

No person or persons shall carry on business with name or title with words:

• “Limited Liability Partnership” or

• “LLP” or

• any contraction or imitation thereof

as the last word or words, unless duly incorporated as LLP under this Act

Penalty for use of words “Limited Liability Partnership” or “LLP” as last words in the name:

Every person shall be punishable with fine-Min. Rs.50,000/- and Max. Rs.5 Lakhs

28.2.2009

Chapter III

Section 21

Publication of name by a LLP

Every LLP should ensure that its Invoices, Official Correspondence and Publications bear the following:-

• name

• registered office address

• registration number of the LLP and

• a statement that it is registered with limited liability.

Penalty for contravention of provisions

LLP contravening provisions of Sub-Section (1) shall be punishable with fine-Min. Rs.2,000/- and Max. Rs.25,000/-

28.2.2009

Chapter IV

Section 22

Who shall be partners

Persons who are subscribers to the incorporation document shall be LLP’s partners.

A person other than subscriber may become a partner of LLP by signing LLP Agreement and in accordance with the LLP Agreement.

28.2.2009

Chapter IV

Section 23

Relationship of Partners

Except as may be provided by this Act, LLP Agreement governs:

• the mutual rights and duties of partners inter-se • the mutual rights and duties of LLP and its partners

The LLP Agreement and changes made to LLP Agreement should be filed with the ROC in Form no.4 [Rule 21 (1)] within 30 days.

Form no.4 should contain following information:

• Place at which LLP Agreement is made• Date of LLP Agreement• Name of LLP• Registered Office Address of LLP• Business to be carried on by LLP

28.2.2009

Chapter IV

Section 23


• Names of Designated Partners• Acts, matters and things required to be done by a Designated Partner• Power which can be exercised by Designated Partner(s) only with the consent of all the partners/requisite majority of partners• Contributions to be made by each partner• Powers and Authority of Partners• Mutual rights and duties of Partners• Mutual rights and duties of LLP vis-à-vis Partners• Management and Administration of LLP• Acts which can be done with consent/requisite majority of Partners• Manner in which consent of Partners shall be obtained• Procedure for calling, holding and conducting meetings of Partners• Whether LLP has common seal and authority to affix common seal• Indemnity clause if any• Clause relating to admission of a Partner• Clause relating to retirement of a Partner

28.2.2009

Chapter IV

Section 23


• Clause relating to cessation of a Partner• Clause relating to expulsion of a Partner• Clause relating to resignation of a Partner• Obligations, rights, entitlements of a Partner on retirement, cessation, expulsion or resignation• Clauses, if any, relating to resolution of disputes between partners and between partners and the LLP• Duration of the LLP, if any• Clauses if any, relating to voluntary winding up• LLPIN for filing changes in the LLP Agreement• Changes in respect of any of the above items• Changes in LLP Agreement in respect of matters not mentioned above• Contribution made at the time of incorporation and before filing of this Form• Declaration by the Designated Partner

Pre-Incorporation agreement in writing between subscribers to incorporation document is binding on the LLP if ratified by all partners after incorporation

28.2.2009

Chapter IV

Section 23


In the absence of formal written agreement with respect to any matter, the mutual rights and duties: • of partners inter-se and

• of partners and LLP shall be determined as per provisions contained in ‘First Schedule’ to this Act

28.2.2009

Chapter IV

Section 24

Cessation of Partnership Interest

A person may cease to be a partner of a LLP:

• in accordance with an Agreement with other partners or

• by giving 30 days notice in writing to other partners of his intention to resign or

• on death or

• on dissolution of LLP or

• on becoming unsound mind and declared as such by a competent court or

• on application to be adjudged as insolvent or declared as insolvent

A ceased partner shall still be regarded a partner of LLP unless:

• the person has notice that the partner has ceased to be partner of the LLP

• notice is delivered to the ROC regarding ceasing of partner in Form no.5

28.2.2009

Chapter IV

Section 24

Share in accumulated profits

A person on ceasing to be a partner, unless otherwise provided in the LLP Agreement:

• shall or

• his legal heirs

be entitled to receive after deduction of accumulated losses as on the date of ceasing to be a partner of the LLP:

• amount of capital contributed to the LLP and

• share in the accumulated profits of the LLP

A former partner or his legal heir(s) on death of the partner, shall not have any right to interfere in the management of the LLP

28.2.2009

Chapter IV

Section 24

Liability of person after ceasing to be partner

A person shall continue to be liable, even after ceasing to be a partner of LLP for the obligations incurred while being a partner:

o to the LLP or

o to the other partners or

o to any other person

28.2.2009

Chapter IV

Section 25

Intimation of Changes in partners of LLP

A partner should inform the LLP of any change in his name or address within 15 days of such change in Form no.6 (Rule 22 (1))

A LLP shall file:

• a notice in Form no.5 [Rule 22 (2)] with the Registrar within 30 days of following events

i) a person becoming a partner or

ii) ceasing to be a partner

iii) any change in the name or address of a partner

Filing of Form no.5 attracts a Fee as per Annexure ‘B’ [Rule 22 (5)] Statement of Consent signed by the incoming partner shall form part of Form no.5 [Rule 22 (3)]

28.2.2009

Chapter IV

Section 25

Partner on cessation can file Form no.5

A person on ceasing to be a partner of LLP may himself file with Registrar the notice in Form no.5 (with prescribed fees) if:

• he has reasonable cause to believe that LLP may not file the notice with ROC

The Registrar should obtain confirmation from the LLP whether the person ceased to be a partner; unless the LLP has filed Form no.5

In case the Registrar does not receive confirmation from LLP within 15 days, he may register the notice in Form no.5 filed by the person ceasing to be a partner.

28.2.2009

Chapter IV

Section 25

Penalty on partner failing furnish any change in his name or address within 15 days to the LLP:

The partner concerned shall be punishable with fine– Min. Rs.2,000/- and Max.Rs.25,000/-

Penalty for not filing Form no.5 in respect of appointment/cessation or change in the name and address of a partner within 30 days with the Registrar:

LLP and every Designated Partner shall be punishable with fin – Min.Rs.2,000/- and Max.Rs.25,000/-

28.2.2009

Chapter V

Section 26

Partner is Agent of LLP

A partner is an Agent of the LLP for the purpose of business

A partner is not an agent of other partners

Section 27

When is LLP not liable for acts of Partner

LLP shall not be bound by any thing done by a partner if:

• the partner had no authority to act for the LLP in doing the particular act and

• the person knows that the partner has no authority or

• the person does not know or believe him to be a partner of the LLP

28.2.2009

Chapter V

Section 27

Liabilities of LLP for wrongful act or omission by a partner

A LLP shall be liable:

• if a partner of the LLP is liable to any person as a result of wrongful act or omission on his part in the course of the business of the LLP or

• for obligation arising from a contract or otherwise

Liabilities of the LLP shall be met out of property of the LLP

28.2.2009

Chapter V

Section 28

Extent of Liability of a Partner

A Partner is not personally liable directly or indirectly for obligations of the LLP arising from a contract or otherwise A Partner shall not be personally liable for the wrongful acts or omissions of any another Partner of the LLP.

A Partner shall be personally liable for his own wrongful acts or omissions

28.2.2009

Chapter V

Section 29

Holding Out as Partner

If a person represents himself by words:

o spoken or written or

o by conduct or

o knowingly permits himself to be represented as a partner in a LLP

then such a person shall be liable to the person who has on the faith of such representation given credit to the LLP

The person shall be liable irrespective of fact whether he knows or not that the representation has reached the person who has given credit to the LLP

(Liability restricted only for moneys lent and not for supply of material or services)

28.2.2009

Chapter V

Section 29

Liability of Partner for holding out

The LLP as well as the person representing himself as partner or being represented as partner:

• shall be liable to the person to the extent of credit received by LLP or

• any financial benefit derived thereon

The legal representatives or deceased partner’s estate shall not be liable for acts of the LLP done after the death of the partner:

• where business is carried on in the same LLP name or

• with the continued use of the deceased’s partners name as part thereof

28.2.2009

Chapter V

Section 30

Unlimited Liability in case of Fraud

Where an act is carried out by a LLP or any of its partners :

o with an intent to defraud creditors of the LLP or

o defraud any other person or

o for any fraudulent purpose

then the LLP and the partners who acted as such shall be liable for all or any of the debts or other liabilities of the LLP.

For the acts of a partner, the LLP is not liable if it is established by the LLP that such act was carried out without the knowledge or authority of the LLP

28.2.2009

Chapter V

Section 30

Punishment of partners or other persons in case of Fraud

Where any business is carried on with intent or purpose mentioned in Sub-Section (1) Section 30, then every person who was knowingly a party in the manner aforesaid shall be punishable with:

• imprisonment for a period extending upto 2 years and

• with fine- Min.Rs.50,000/- and Max.Rs.5 Lakhs

28.2.2009

Chapter V

Section 30

Unlimited Liability of LLP, Partner, Designated Partner or employee for conduct of affairs of LLP in Fraudulent manner

For conducting affairs in fraudulent manner by LLP, Partner, Designated Partner or Employee:

• the LLP and such partner or Designated Partner or employee shall be liable to pay compensation to any person who suffered loss or damage by reason of such conduct and

• the individual concerned shall also be subject to criminal liability.

The LLP shall not be liable if such partner or Designated Partner or employee has acted fraudulently without its knowledge.

