Limited Liability Partnership Act - Features and Objectives

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.

Individuals willing to form an LLP must know about the Limited Liability Partnership Act of 2021.

Here are all the details regarding this latest amendment. Keep reading!

What Is Limited Liability Partnership Act in India?

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.

What Are the Features and Objectives of Limited Liability Partnership Act?

1. Change in Name of Limited Liability Partnership Company

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.

2. Increased Punishment in Case of Fraud

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.

3. Small LLP Concept

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.

4. Prescribing Auditing and Accounting Standards

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.

5. Compounding Offences

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.

6. Special Courts

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.

7. Additional Fee Reduction

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.

8. Appointing Adjudicating Officers

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.

9. Decriminalization of Several Offences

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.

Frequently Asked Questions

✓ When did authorities pass the Liability Partnership Act 2021?

Rajya Sabha introduced the Limited Liability Partnership Act on 30th July 2021 while Lok Sabha passed it on 9th August 2021.

✓ How many partners are mandatory to form an LLP in India?

An LLP must consist of two designated partners.