The Limited Liability Partnership Act, 2008 - An Overview
[Submitted by CA. Kishori Sharan,
B.Com(H), ACA, MBA,
January 23, 2009
The LLP Act has received the assent of President on Jan-09-2009.
The salient features of this Act.
- LLP will be body corporate having legal entity distinct from its members and will have perpetual succession.
- LLP can sue, be sued, own, acquire properties in its own name and will have common seal.
- The provision of Indian Partnership Act will not apply unless otherwise specified.
- An Individual/body corporate (Foreign LLP or Foreign Company) can become a partner in LLP. However a Cooperative Society is excluded from membership.
- Minimum partners are two. However there is no maximum limit specified by the Act
- At least two designated partners must be there and one of should be resident in India.
- All the designated partners are required to obtain DPIN (Designated Partner Identification Number) from Central Government.
Formation of LLP
- Incorporation Document needs to be filed to ROC of the State in which the registered office of LLP would be situated.
- The name of LLP must end with “Limited Liability Partnership” or “LLP”.
- The incorporation certificate is being issued within 14 days from completion of all formalities required.
- Every partner shall be required to contribute money or property for LLP as per LLP agreement (if any). In the absence of LLP agreement, the contribution shall be equal by all the partners.
Relations among Partners
- The rights and duties of LLP and Partners are governed by LLP agreement. (if any). In the absence of such agreement, the rights and duties are governed by Schedule-1 of the LLP Act.
- The LLP agreement has to be filed with ROC and further if any changes have been made must be intimated to ROC.
- A person cease to be the partner of LLP if as per agreement or by giving notice to all partners for not less than 30 days.
- A person may also cease to partner automatically in case of death or dissolution of LLP.
- An LLP can also have business transaction with it partners being a separate legal entity different from its partners.
- A partner would be personally liable for his wrongful acts and but would not be liable for other partners’ wrongful acts.
- A partner is not personally liable for an obligation of LLP.
- The partner of LLP can transfer his share of the profits or losses of LLP either wholly or in part. The transfer of rights would not mean the disassociation of the partner from LLP.
Books and records
- Books of accounts (as prescribed) to be maintained on cash/accrual basis of accounting. In addition, a statement of Account and Solvency to be prepared and signed by designated partners filed to ROC every year in addition to Annual Return which is to be filed within 60 days of end of financial year.
- The books are required to be audited as per the prescribed rules.
Existing Firms/Companies to LLP
- An existing firm/Company may apply to ROC for conversion LLP provided all partners/shareholders of firm/Company become of partners of LLP and fulfill all the formalities as specified under the LLP Act.
- The so converted LLP has to ensure that for a period of 12 months after the date of registration as LLP, every correspondence of LLP bears a statement that “it was converted from a firm/Company to LLP and name and registration of the firm/Company from which it was converted.
Winding Up/ Dissolution of LLP
- Winding up can be ordered by Central Govt. or National Company Law Board Tribunal (NCLT) on account of inability to pay the debts, default in filing the statements to ROC for continuous period of 5 years or on any other grounds.
- The rules for winding up are to be notified by Central Got in the due course.
- The taxation aspect of LLP’s under the Income Tax will be made in due course.
- LLP Act also provides the setting up of foreign LLPs to carry on business activities. Hence the necessary changes need to be made in exchange control regulations.