28.2.2009

Chapter V

Section 31

Whistle Blowing – reduction or waiver of penalty

The Court or Tribunal may reduce or waive penalty leviable on any partner or employee if it is satisfied that such partner of LLP or employee of LLP:

• has provided useful information during investigation of such LLP or

• when any information given by any partner or employee (whether during investigation or not) leads to LLP or any partner or employee of such LLP being convicted under this Act or any other Act

28.2.2009

Chapter V

Section 31

Whistle Blowing – protection to partner or employee

No partner or employee of LLP shall be:

o discharged o demoted o suspendedo threatened o harassed or o in any other manner discriminated

against the terms and conditions of his partnership or employment, as the case may be, merely because of providing information during investigation to the Court or Tribunal

28.2.2009

Chapter VI

Section 32

Form of Contribution

Contribution by a partner in the LLP may be in any of the following forms:

• tangible - movable or immovable or intangible property or

• other benefit to the LLP, including money, promissory notes, other agreements to contribute cash or property or contracts for services performed or to be performed

Monetary Value of contribution of every partner should be accounted for and disclosed in the Accounts of LLP in the manner prescribed [Section 23 (2))]

The contribution brought other than by way of cash should be valued by a Practising CA or CWA or by an Approved Valuer from the panel maintained by CG [Section 23 (1))]

28.2.2009

Chapter VI

Section 33

Obligation of a partner to Contribute

Contribution by a Partner shall be as per the LLP Agreement and can be by way of :

• money or

• property or

• benefit or

• performance of services

A creditor extending credit has right to enforce the original obligation against the partner if he acts relying on the obligation described in the Agreement and without notice of any compromise between partners.

28.2.2009

Chapter VII

Section 34

Maintenance of books of account, other records and audit etc.

A LLP should maintain books of account relating to its affairs for each financial year.

The Books shall be maintained on cash basis or accrual basis on double entry system.

The books shall be maintained at the registered office

As per Rule 24 (1) the Books of Account should:

• disclose with reasonable accuracy the financial position of the LLP

• enable the Designated Partners to ensure that any Statement of Account and Solvency prepared under Rule 23 complies with the requirements of the LLP Act

28.2.2009

Chapter VII

Section 34

Entries in Accounting Records and preservation of Records

As per Rule 24 (2) the Accounting Records shall:

• contain entries of all sums of money received and expended by the LLP

• record all the assets and liabilities of the LLP

• statements of cost of goods purchased, inventories, work-in- progress, finished goods and cost of goods sold

• any other details which the partners may decide

As per Rule 24 (4) the Accounting Records shall be preserved for a period of 8 years from the date on which they are made

28.2.2009

Chapter VII

Section 34

Form of Statement of Account and Solvency and filing with the Registrar

A LLP should prepare:

• statement of account and

• statement of solvency

for each financial year as at the last day of financial year within 6 (six) months from the end of the financial year.

The Statement of Account and Solvency shall be in Form 8 [Rule 24 (5)]

The statements shall be signed by the Designated Partners of LLP [Rule 24(7)]

A LLP should file the Statement of Account and Solvency in Form no.8 with the Registrar within a period of 30 days from the end of 6 months of the financial year to which they relate [Rule 24 (5)]

The Form no.8 should be filed with the Registrar along with fee as per Annexure ‘B’ [Rule 24 (6)]

28.2.2009

Chapter VII

Section 34

Audit of Accounts of LLP

A LLP is exempted from audit of its accounts if the turnover does not exceed Rs.40 Lakhs in a financial year or its contribution does not exceed Rs.25 Lakhs [Rule 24 (10)]

• Where an LLP is exempted from requirement of audit under Rule 24 (10) in any financial year, the accounts shall be audited in any other form and manner as may be decided by the partners [Rule 24 (11)]

A LLP is not exempted from Audit even if the turnover is not more than Rs.40 Lakhs or its contribution is not exceeding Rs.25 Lakhs unless :

• the accounts contain a Statement by the partners to the effect that they acknowledge their responsibilities for complying with the requirements of the Rule with respect to accounting records and the preparation of accounts [Rule 24 (12)]

28.2.2009

Chapter VII

Section 34

Appointment of Auditors for each financial year

Auditor or Auditors of a LLP should be appointed for each financial year unless it is exempted from audit [Rule 24 (13)]

The appointment of Auditor or Auditors must be made within 30 days before the end of the financial year (other than for first financial year [Rule 24 (14)]

Who can be appointed as an Auditor

Only a Chartered Accountant in practice can be appointed as an Auditor of a LLP [Rule 24 (17)]

28.2.2009

Chapter VII

Section 34

Who can Appoint Auditors

Designated Partners may appoint an Auditor or Auditors:- [Rule 24 (15)]

o at any time before the end of first financial year in respect of first financial year or

o within 30 days before the end of each financial year or

o to fill up casual vacancy in the office or

o to fill up vacancy caused by removal of an Auditor

The Partners may appoint an Auditor or Auditors if the Designated Partners have failed to make appointment under Rule 24 (15) mentioned above [Rule 24 (16)]

28.2.2009

Chapter VII

Section 34

Remuneration of Auditors [Rule 24 (22)]

The Remuneration of an Auditor may be fixed by the Designated Partners or by following procedure stipulated in the LLP Agreement

When can a new Auditor take office and cease to be an Auditor [Rule 24 (18)]

An Auditor shall hold office in accordance with the terms of his appointment

An Auditor or Auditors of a LLP shall not take office until previous Auditor or Auditors cease to hold office

An Auditor shall cease to hold the office at the end of the next period for appointment of Auditors unless re-appointed

28.2.2009

Chapter VII

Section 34

Deemed re-appointment of Auditor [Rule 24 (19)]

If no auditor is appointed by the end of next period, any Auditor in office immediately before that period shall be deemed to be re-appointed at that date, unless:

• the LLP Agreement requires actual re-appointment

• the deemed re-appointment is prevented by such number of partners, as specified in the LLP Agreement, by giving notice

• the partners have decided not to re-appoint the existing Auditor

• the Designated Partners have decided not to appoint an Auditor for the financial year in question

28.2.2009

Chapter VII

Section 34

Removal/Resignation of Auditors [Rule 24 (23)] LLP may remove an Auditor from office at any time by following the procedure as laid down in the LLP Agreement

Where LLP Agreement is silent regarding procedure for removing an Auditor, then consent of all the partners is required.

28.2.2009

Chapter VII

Section 34

Resignation of Auditor [Rule 24 (23)]

An Auditor of a LLP may resign from the office by depositing a notice in writing at the LLP’s registered Office (not other designated Office).

The notice is effective only if it is accompanied by the statement of the circumstances connected with his ceasing to hold office to be brought to the notice of all partners

If there are no circumstances that needs to be brought to the attention of partners of the LLP then the statement must state so.

28.2.2009

Chapter VII

Section 34

Removal/Resignation of Auditors [Rule 24 (23)] The statement required with his ceasing to hold office must be deposited:-

o in the case of resignation, along with the notice of resignation

o for not seeking re-appointment, not less than 14 days before the end of the time allowed for next appointment of Auditor

o in any other case, not later than the end of the period of 14 days beginning with the date on which he ceases to hold office

The resignation shall be effective from the date of deposit of notice or on such later date as may be specified in the notice

28.2.2009

Chapter VII

Section 34

CG’s powers to exempt from Audit of accounts

The Central Government may by notification exempt any class or classes of LLPs from the auditing of its accounts.

Penalty for contravention of provisions:

LLP failing to comply with the provisions of this Section shall be punishable with fine-Min. Rs.25,000/- and Max. Rs.5 Lakhs and

Every Designated Partner shall be punishable with fine- Min. Rs.10,000/- and Max. Rs.1 Lakh

28.2.2009

Chapter VII

Section 35

Annual Return

Every LLP should file duly authenticated Annual Return with ROC within 60 (Sixty) days from the close of its financial year

Annual Return shall be prepared in Form no.11 [Rule 25 (1)]

Filing Fee for filing of Annual Return is as per Annexure ‘B’ [ Rule 25 (1) and (3)]

Annual Return shall be certified by PCS [Rule 25 (2)]

PCS certificate shall state that he has verified the particulars from the Books and Records and are true and correct [Rule 25 (2)]

28.2.2009

Chapter VII

Section 35

Penalty for non-filing of Annual Return:

LLP failing to comply with the provisions of this Section shall be punishable with fine- Min. Rs.25,000/- and Max. Rs.5 Lakhs and

Every Designated Partner shall be punishable with fine-Min. Rs.10,000/- and Max. Rs.1 Lakh

28.2.2009

Chapter VII

Section 36

Public Inspection of Documents kept by Registrar

Any person can inspect the following documents filed by a LLP with the Registrar:

o Incorporation Document

o Names of Partners and Changes, if any

o Statement of Account and Solvency

o Annual Return

Fee for Inspection of documents is Rs.50/- as per Annexure ‘B’ (Rule 26)

Fee for obtaining certified copy of documents is Rs5/- per page and COI or COR Rs.50/- as per Annexure ‘B’ (Rule 26)

28.2.2009

Chapter VII

Section 37

Penalty for False Statement in any Return etc.,


If any person makes a statement in any Return, Statement or other Document required by or for the purposes of any of the provisions of this Act:-

o which is materially false; knowing it to be false or

o which omits any material fact; knowing it to be material

then, the person shall be punishable with imprisonment for a period upto 2 (two) years and shall also be liable to fine-Min. Rs.1 Lakh and Max. Rs.5 Lakhs

(The punishment is for every person making such statement and includes a PCS wherever PCS is issuing certificate under the Act)

28.2.2009

Chapter VII

Section 38

Power of Registrar to obtain information

ROC may call for any information considered necessary by him for carrying out provisions of this Act from:

o any person including any present or past Partner or

o present or past Designated Partner or

o present or past Employee of a LLP

to answer any question or make any declaration or furnish any details or particulars in writing to him within a reasonable period.

