The Corporate Affairs Ministry (MCA) has now come out with a detailed framework for adjudication of penalties under the Limited Liability Partnership Act ( LLP Act).

The framework — now specified through amendment of LLP Rules — also provides for registration of appeals against such adjudication and its disposal by the Regional Director.

This specified framework will come into effect from April 1. Another important move is the introduction of a graded additional and other fee structures that makes the required distinction between small LLPs and others, official sources said.

Specified framework

As per the specified framework, an adjudication officer is empowered to issue show cause notices and the LLP is required to file its response in electronic mode only, unless the adjudicating officer is of the opinion that physical appearance is required. It maybe recalled that LLP Act 2008 was amended in August last year so as to among other things “decriminalise” several offences and consequently provided that LLPs would only be liable to pay a penalty and not be punishable with a fine. The LLP Amendment Act 2021 largely decriminalises minor procedural offences and non-compliances and imposed certain penalties instead. For this, the Act has introduced a new section for the appointment of adjudicating officers by the Central government for awarding penalties for defaults by LLPs under the Act. The Act had also introduced the concept of small LLPs and penalties payable by such firms.

Experts’ take

Abhishek Sanyal, Partner, Economic Laws Practice, said that “these changes operationalise the adjudication process and further cement the welcome move of decriminalisation of offences under corporate legislations for non-material offences. This sends a positive signal to the start-up community and small business owners.”

Aseem Chawla, Managing Partner, ASC Legal, said that small LLPs would henceforth need to pay relatively lower amounts as per the separate fee schedule stated in this notification which is effective April 1. “All amendments are intended to make small and other forms of LLPs as a viable alternate vehicles for carrying business”, Chawla said.

Ruby Singh Ahuja, Sr Partner, Karanjawala & Co, said the amendment made to the LLP Act, 2008 is certainly a step towards making the ease of doing business more effective in India. The amendment not only decriminalises certain procedural lapses but also delegates the adjudicatory power to the Registrar of Companies in some cases. “This will help the speedy resolution of the disputes between the parties and also be economically viable for the stakeholders”, she said.

Maneet Pal Singh, Partner, I.P. Pasricha & Co, said that change in the recent LLP related notification is reduction in additional fees/ penalty for non-filing of LLP forms like Form 8 and 11.  “In the past it had been seen that whenever there were extension of dates or reduction in addition fees it was done for Companies only. This time specifically MCA has come up with notification to reduce addition fees/ penalty for LLPs. This opportunity will help some small and other non-compliant LLPs to get compliant by paying reasonable additional fees,” he said. Pritika Kumar, Founder & Counsel, Cornellia Chambers, said the latest MCA move would help reduce compliance burdens for minor procedural defaults