With the motive of facilitating greater ease of business in India, the government on Wednesday i.e. 28.07.2021 approved certain amendments in the LLP Act, 2008 vide LLP(amendment) Bill, 2021 thereby decriminalizing certain provisions and introducing two different types of LLP viz. Small Limited Liability Partnership and Startup Limited Liability Partnership and making various other amendments.
Objective of the government for the proposed amendment in the LLP Act,2008
“In view of the constant endeavor of the Central Government to facilitate greater ease of living to law abiding corporates and to decriminalize certain provisions of the Act, it has become necessary to amend certain provisions of the Act. Hence the Bill, namely, the Limited Liability Partnership (Amendment) Bill, 2021 is proposed to be enacted.”
Various Amendments proposed in the Limited Liability Partnership (Amendment) Bill, 2021
The Limited Liability Partnership (Amendment) Bill, 2021, inter alia, provides for the following, namely:—
(i) to introduce the concept of “small limited liability partnership” in line with the concept of “small company” under the Companies Act, 2013;
(ii) to amend certain sections of the Act so as to convert offences into civil defaults and to convert the nature of punishment provided in the said sections from fines to monetary penalties;
(iii) to insert a new section 34A so as to empower the Central Government to prescribe the “Accounting Standards” or “Auditing Standards” for a class or classes of limited liability partnerships;
(iv) To amend section 39 of the Act relating to “compounding of offences” so as to authorise the Regional Director to compound any offence under this Act which is punishable with fine only;
(v) To insert a new section 67A empowering the Central Government to establish or designate as many “Special Courts” as may be necessary for the purpose of providing speedy trial of offences under the Act;
(vi) To amend section 72 of the Act so as to provide more clarity in the provisions when any person aggrieved by an order of “Tribunal” prefers an appeal to the “Appellate Tribunal”;
(vii) to insert a new section 76A so as to provide that the Central Government may appoint as many officers as Adjudicating Officers as it thinks necessary for the purpose of adjudicating penalties under the Act.
The following definition is proposed for Small Limited Liability Partnership
(ta) “small limited liability partnership” means a limited liability partnership—
- the contribution of which, does not exceed twenty-five lakh rupees or such higher amount, not exceeding five crore rupees, as may be prescribed; and
- the turnover of which, as per the Statement of Accounts and Solvency for the immediately preceding financial year, does not exceed forty lakh rupees or such higher amount, not exceeding fifty crore rupees, as may be prescribed; or
- which meets such other requirements as may be prescribed,
and fulfils such terms and conditions as may be prescribed;’
The Government has also proposed a new from of LLP which is to reckoned as ‘Startup LLPs’ definition of which is proposed as below:-
Start-up limited liability partnership” means a limited liability partnership incorporated
under this Act and recognised as such in accordance with the notifications
issued by the Central Government from time to time.
*A lot of changes are being made in the Companies Act, decriminalizing many sections and improving ease of doing business for companies. A similar treatment had to be given for LLPs,” Union finance minister Nirmala Sitharaman said while addressing a press conference.
“With the Limited Liability Partnership Amendment Bill, we will have only 22 penal provisions, 7 compoundable offences and 3 non-compoundable offences,” she said, adding 12 offences will be decriminalised for LLPs and three sections will be omitted.
Finance Minister Nirmala Sitharaman also said the amendments would bring an equal playing field for LLPs, compared to large companies which come under the Companies Act, as LLPs are becoming popular among startups. Earlier, LLPs did not have the benefit of either simplified regulation or ease of practice under proprietorship, she pointed out.*
*Source: Hindustan Times
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