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A Limited Liability Partnership (LLP) company is a business structure where the members have limited liabilities. This means any designated partner will not be held accountable for the misconduct or negligence of other members.Â
Individuals willing to form an LLP must know about the Limited Liability Partnership Act of 2021.Â
Here are all the details regarding this latest amendment. Keep reading!
The Rajya Sabha introduced the Limited Liability Partnership on 30th July 2021. The Lok Sabha passed this amendment on 9th August 2021. It is a revised version of the LLP Act 2008 and provides regulations of LLP companies. The LLP Act turns certain offences into civil defaults and changes the form of punishment for such violations. It also looks after the formation of special courts and appoints various settling officers.
This Act gives power to the Central Government to recommend changing an LLP name if it is undesirable or similar to any existing LLP. It generally allottes three months from the date of issue to do the same. The government holds power to rename an LLP if it fails to comply with the government's order. The registrar then replaces the old name with a new allotted name.
If any LLP or its member has an intention to defraud its creditors or any fraudulent purposes, all individuals who are knowingly a part to it is punishable with a fine in addition to two years of imprisonment. This Act amended the imprisonment period from two years to five years.
In the Limited Liability Partnership (Amendment) Act, 2021, the concept of Small Limited Liability Partnership was introduced. Small LLP refers to any LLP with a capital contribution of not more than ₹ 25 lakhs or such higher amount and also does not exceeds ₹ 5 crore. In addition, the turnover of this LLP in the previous financial year must not be more than ₹ 40 lakhs and or such higher amount and also does not exceeds ₹ 50 crore. To act as Small LLP, that LLP must meet other requirements prescribed from time to time.
The Central Government can prescribe Standards of Accounting and Standards of Auditing with the help of National Financial Reporting Authority (NFRA), as recommended by Institute of Chartered Accountants of India.
Under Section 39 of Limited Liability Partnership Act 2021, the Regional Director or any other officer whose rank is not below the Regional Director can compound an offence. If this law compounds an offence that an LLP or its members commit, it cannot compound any similar offence for three years.
Under Section 67A, the Central Government can form special courts for speedy trials of the offences under the Act. These courts will include a Session Judge or an Additional Sessions Judge. These will also comprise a Metropolitan Magistrate or a Judicial Magistrate of First Class.
If one needs to file any return or document with the registrar, they can do so within 300 days of the payment due date. In such cases, the authorities will charge an additional fee of ₹ 100 per day.
The Central Government holds power to appoint an adjudicating officer for awarding the penalties. The Regional Director will look upon any appeal against the adjudicating officer.
Scenarios such as changes in LLP partners, change of the registered office, filing of statement of account and solvency, reconstruction of an LLP are decriminalized.
These revised regulations in the LLP Act 2008 got a nod from the Hon’ble Prime Minister, Narendra Modi. The objectives and features of the new Act benefited small companies, especially start-ups.
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