28.2.2009

Chapter VII

Section 38

Power of Registrar to obtain information

If the person concerned does not within a reasonable period given to him:

o answer the question or make such declaration or

o furnish details or particulars asked by the Registrar

or

If the Registrar is not satisfied with:

o the reply or declaration or

o details or particulars provided by such person

then the Registrar shall have power to summon that person to appear before him or an Inspector or any other Public Officer whom the Registrar may designate to answer such question or make such declaration or supply such details as the case may be.

28.2.2009

Chapter VII

Section 38

Penalty for non-submission of information etc.:

Any person referred to in Sub-Section (1) without lawful excuse, fails to comply with any summons or requisition of the Registrar under this Section shall be punishable with fine-Min. Rs.2,000/- and Max. Rs.25,000/-

Section 39

Compounding of Offences

Central Government may compound any offence committed under this Act which is punishable with fine only

The fine shall not exceed the maximum fine prescribed for the offence

28.2.2009

Chapter VII

Section 40

Destruction of Old Records

The Registrar may destroy any physical or electronic document filed in accordance with the Rules prescribed.

• Permanent Records to be maintained are those specified in Annexure ‘C’ as per Rule 27 (1)

• Registered Documents shall be preserved for such periods as specified in Annexure ‘D’ as per Rule 27 (3) and

• the Register showing Documents destroyed should be as per Annexure ‘E’ as per Rule 27 (7)) (This is Registered to be maintained by ROC)

28.2.2009

Chapter VII

Section 40

Destruction of Old Records

Permanent Records as per Annexure ‘C” [Rule 27 (1)] are:

• Incorporation Document [Section 11 (1) (b)]

• Notice of situation of Registered Office [Section 13]

• LLP Partnership Agreement [Section 23 (2)]

• Notice of Other Address at which documents to be served [Section 13 (2)]

• Copy of Order of Tribunal regarding Compromises and Arrangements with creditors and members and copy of orders in appeal

• Copy of Orders of Tribunal relating to Reconstruction and Amalgamation of LLP

28.2.2009

Chapter VII

Section 40

Records to be preserved for specified period

‘Registered Documents to be preserved for such periods as specified in Annexure ‘D’ as per Rule 27 (3) are:

• Declaration of compliance with requirements of the Act –Form no.3 --- 5 Years

• Change of name, address and cessation of partners Form no.5 & 6 --- 5 years

• Regd documents relating to LLP struck off under Section 75 --- 5 years • Annual Return --- 5 years

• Consent to act as a Designated Partner - Form no.9 --- 5 years

• Consent to act as a partner-Form no.5 --- 5 years

• Statement by all shareholders containing particulars of private --- 5 years company along with application for its conversion into LLP

28.2.2009

Chapter VII

Section 40

•Statement by all shareholders containing particulars of unlisted --- 5 years public company along with application for its conversion into LLP •Certified copy of the order for transfer of property or liabilities --- 5 years by virtue of the compromise or arrangement (Section 62 (2))

•Copy of the order of dissolution of a LLP by Tribunal (Section63) --- 5 years Records to be preserved for a period of 21 years

• All Papers, registers, refund orders, correspondence relating to LLP Liquidation accounts [Rule 27 (2)]

28.2.2009

Chapter VII

Section 41

Enforcement of Duty to make Return etc.

If any LLP defaults to:

o file any return, account, document or notice under the provisions of this Act or any other law with the Registrar or

o comply with any request of the Registrar to amend and resubmit any document or to submit a fresh document

within 14 days after receipt of notice from the Registrar

the Tribunal may on an application by Registrar, make an order directing the LLP or its Designated Partners or its Partners to make good the default within such period as may be specified in the order.

28.2.2009

Chapter VII

Section 41

Costs to be borne by LLP and continuation of liability of LLP.

The order may provide for the costs and incidentals to be borne by the LLP

LLP shall be liable for penalties prescribed in this Act or any other law imposing penalties in respect of default referred to in this Section

28.2.2009

Chapter VIII

Section 42

Assignment and Transfer of Rights to profits and distribution

A Partner can transfer either wholly or in part:

o his rights to share in profits and losses of the LLP and

o to receive distributions in accordance with the LLP Agreement

A transfer of right by a partner shall not cause by itself disassociation of the partner or a dissolution and winding up of the LLP

Transfer of right by a partner shall not entitle the transferee or assignee to:

• participate in the management or

• conduct of the activities of LLP or

• access information concerning the transactions of the LLP

28.2.2009

Chapter IX

Section 43

Investigating of the affairs of LLP

The Central Government shall appoint Inspector(s) to investigate the affairs of a LLP and to report thereon in such manner as it may direct if:

• Tribunal Orders:

o suo moto or

o on application from not less than 1/5th of the total number of partners declare that the affairs of the LLP ought to be investigated or

• Court orders that the affairs of a LLP ought to be investigated

28.2.2009

Chapter IX

Section 43 - Investigating of the affairs of LLP

The CG may appoint Inspector(s) to investigate the affairs of a LLP and to report on them in such manner as it may direct

o If atleast 1/5th of the total number of partners of LLP make an application along with supporting evidence and security amount as may be prescribed or

o If the LLP makes an application that the affairs of the LLP ought to be investigated or

o If in the opinion of the CG, circumstances suggest the business of LLP is conducted:

i) with an intent to defraud its creditors, partners or any other person, or

ii) for a fraudulent or unlawful purpose, or

iii) in a manner oppressive or unfairly prejudicial to some or any of its partners

or iv) that the LLP was formed for any fraudulent or unlawful purpose or

28.2.2009

Chapter IX

Section 43

Investigating of the affairs of LLP

o that the affairs of the LLP are not being conducted in accordance with the provisions of this Act or

o there are sufficient reasons that the affairs of the LLP ought to be investigated as per Report of the Registrar or investigating or regulatory agency

Security Amount to be deposited with CG (Rule 28)

Where application is made by at least 1/5th of the total number of partners of LLP shall be:

Turnover (Rs.) Amount of Security (Rs) (i) Upto Rs.1 Crore Rs. 2 Lakhs (ii) Rs.1 Crore but less than Rs.5 Crores Rs. 5 Lakhs (iii) Rs.5 Crores but less than Rs.10 Crores Rs.10 Lakhs (iv) Rs.10 Crores and above Rs. 25 Lakhs

28.2.2009

Chapter IX

Section 44

Application by partners for investigation

The application by partners of LLP under Section 43 (1) (a) should be supported by evidence as the Tribunal may require

Supporting evidence is for the purpose of showing that the applicants have good reason for requiring the investigation

CG may, before appointing an inspector, require applicants to give security of such amount as may be prescribed, for payment of costs of the investigation.

• As per Rule 29 the security amount shall be not exceeding Rs.5 Lakhs as may be fixed by the Tribunal

28.2.2009

Chapter IX

Section 45

Firm, Body Corporate or Association not be appointed as Inspector

A firm, body corporate or other association shall not be appointed as an Inspector

Section 46

Powers of Inspectors to carry out investigation into affairs of related entities etc.

If the Inspector thinks that it is necessary to investigate also the affairs of any associated entity whether associated in the past or at present with the LLP or any present or former partner then such investigation may be conducted

28.2.2009

Chapter IX

Section 47

Duty of Designated Partners and Partners and powers of Inspector

It is the duty of Designated Partner and Partners:

o to preserve and produce all books and papers of LLP or other entity which are in their custody to the Inspector/authorised person and

o give all assistance in connection with the investigation

Inspector may with previous approval of CG may require any other entity also to furnish information or produce books and papers considered relevant or necessary for the purpose of his investigation

The Inspector may keep the books and papers in his custody for a period of 30 days only. However, he may call the books and papers whenever required

28.2.2009

Chapter IX

Section 47

Powers of Inspector

An Inspector may examine on oath:

• Designated Partner or Partner

• with the previous approval of CG any other person or an entity in relation to affairs of LLP

• administer oath and for that purpose require personal appearance of the persons before him

Penalty on person who refuses (without reasonable cause):

• to produce book or paper to the Inspector or

• appear before the Inspector personally when required or

• to sign the notes of any examination

shall be punishable with fine- Min.Rs.2,000/- and Max.Rs.25,000/- and with further fine-Min. Rs.50/- and Max.Rs.500/- per day of default

28.2.2009

Chapter IX

Section 47

Notes made on oath may be used as evidence by Inspector

The notes shall be in writing and shall be signed by the person who is on oath and a copy of such notes shall be given to the person so examined

The notes may be used as an evidence by the Inspector

28.2.2009

Chapter IX

Section 48

Seizure of Documents by Inspector

The Inspector may make an application to the First Class Judicial Magistrate or Metropolitan Magistrate as the case may be for an order for the seizure of such Books and papers:

• if during the course of investigation has reasonable ground to believe that Books and papers may be destroyed, mutilated, altered, falsified or secreted

The Magistrate may after hearing the application by order authorise the Inspector:

• to enter the place or places where such Books and papers are kept

• to search that place or those places in the manner as specified in the order

• to seize the Books and papers considered necessary for his investigation

28.2.2009

Chapter IX

Section 48

Seizure of Documents by Inspector

The Books and papers cannot be kept seized for continuous period of more than 6 months

The Liquidator should return the Books and papers to the entity or person concerned on conclusion of investigation after making such identification marks he may consider necessary and inform the Magistrate of such return

The search and seizure shall be carried out in accordance with the provisions of Code of Criminal Procedure 1973

28.2.2009

Chapter IX

Section 49

Inspectors Report to be furnished to LLP etc.

The Inspector shall submit interim report as the CG may direction and submit final report on conclusion of investigation.

The report shall be written or printed as the CG may direct

The CG may forward a copy of final report to the LLP at is Registered Office and to other entity or person and

The CG may also on payment of prescribed fee furnish a copy of the final report to any other person or entity related to or affected by the report

28.2.2009

Chapter IX

Section 50

Prosecution of Person for offences

If it appears from the Inspectors report that the person is guilty of any offence, then the CG may prosecute such person for such offence

Every partner, Designated Partner and other employees and agents of LLP or other entity as the case may, shall give all reasonable assistance to CG in connection with the prosecution

28.2.2009

Chapter IX

Section 51

Application for winding up of LLP

If it appears from the Inspector’s report to the CG that the circumstances suggest the business of LLP is conducted:

i) with an intent to defraud its creditors, partners or any other person, or

ii) for a fraudulent or unlawful purpose, or

iii) in a manner oppressive or unfairly prejudicial to some or any of its partners

or iv) that the LLP was formed for any fraudulent or unlawful purpose or

vi) that the affairs of the LLP are not being conducted in accordance with the provisions of this Act

then the CG may cause any authorised person to present a petition to the Tribunal for winding up of the LLP on the ground that it is just and equitable

28.2.2009

Chapter IX

Section 52

Proceedings for recovery of damages or property

The CG may if it finds from the Inspectors report that proceedings for recovery of:

• damages in respect of any fraud, misfeasance or other misconduct in connection with promotion or formation or management of affairs of such LLP or such other entity or

• any property of such LLP or such other entity, which has been misapplied or wrongfully retained

is to be carried out in the public interest then, it may itself bring proceedings for above purpose

28.2.2009

Chapter IX

Section 53

Expenses for carrying out investigation

The expenses for carrying out investigation is in the first instance defrayed by the CG but shall be reimbursed by following persons:

• any person convicted on prosecution or who is ordered to pay damages or restore any property in a proceeding

• any entity in whose name the proceedings are brought to the extent of amount or value of any sums or property recovered by it as a result of the proceedings

• any entity, a partner or designated partner or any other person dealt with by the inspectors report

• applicants for the investigation where an Inspector is appointed

The expenses to be reimbursed to CG shall be a first charge on assets of LLP if it is liable to pay to the CG

28.2.2009

Chapter IX

Section 53

Expenses for carrying out investigation

The expenses to be paid to CG by an entity, a partner or designated partner or any other person dealt with by the inspectors report shall be recoverable as arrears of land revenue

Section 54

Inspectors Report shall be evidence in any legal proceedings

The Inspector’s Report (who was appointed under the provisions of this Act andauthenticated as may be prescribed) shall be admissible as evidence in any legal proceedings in relation to any matter contained in the report

28.2.2009

Chapter X

Section 55

Conversion from Firm into Limited Liability Partnership

A ‘Firm’ may convert into a LLP in accordance with the provisions of Chapter X and Second Schedule

Section 56

Conversion from Private Company into LLP

A Private Company may convert into a LLP in accordance with the provisions of Chapter X and the Third Schedule

Section 57

Conversion from Unlisted Public Company into LLP

An Unlisted Public Company may convert into a LLP in accordance with the provisions of Chapter X and the Fourth Schedule

28.2.2009

Chapter X

Section 58

Registration and effect of conversion into LLP

The Registrar may after satisfying that:

• provisions of Second, Third and Fourth Schedule and

• other provisions of the Act and Rules made there under are complied with

register the documents submitted under the respective Schedules

Issue a Certificate of Registration stating that the LLP is registered under this Act from such date as specified in the Certificate.

The Registrar shall issue the certificate on conversion into LLP In Form no.19 (Rule 32)

28.2.2009

Chapter X

Section 58

Post Registration formalities on conversion into LLP

The LLP should within 15 days of the date of Registration inform the Registrar of Firms, or ROC as the case may be, about conversion and furnish the particulars of LLP in Form no.14 (Rule 33): • about the conversion and

• of the particulars of LLP.

Upon conversion, the partners of the firm, shareholders of private company or unlisted public company, as the case may be, the LLP and its partners shall be bound by the provisions of Second, Third or Fourth Schedule, as the case may be

28.2.2009

Chapter X

Section 58

From the date of Certificate of Registration:

o The LLP shall be known by the name specified in the Certificate of Registration

o All Tangible and Intangible Property, assets, interests, rights, privileges, liabilities, obligations and the whole of undertaking of the firm or the company as the case may be, shall be transferred to and shall vest in the LLP without any further assurance, act or deed

o The firm or the company, as the case may be, shall be deemed to be dissolved and removed from the records of the Registrar of Firms or ROC as the case may be

28.2.2009

Chapter XI

Section 59

Foreign Limited Liability Partnerships

The Central Government may make rules, by applying or incorporating with such modifications the provisions of Companies Act, 1956 or such regulatory mechanism, with respect to :

• establishment of place of business by a foreign LLP within India and

• carrying on their business in India

28.2.2009

Chapter XII

Section 60

Compromise or Arrangement of Limited Liability Partnership

– Who can make an Application

An application to the Tribunal for a Compromise or Arrangement :-

o between the LLP and its Creditors or

o between the LLP and its partners

may be made by:

• a LLP or

• any creditor or

• any partner of

• in the case of LLP which is being wound up, the liquidator as the case may be

28.2.2009

Chapter XII

Section 60

Compromise or Arrangement of Limited Liability Partnership- Tribunal to hear the summons On such application the Tribunal may order a meeting of the creditors or of the partners as the case may be

The order shall provide for the meeting to be called, held and conducted in prescribed manner as the Tribunal may direct.

The summons of the Tribunal should be supported by an Affidavit by the Designated Partner/Partner/Creditor or Liquidator as the case may be

The summons and affidavit in support thereof shall be in Form no.20 and Form no. 21 respectively as per Rule 35 (1)

Where LLP is not the applicant, a copy of the summons and affidavit should be served on the LLP

Where LLP is being wound up, a copy of the summons and affidavit should be served on the Liquidator

The notice shall be served at least 14 days before the date fixed for the hearing of summons (Rule 35 (2))

28.2.2009

Chapter XII

Section 60


- Tribunal after hearing on summons shall give directions for meeting(s)

The Tribunal shall after hearing may dismiss the summons or give such directions in respect of following matters: (Rule no.35 (3))

o class or classes of creditors or partners whose meeting or meetings have to held for considering the proposed compromise or arrangement

o fixing the time and place of such meeting or meetings

o appointing a chairman/chairmen of the meeting(s) to be held

o fixing the quorum and the procedure to be followed at the meeting(s) including voting by proxy

o determining the value of the creditors and or the partners as the case may be, whose meetings have to be held

28.2.2009

Chapter XII

Section 60


- Notice of Meeting(s)

o notice to be given of the meeting(s) and advertisement of such notice

o the time within which the Chairman of the meeting should report the result of the meeting to the Tribunal

o such other matters as the Tribunal may deem necessary

The notice of the meeting shall be:

o in accordance with the rule laid down by the Tribunal

o it shall be sent to Creditors or partners as the case may be individually by post under COP atleast 21 clear days before the date fixed for the meeting.

o it shall be signed by the Chairman appointed for the meeting or if the Tribunal directs, by the LLP or its Liquidator or any other person

28.2.2009

Chapter XII

Section 60


- Notice of Meeting(s)

o a copy of the proposed compromise or arrangement and the proxy form shall be enclosed with the notice [Rule 35 (5]

o The Tribunal may order publication of notice of the meeting in such news papers and in such manner as it may decide [Rule 35 (6)]

A Creditor or partner shall be given free of charge the copy of proposed compromise or arrangement within 24 hours of requisition, unless same was already circulated to such Creditor or Partner by the LLP [Rule 35 (6)(1)]

The Chairman appointed for the meeting or the LLP or other person directed to issue the Advertisement and the notice(s) of the meeting(s) should file:

• an affidavit at least 7 days before the meeting date or holding of first of the meetings stating that the directions are duly complied with [Rule 35 (6)(2)]

28.2.2009

Chapter XII

Section 60


- Proxy

Duly signed proxy form should be filed with the LLP at its registered office 48 hours before the meeting [Rule 35 (4)(i)]

A proxy has right to vote at the meeting

A Body Corporate (if Creditor or partner of the LLP), can authorise any person to act as its representative at the meeting provided:

• that a certified true copy of the authorisation certified by a Designated Partner or other authorised officer of such Body Corporate is lodged with the LLP at its registered office 48 hours before the meeting [Rule 35 (4) (ii)]

28.2.2009

Chapter XII

Section 60


- Approval of Compromise or Arrangement and Chairman’s Report to the Tribunal

At least 3/4ths of the total value of Creditors or 3/4ths of the partners, as the case may be, should approve the compromise or arrangement at the meeting

The Chairman of the meeting (where there are separate meetings, the Chairman of each meeting) should within the time fixed by the Tribunal and if no time is fixed, within 7 days after the meeting report the result to the Tribunal [Rule 35 (6) (3)]

The report should state the number of creditors or the partners present and voted at the meeting either in person or by proxy, their individual values and way

they voted [Rule 35 (6) (3)]

28.2.2009

Chapter XII

Section 60


- Petition shall pray for appropriate orders

A Petition for Compromise or Arrangement proposing:

• a scheme for the reconstruction of a LLP or

• the amalgamation of two or more LLPs should pray for appropriate orders and directions under Section 62 [Rule 35 (4)(i)]

Where:

• no petition for confirmation of the compromise or arrangement is presented or

• where the compromise or arrangement is not approved by 3/4th majority of Creditors or partners as the case may be

the Chairman’s report shall be placed for consideration before the Tribunal for suitable orders [Rule 35 (4)(iii)]

28.2.2009

Chapter XII

Section 60

- Order of Tribunal

Tribunal shall not sanction order of any compromise or arrangement unless it is satisfied that :

o the LLP or

o any other person by whom an application is been made under Sub-Section (1)

has by means of an affidavit or otherwise disclosed to the Tribunal:

o all material facts relating to the LLP

o the latest financial position of the LLP and

o the pendency of any investigation proceedings in relation to the LLP

The LLP should file the order of the Tribunal in Form no.22 along with fees as specified in Annexure B (Rule 35 (11)) with the Registrar within 30 days

The order of Tribunal shall be effective only after it is so filed with the Registrar

28.2.2009

Chapter XII

Section 60

- Order of Tribunal binding

The compromise or arrangement, if sanctioned by the Tribunal by order shall be binding:

o on all the creditors or all the partners as the case may be and

o also on the LLP or in the case of a LLP under liquidation on the Liquidator and Contributories of the LLP

The Tribunal has powers at any time, stay the commencement or continuation of any suit or proceedings against the LLP on such terms as it may think fit, until the application is finally disposed of

Penalty for contravention of provisions of sub-section (3):

If the Order of the Tribunal is not filed within 30 days with the Registrar then the LLP and every Designated Partner of the LLP shall be punishable with fine which may extend to Rs.1 Lakh

28.2.2009

Chapter XII

Section 61 - Power of Tribunal to enforce compromise or arrangement

-Tribunal shall have power to supervise carrying out of Compromise or Arrangement

The Tribunal making Order sanctioning a Compromise or Arrangement, in respect of a LLP:-

o shall have power to supervise the carrying out of the Compromise or Arrangement and

The Tribunal may at any time of making such order or at any time thereafter:

• give such directions with regard to any matter or

• make such modifications in the Compromise or Arrangement as it may consider necessary for the proper working of the Compromise or Arrangement

28.2.2009

Chapter XII

Section 61

- Order of Tribunal for winding up of LLP

If the Tribunal is satisfied that Compromise or Arrangement sanctioned under Section 60 cannot be worked satisfactorily with or without modifications, then

o it may, either on its own motion or

o on application of any person interested in the affairs of the LLP

make an order for winding up of the LLP, and such order shall be deemed to be an order made under Section 64 of this Act.

28.2.2009

Chapter XII

Section 62

Provision for facilitating reconstruction or amalgamation of Limited Liability Partnership

Where an application is made under Section 60 for sanctioning of compromise or arrangement:

o between a LLP and its creditors or

o between a LLP and all partners

and

it is shown to the Tribunal that the compromise or arrangement has been proposed for the purposes of or in connection with:

o a scheme for reconstruction of any LLP or LLPs or

o the amalgamation of any two or more LLPs

28.2.2009

Chapter XII

and the scheme provides for transfer of:

o the whole or

o any part of the undertaking,

o property or liabilities

of any LLP concerned in the scheme (referred as ‘transferor LLP’) to another LLP (referred as ‘transferee LLP’),

the Tribunal may, either by the order or by a subsequent order, make provisions for all or any of the matters

28.2.2009

Chapter XII

Section 62

Provision for facilitating reconstruction or amalgamation of Limited Liability Partnership

the Tribunal’s order sanctioning the compromise or arrangement or subsequent order may provide for all or any of the following matters:

o the transfer of the whole or any part of the undertaking, property or liabilities of any transferor LLP to the transferee LLP;

o the continuation of any legal proceedings pending by or against any transferor LLP by or against the transferee LLP;

o the dissolution, without winding up of any transferor LLP;

o the provision to be made for any person who within the time prescribed by the Tribunal dissent from the compromise or arrangement and

28.2.2009

Chapter XII

Section 62 - Provision for facilitating reconstruction or amalgamation of Limited Liability Partnership

o such incidental, consequential and supplemental matters as are necessary to secure the reconstruction or amalgamation shall be fully and effectively carried out;

no compromise or arrangement in connection for the amalgamation of a LLP with another LLP or LLPs shall be sanctioned by the Tribunal unless the Tribunal has received: o a report from the Registrar that the affairs of the LLP have not been conducted in a manner prejudicial to the interests of it partners or to public interest:

28.2.2009

Chapter XII


no order for the dissolution of any transferor LLP shall be made by the Tribunal unless the Tribunal has received:

o a report from the official liquidator on scrutiny of books and papers of the LLP that the affairs of the LLP have not been conducted in a manner prejudicial to the interests of its partners or to public interest

Where the order under this Section provides for transfer of any property or liabilities, then, by virtue of the order, the properties or liabilities of the transferor LLP shall become the properties or liabilities of transferee LLP and the order may free the property from any charge by virtue of compromise or arrangement.

28.2.2009

Chapter XII


The LLP should file copy of the Tribunal order with the Registrar within 30 days after the making of the order

For the purposes of Section 62 the word :

o ‘property’ includes property, rights and powers of every description and

o ‘liabilities’ includes duties of every description. Penalty for contravention of provisions:

If default is made in filing the order within 30 days with the Registrar as required under Sub-Section (3) then the LLP and every Designated Partner of the LLP shall be punishable with fine which may extend to Rs.50,000/-

28.2.2009

Chapter XIII

Section 63 - Winding up and Dissolution

The winding up of a LLP may be done:

o by voluntary winding up

o by the order of Tribunal

LLP so wound up may be dissolved.

28.2.2009

Chapter XIII

Section 64 - Circumstance in which Limited Liability Partnership may be wound up by Tribunal

A LLP may be wound up by the Tribunal:-

o where the LLP decides for winding up by the Tribunal;

o where for more than six months the number of partners of the LLP is reduced below two;

o where the LLP is unable to pay its debts;

o where the LLP has acted against the interest of the sovereignty and integrity of India, the security of the State or public order;

o where the LLP has made default in filing with the Registrar the Statement of Account and Solvency or Annual Return for any five consecutive financial years or

o where the Tribunal is of the opinion that it is just and equitable that the LLP should be wound up.

28.2.2009

Chapter XIV

Section 66 - Business Transaction of partner with Limited Liability Partnership

A partner may lend money or transact other business with LLP

The partner shall have same rights and obligations with respect to the loan or other transactions with LLP as any other person would have.

28.2.2009

Chapter XIV

Section 67 - Application of the provisions of the Companies Act to LLP

By notification in the official gazette, Central Government may direct that any of the provisions of the Companies Act, 1956 specified in the notification shall:-

o apply to any LLP or

o apply to any LLP with such exception, modification and adaptation as specified in the notification

28.2.2009

Chapter XIV

Section 67 - Application of the provisions of the Companies Act

A copy of every notification proposed to be issued under Sub-Section (1) shall not be issued or issued with or without modifications without the approval by both houses of parliament.

The notification is laid in draft before both the houses of parliament, while it is in session for a total period of 30 days which may be comprised in one or two or more successive sessions

Approval with or without modifications or disapproved before the expiry of the session immediately following the session or the successive sessions aforesaid

28.2.2009

Chapter XIV

Section 68 - Electronic Filing of Document

Any document which is required to be filed, recorded and registered under this Act may be filed, recorded or registered in the manner and subject to such conditions as may be prescribed (Rule36)

• Filing and Authentication shall be in electronic manner • Maintenance of Website by CG for filing e-forms, documents etc.• Maintenance of Electronic Registry by the CG• Issue of Certificate, Approval etc., shall be in Electronic form

A digitally certified true copy issued by the Registrar of any Document or an extract from any Document electronically filed with him shall be admissible as evidence in any legal proceedings

28.2.2009

Chapter XIV


o e-form or

o Application or

o Document or

o Declaration

to be filed or delivered should be in electronic form and in pdf format.

The e-form should be authenticated by MD, Director or Secretary or Person specified in the Act by use of Digital Signature.

Where documents require non-judicial stamp paper, then the company should also submit such documents in physical form in addition to submission in electronic form. [Rule 36 (1)]

28.2.2009

Chapter XIV


Every Designated Partner, authenticating of e-form, document or application to be filed or delivered under the Act should obtain Digital Signature Certificate from Certifying Authority which is Class II or Class III [Rule 36 (1)]

The electronic registry shall enable public access and inspection of the documents filed on payment of fee of Rs.50/- prescribed in Annexure ‘B’ [Rule 36 (3)(i)]

The Registrar of Companies should also affix his signature in digital form while approving the document [Rule 36 (3) (ii)]

Where a certificate cannot be issued in electronic form, the ROC or other officer of the Central Government may issue such certificate or receipt in physical form under manual signature with his seal affixed thereon [Rule 36 (4)]

28.2.2009

Chapter XIV


Application or e-form or document required to be filed or delivered to the ROC should be done in electronic form through the MCA portal for approval, registration, taking on record or rectification by the Registrar [Rule 36 (5)]

Where the ROC require information or corrections to the documents already submitted he may do so by electronic means through e-mail and if the LLP does not have e-mail address then he shall give intimation in writing through registered post at the registered office address or other address given by LLP as the case may be [Rule 35 (6)]

ROC should give 30 days time for the LLP to rectify or furnish the information sought [Rule 35 (7)]

28.2.2009

Chapter XIV


The Registrar should re-examine every application or e-form or document filed electronically and pending in his office for more than 30 days which are found to be defective or incomplete, within a period of 60 days.

Thereafter intimate such defects or incompleteness by placing them on the website and also by e-mail.

Where e-mail is not available, by post to the address given in Form no.12 or registered office address advising rectification and re-submission within a period of 30 days from the date of such notice.

If the application or e-form or document duly corrected is not re-submitted within 30 days, then they shall be treated as invalid and shall not be approved or registered or taken on record as the case may be

The intimation of rejection should be given by ROC as explained in the previous case (Rule 36 (12))

28.2.2009

Chapter XIV

Section 69 - Payment of Additional Fee


• If any document or return required to be filed under this Act is filed within 300 days from the date within which it should have been filed the penalty shall be:

o additional fee of Rs.100 for every day of default.

• If any document or return is filed after 300 days from the date within which it should have been filed the penalty shall be:

o additional fee as specified in this Section without prejudice to any other action or liability under this Act.

28.2.2009

Chapter XIV

Section 70 - Enhanced Punishment

For the second and subsequent offences committed by:

o an LLP

o any partner or

o Designated Partner

the LLP or any partner or Designated LLP shall be punishable with imprisonment if such offence is not punishable under this Act with fine

In case of offences for which fine is prescribed (along with or exclusive of imprisonment) then they shall be punishable with fine which shall be twice the amount of fine for such offence

28.2.2009

Chapter XIV

Section 71 - Application of other Laws not barred

The provisions of this Act shall be in addition to, and not in derogation of the provisions of any other law for the time being in force

28.2.2009

Chapter XIV

Section 72 - Jurisdiction of Tribunal and Appellate Tribunal

The Tribunal shall exercise such powers and perform such functions as are conferred on it by or under this Act or any other law for the time being in force.

Any person aggrieved by an order or decision of Tribunal may prefer an appeal to the Appellate Tribunal

Provisions of Sections 10FQ, 10FZA, 10G, 10GD, 10GE and 10GF of the Companies Act, 1956 shall apply in respect of such appeal.

28.2.2009

Chapter XIV

Section 73

Penalty on non-compliance of any order passed by Tribunal

• Whoever fails to comply with order made by the Tribunal under any provisions of this Act shall be punishable:

o with imprisonment which may extend to six months and

o shall also be liable to fine which shall not be less than Rs.50,000/-

28.2.2009

Chapter XIV

Section 74

General Penalties

• Any person guilty of offence under this Act for which no punishment is expressly provided in the Act shall be liable to fine which shall be:

o Min. of Rs.5000/- and

o Max. of Rs.5 Lakhs

In case of continuation of default the person shall be punishable for further fine which may extend to Rs.50/- for every day of default

28.2.2009

Chapter XIV

Section 75 - Power of Registrar to strike defunct Limited Liability Partnership off Register

Where the Registrar has reasonable cause to believe that a LLP is not carrying on business or its operation are not in accordance with the provisions of this Act

o he may strike off the name of LLP from the Register of LLPs in such manner as may be prescribed

Before striking off the name of LLP under this Section the Registrar should give a reasonable opportunity to be heard to such LLP

28.2.2009

Chapter XIV

Section 75 - Power of Registrar to strike defunct LLP off Register

Rule 37 lays down the procedure to be followed by the Registrar for strike off name of LLP from the Register maintained

As per Rule 37 (1) if a LLP has stopped carrying on business or operation for a period of 1 year or more and Registrar has reasonable cause to believe the same, he may either on:

o an application made by LLP in Form no.24 along with fee [Rule 37 (7)] for removal or

o on his own motion

• send a notice to the LLP and all its partners of his intention to remove the name of the LLP from the Register and ask for representations along with copies of relevant documents, if any, to be submitted to him within a period of 1 (one) month from the date of notice.

• where, a LLP is regulated under a special law, the application for removal of name should be accompanied by approval of the regulatory body constituted or established under that law

28.2.2009

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• As per Rule 37 (2) the notice issued Sub-Rule (1) shall be placed by the ROC on the website of the MCA for information of the general public

• As per Rule 37 (3) after the expiry of time mentioned in the notice, unless cause to the contrary is shown by the LLP,

o the ROC may strike off the name from the Register and o shall publish notice of strike off in the Official Gazette.

• Upon publication in the Official Gazette the LLP shall stand dissolved [Rule 37 (3)]

28.2.2009

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As per Rule 37 (4) before passing order for strike off the ROC should satisfy:

• that sufficient provision has been made for realisation of all the amounts due to the LLP and

• for the payment or discharge of all its liabilities and obligations within a reasonable time.

If considered necessary the Registrar shall obtain necessary undertakings from the Designated partners or partners or other persons in charge of management of the LLP

Not withstanding the undertaking, all the assets of the LLP shall be made available for the repayment or discharge of all its liabilities and obligations even after the date of the order removing the name of the LLP from the Register

The Designate partners shall continue to be liable for all liabilities if any attached to them under the provisions of the Act even after the LLP is dissolved and its name is struck of from the Register (Rule 37 (5)

28.2.2009

Chapter XIV

Section 75 – Tribunal’s Order

If aggrieved due to strike of LLP’s name from the Register :

• a LLP or

• any partner or

• any creditor of LLP

may apply to the Tribunal for restoration of name of LLP on the Register before the expiry of 5 years from the publication in the Official Gazette.

The Tribunal if satisfied that:

• LLP was carrying on business or operation at the time of strike off or

• it is just that the LLP be restored to the Register,

o may order for restoration of name of LLP to the Register and

o also give such directions and make such provisions as it may seem just for placing the LLP and all other partners in the same position as nearly as may be as if the name of the LLP has not been struck off (Rule 37 (8))

28.2.2009

Chapter XIV

Section 75 – Effect of filing of Tribunal’s Order with the Registrar

The LLP should file the certified copy of the order of the Tribunal with the Registrar in Form no.22 along with filing fee specified in Annexure ‘B’ [Rule 37 (9)]

Upon the LLP filing the order of the Tribunal with the Registrar it shall be deemed to have continued in existence as if its name had not been struck off (Rule 37 (9))

28.2.2009

Chapter XIV

Section 76 - Offence of Limited Liability Partnerships with connivance of a partner etc.

Where an office committed by an LLP under this Act is proved:-

o to have been committed with the consent or connivance of a partner or partners or Designated Partner or Designated Partners of LLP or

o to be attributable to any neglect on the part of the partner or partners or Designated Partner or Designated Partners of the LLP

then the partner, partners or Designated Partner or Designated Partners of the LLP as the case may be and the LLP shall be guilty of the offence and

they shall be liable to be proceeded against and punished accordingly

28.2.2009

Chapter XIV

Section 77 - Jurisdiction of the Court

o the Judicial Magistrate of the First Class or

o the Metropolitan Magistrate

as the case may be, shall have jurisdiction or try any offence under this Act and shall have power to impose punishment in respect of said offence

28.2.2009

Chapter XIV

Section 78

Alteration of Schedules to the Act

Alteration to any provision in the Schedules to the Act made by the Central Government, shall be laid before each house of parliament while it is in session for a total period of 30 days which may be comprised in one or two or more successive sessions, and

If before the expiry of the session immediately following the session or the successive sessions aforesaid,

• both houses agree in making any modification in the alteration, or

• both houses agree that the alteration should not be made

then alteration shall thereafter have effect only in such modified form or be of no effect as the case may be

28.2.2009

Chapter XIV

Section 78 - Alteration of Schedules to the Act

Any alteration notified under Sub-Section (1) shall come into force only upon gazette notification and the alterations shall be effective from the date of the notification unless otherwise notified in that regard

Any act done before the alteration shall be binding and valid

28.2.2009

Chapter XIV

Section 79 - Power to make Rule

The Central Government may by notification in the official gazette make rul for carrying out of the provisions of the Act.

The Rules may provide, apart from any other, for all or any of the following matters:

1. Form and manner of prior consent to be given by Designated Partner under Section 7 (3)

2. Form and manner of particulars of every individual agreeing to act as Designated Partner of LLP under Section 7 (4)

3. The conditions and requirements relating to the eligibility of an individual to become a Designated Partner under Section 7 (5)

4. The manner of filing the incorporation document and payment of fees payable thereof under Section 11 (1) (b)

28.2.2009

Chapter XIV


5. Form of statement to be file under Section 11 (1) (C) 6. Form of incorporation document under Section 11 (2) (a) Information to be contained in the incorporation document concerning the proposed LLP under Section 11 (2) (g)

7. Manner of serving the documents on LLP or Partner or a Designated Partner and the form and manner in which any other address may be declared by the LLP under Section 13 (2).

8. Form and manner of notice to the Registrar and conditions in respect of change of Registered Office under Section 13 (3).

9. Form and manner of application and amount of fee payable to the Registrar under Section 16 (1).

10. Manner in which names will be reserved by the Registrar under Section 16

28.2.2009

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11.Manner in which an application may be made by an entity under Section 18 (1)

12. Form and manner of notice of change of name of LLP and the amount of fee payable under Section 19.

13. Form and manner of the LLP agreement and changes made therein and the amount of fee payable under Section 23 (2).

14. Form of notice, the amount of fee payable and the manner of authentication of the statement midst clauses (a), (b) and (c) of Sub-Section (3) of Section 25.

15. Manner of accounting and disclosure of monetary value of contribution of a partner under Section 32 (2).

16.Form of Statement of Account and Solvency under Section 34 (2).

28.2.2009

Chapter XIV


17.Form, manner, fee and time of filing of Statement of Account and Solvency under Section 34 (3).

18.Audit of accounts of a LLP under Section 34 (4).

19.Form and manner of Annual Return and fee payable under Section 35 (1).

20.Manner and amount of fee payable for inspection of incorporation document, names of partners and changes made there in, Statement of Account and Solvency and Annual Return under Section 36.

21.Destruction of documents by Registrar in any form under Section 40

22.Amount required as security under Section 43 (3) (a).

23. Amount of security to be given under Section 44.

28.2.2009

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24.Fee payable for furnishing a copy under Section 49 (2) (b).

25. Manner of authentication of report of inspector under Section 54.

26. Form and manner of particulars about conversion under Section 58 (1).

27. In relation to establishment of place of business and carrying on business in India by foreign LLP and regulatory mechanism and composition under Section 59.

28. Manner of calling, holding and conducting meeting under Section 60 (1).

29. In relation to winding up and dissolution of LLPs under Section 65.

30. Manner and conditions for filing document electronically under Section 68 (1).

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31.Manner for striking off the names of LLPs from the Register under Section 75.

32. Form and manner of statement containing particulars and amount of fee payable under Paragraph 4 (a) of Second Schedule.

33. Form and manner of particulars about conversion under Paragraph 5 of Second Schedule

34. Form and manner of the Statement and the amount of fee payable under Paragraph 3 of Third Schedule.

35.Form and manner of particulars about conversion under Paragraph 4 of Third Schedule.

36. Form and manner of the Statement and amount of payable under Paragraph 4 of Fourth Schedule.

37. Form and manner of particulars about conversion under Paragraph 5 of Fourth Schedule.

28.2.2009

Chapter XIV


Every rule made under this Act by the Central Government:

• should be laid as soon as it is made before each house of parliament while it is in session for a total period of 30 days comprised in one or two or more successive sessions and

• if both houses agree in making any modification in the rule, or both houses agree that the rule should not be made,

then the rule shall thereafter have effect only in modified form or be of no effect as the case may be.

Any act done before the modification or annulment shall be binding and valid.

28.2.2009

Chapter XIV

Section 80 - Power to remove difficulties

If any difficulty arises in giving effect to the provisions of this Act, the Central Government may by order published in Official Gazette, make such provisions, not inconsistent with the provisions of this Act, as may appear to it to be necessary for removing the difficulty.

No such order shall be made under this Section after the expiry of a period of 2 years from the commencement of the Act.

Every order made under this Section shall be laid as soon as may be, after it is made, before each house of parliament.

28.2.2009

Chapter XIV

Section 81

Transitional Provisions

Until the Tribunal and the Appellate Tribunal are constituted under the provisions of the Companies Act, 1956

o for the word ‘Tribunal’ occurring in Section 41 (1) (6), Section 43 (1) (a) and Section 44, the words “Company Law Board have been substituted.

o For the word ‘Tribunal’ occurring in Section 51 and in Sections 60 to 64, the words ‘High Court’ had been substituted.

o For the words ‘Appellate Tribunal’ occurring Section 72 (2), the words ‘High Court’ had been substituted.

28.2.2009

THE FIRST SCHEDULE

(SECTION 23 (4))

Mutual Rights and Duties of Partners

and

LLP and its Partners

28.2.2009

FIRST SCHEDULE

1 In the absence in the LLP agreement the:

i) mutual rights and duties of partners and

ii) mutual rights and duties of LLP and its partners

shall be determined by the provisions of First Schedule

2 All the Partners shall share equally in the Capital, Profit & Losses of the LLP

3 LLP Shall indemnify a Partner in respect of payments made and personal liabilities incurred by him:

i) in the ordinary and proper conduct of business of the LLP or

ii) for the preservation of business or property of the LLP

4 A Partner should indemnify the LLP for any loss caused to it by his fraud in the conduct of business of the LLP

28.2.2009

FIRST SCHEDULE

5 Every Partner can take part in the management of the LLP

6 A Partner is not entitled to remuneration for acting in the business or management of the LLP

7 No Person can be inducted as a Partner without the consent of all the existing partners

8 i) All matters relating to LLP should be decided by resolution passed by majority of partners

ii) Every partner shall have one vote

iii) A change of business of the LLP would require consent of all the partners

9 i) A LLP should maintain minutes of decisions taken within 30 days of taking such decisions

ii) The minutes should be kept at the Registered Office of the LLP

28.2.2009

FIRST SCHEDULE

10 Every partner should render true accounts and full information of all things affecting the LLP to any partner or his legal representative

11 If a Partner engages in business which is of same nature and competing with the LLP, without the consent of the LLP, then he must account for and pay to the LLP all profits made by him in that business

12 If a Partner derives any benefit from any transaction, without the consent of the LLP, he must account for and pay to the LLP such benefit derived by him concerning the LLP or from any use of the property, name or any business connection of the LLP

13 Majority of partners cannot expel any partner, unless the LLP Agreement gives such power to the majority of partners

14 Disputes between the partners arising out of the LLP Agreement which cannot be resolved in terms of the Agreement should be referred to Arbitration as per provisions of Arbitration and Conciliation Act, 1996

28.2.2009

THE SECOND SCHEDULE

(SECTION 55)

CONVERSION FROM FIRM

INTO

LIMITED LIABILITY PARTNERSHIP

28.2.2009

SECOND SCHEDULE

1 A Firm may convert into a LLP by complying with Second Schedule

2 Upon conversion, the Partners of the Firm shall be bound by the provisions Second Schedule that are applicable to them

3 A firm can convert itself into a LLP only if all the partners the Firm become partners of LLP. No additions or deletions are permitted.

4 A Firm for conversion into a LLP shall file statement in Form no.17 [Rule 38 (1) ] signed by all the partners with the Registrar along with prescribed fees prescribed in Annexure “B” [Rule 38 (2)]containing:

i) the name and registration number, if applicable, of the firm; and

ii) the date on which the firm was registered under the Indian Partnership Act, 1932 or under any other law, if applicable and

iii) Incorporation document and Statement referred to in Section 11

28.2.2009

SECOND SCHEDULE

5 i) The Registrar shall register the documents and issue a certificate of registration in Form no.19 [Rule 38 (3)] if satisfied regarding compliance of the provisions of the Act.

ii) The LLP shall come into existence from the date specified in the certificate

iii) The LLP should inform the Registrar the particulars of LLP in Form 14 [Rule 38 (2)] within 15 days of date of registration about the conversion

6 i) The Registrar may refuse to Register If he is not satisfied with the particulars or other information furnished under the provisions of this Act

ii) The firm has right to make an appeal to the Tribunal if the Registrar refuses to Register the LLP

28.2.2009

SECOND SCHEDULE

7 From the date of Registration specified in the Registration Certificate issued:-

i) The LLP shall come into existence by the name specified in the Registration Certificate

ii) All tangible (movable and immovable) property as well as intangible property vested in the firm, all assets, interests, rights, privileges, liabilities, obligations relating to the firm and the whole of the undertaking

of the firm shall be transferred to and shall vest in the LLP without further

assurance, act or deed and

iii) The firm shall be deemed to be dissolved and if earlier registered under the Indian Partnership Act, 1932 removed from the records maintained under that Act

28.2.2009

SECOND SCHEDULE

8 If any property is registered with any authority, the LLP shall immediately after the date of registration, take necessary steps to notify the authority of the conversion and of the particulars of the LLP in such form as the authority may specify

9 All the proceedings by or against the firm pending in any court or tribunal or other authority on the date of registration may be continued, completed and enforced by or against the LLP

10 Any conviction, ruling, order or judgement of any court, tribunal or other authority in favour or against the firm may be enforced by or against the LLP

11 Every agreement to which the firm was a party immediately before the date of registration, shall have effect as from that date as if:-

i) the LLP were a party to such an agreement instead of the firm and

ii) any reference to the firm will be deemed to be reference to LLP

28.2.2009

SECOND SCHEDULE

12 All contracts and arrangements etc. subsisting immediately before the date of registration relating to the firm shall be enforceable by or against the LLP as if the LLP were named therein or were a party thereto

13 Every contract of employment shall continue to be in force as if the LLP were the employer there under instead of the firm

14 i) Every appointment of the Firm in any capacity which was in force immediately before the date of registration shall take effect and operate from that date as if LLP were appointed

ii) Any authority or power conferred on the firm immediately before the date of registration shall take effect and operate from that date as if it were conferred on the LLP

28.2.2009

SECOND SCHEDULE

15 The provisions of paragraphs 7 to 14 shall apply to any approval, permit or licence issued to the firm under any other Act and in force immediately before the date of registration of the LLP subject to the provisions of such Act under which such approval, permit or licence has been issued

16 Not withstanding anything in paragraph 7 to 14, every partner of a firm that is converted into a LLP shall continue to be personally liable (jointly or severally with the LLP): i) for the liability and obligations of the firm which were incurred prior to the conversion or

ii) which arose from any contract entered into prior to the conversion

If any such partner discharges any liability referred to in Sub-Section (1), he shall be entitled subject to any contrary agreement with the LLP to be fully indeminified by the LLP in respect of such liability

28.2.2009

SECOND SCHEDULE

17 The LLP should ensure for a period of 12 months commencing within 14 days after the date of registration, that every official correspondence of the LLP bears the following:-

i) a statement that it was converted from a firm into a LLP as from the date of registration and

ii) the name and registration number, if applicable, of the firm from which it was converted

If any LLP contravenes above provision it shall be punishable with fine- Min.Rs.10,000/- and Max. Rs.1 Lakh and with a further fine- utpo Rs.50/- per day of default but extend upto Rs.500/- per day of default

28.2.2009

THE THIRD SCHEDULE

(SEE SECTION 56)

CONVERSION FROM PRIVATE COMPANY

INTO


28.2.2009

THIRD SCHEDULE

1 i) A private company may convert into a LLP by complying with the requirements set out in Third Schedule

ii) A private company may apply to convert into a LLP in accordance with Third Schedule only if:

o there is no security interest in its assets subsisting or in force at the time of application and

o the all the shareholders of the company become partners of the LLP. No addition or deletion is permitted

Upon such conversion, the company, its shareholders, the LLP and the partners of that LLP shall be bound by the provisions of Third Schedule that are applicable to them

28.2.2009

THIRD SCHEDULE

2 A private company may apply to convert into a LLP by filing with the Registrar:-

i) a statement in Form no.18 [Rule 39 (1) ]signed by all its shareholders along with fees prescribed in Annexure “B” [Rule 39 2)] containing following particulars:

o the name and registration of the private company

o the date on which the private company was incorporated and

ii) incorporation document and statement referred to in Section11

28.2.2009

THIRD SCHEDULE

3 i) The Registrar shall register the documents and issue a certificate of registration in Form no.19 if satisfied regarding compliance of the provisions of the Act


iii) The LLP should inform the Registrar of Companies the particulars of LLP in Form no.14 [Rule 39 (4)] within 15 days of date of registration

4 i) The Registrar may refuse to Register if he is not satisfied with the particulars or other information furnished under the provisions of this Act ii) The private company has right to make an appeal to the Tribunal if the Registrar refuses to Register the LLP

28.2.2009

THIRD SCHEDULE

5 From the date of registration specified in the Registration Certificate: i) The LLP shall come into existence by the name specified in the Registration Certificate

ii) all tangible (movable or immovable) and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relating to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the LLP without further assurance, act or deed and

iii) the private company shall be deemed to be dissolved and removed from the records of the ROC

28.2.2009

THIRD SCHEDULE

6 If any property is registered with any authority immediately after the date of registration, LLP should take necessary steps required to notify

the authority of the conversion and of the particulars of the LLP in such form and manner as the authority may determine.

7 All proceedings by or against the private company which are pending before any court, tribunal or other authority on the date of registration may be continued, completed and enforced by or against the LLP

8 Any conviction, ruling, order or judgement of any court, tribunal or other authority in favour of or against the private company may be enforced by or against the LLP

9 Every agreement to which the private company was a party immediately before the date of registration, shall have effect as from that date as if:-

i) the LLP were a party to such an agreement instead of the private company and

ii) any reference to the private company will be deemed to be reference to LLP

28.2.2009

THIRD SCHEDULE

10 All contracts and arrangements etc. subsisting immediately before the date of registration relating to the private company shall be enforceable by or against the LLP as if the LLP were named therein or were a party thereto

11 Every contract of employment shall continue to be in force as if the LLP were the employer there under instead of the private company

12 i) Every appointment of the private company in any capacity which was in force immediately before the date of registration shall take effect and operate from that date as if LLP were appointed

ii) Any authority or power conferred on the private company immediately before the date of registration shall take effect and operate from that date as if it were conferred on the LLP

28.2.2009

THIRD SCHEDULE

13 The provisions of paragraphs 6 to 13 shall apply to any approval, permit or licence issued to the private company under any other Act and in force immediately before the date of registration of the LLP subject to the provisions of such Act under which such approval, permit or licence has been issued


i) a statement that it was converted from a private company into a LLP as from the date of registration and

ii) the name and registration number of the private company from which it was converted

If any LLP contravenes above provision it shall be punishable with fine- Min.Rs.10,000/- and Max. Rs.1 Lakh and with a further fine- upto Rs.50/- per day and it may extend to max. of Rs.500/- per day of default

28.2.2009

THE FOURTH SCHEDULE

(SEE SECTON 57)

CONVERSION FROM

UNLISTED PUBLIC COMPANY

INTO


28.2.2009

FOURTH SCHEDULE

1 i) An unlisted public company may convert into a LLP by complying with the requirements set out in Fourth Schedule

ii) An unlisted public company may apply to convert into a LLP in accordance with Fourth Schedule only if:

o there is no security interest in its assets subsisting or in force at the time of application and

o the all the shareholders of the company become partners of the LLP. No addition or deletion is permitted

2 Upon such conversion, the company, its shareholders, the LLP and the partners of that LLP shall be bound by the provisions of Fourth Schedule that are applicable to them

28.2.2009

FOURTH SCHEDULE

3 An unlisted public company may apply to convert into a LLP by filing with the Registrar:-

i) a statement in Form no.18 [Rule 40 (1)] signed by all its shareholders along with fees prescribed in Annexure “B” [Rule 40 (2)] containing following particulars:

o the name and registration of the unlisted public company

o the date on which the unlisted public company was incorporated and

ii) incorporation document and statement referred to in Section11

28.2.2009

FOURTH SCHEDULE

4 i) The Registrar shall register the documents and issue a certificate of registration in Form no.19 if satisfied regarding compliance of the

provisions of the Act


iii) The LLP should inform the Registrar of Companies the particulars of LLP in Form no.14 [Rule 40 (4)] within 15 days of date of registration

5 i) The Registrar may refuse to Register if he is not satisfied with the particulars or other information furnished under the provisions of this Act ii) The unlisted public company has right to make an appeal to the Tribunal if the Registrar refuses to Register the LLP

28.2.2009

FOURTH SCHEDULE

6 From the date of registration specified in the Registration Certificate: i) The LLP shall come into existence by the name specified in the Registration Certificate

ii) all tangible (movable or immovable) and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relating to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the LLP without further assurance, act or deed and

iii) the unlisted public company shall be deemed to be dissolved and removed from the records of the ROC

28.2.2009

FOURTH SCHEDULE

7 If any property is registered with any authority immediately after the date of registration, LLP should take necessary steps required to notify

the authority of the conversion and of the particulars of the LLP in such form and manner as the authority may determine.

8 All proceedings by or against the unlisted public company which are pending before any court, tribunal or other authority on the date of registration may be continued, completed and enforced by or against the LLP

9 Any conviction, ruling, order or judgement of any court, tribunal or other authority in favour of or against the unlisted public company may be enforced by or against the LLP

28.2.2009

FOURTH SCHEDULE

10 Every agreement to which the unlisted public company was a party immediately before the date of registration, shall have effect as from

that date as if:-

i) the LLP were a party to such an agreement instead of the unlisted public company and

ii) any reference to the unlisted public company will be deemed to be reference to LLP

11 All contracts and arrangements etc. subsisting immediately before the date of registration relating to the unlisted public company shall be enforceable by or against the LLP as if the LLP were named therein or were a party thereto

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FOURTH SCHEDULE

12 Every contract of employment shall continue to be in force as if the LLP were the employer there under instead of the unlisted public company

13 i) Every appointment of the unlisted public company in any capacity which was in force immediately before the date of registration shall take effect and operate from that date as if LLP were appointed

ii) Any authority or power conferred on the unlisted public company immediately before the date of registration shall take effect and operate from that date as if it were conferred on the LLP

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FOURTH SCHEDULE

14 The provisions of paragraphs 7 to 14 shall apply to any approval, permit or licence issued to the unlisted public company under any other Act and in force immediately before the date of registration of the LLP subject to the provisions of such Act under which such approval, permit or licence has been issued


i) a statement that it was converted from a private company into a LLP as from the date of registration and

ii) the name and registration number of the unlisted public company from which it was converted

If any LLP contravenes above provision it shall be punishable with fine- Min.Rs.10,000/- and Max. Rs.1 Lakh and with a further fine- upto

Rs.50/- per day and it may extend to max. of Rs.500/- per day of default

28.2.2009

THANK YOU

28.2.2009