Bill to amend the LLP Act introduced in Rajya Sabha

Our Bureau New Delhi | Updated on July 31, 2021

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Concept of ‘small LLP’ being introduced as part of changes

The Centre on Friday introduced a Bill in the Rajya Sabha to amend the existing Limited Liability Partnership ( LLP) Act 2008 as part of its efforts to facilitate greater ‘ease of living’ to law abiding entities and to decriminalise certain provisions of the Act.

This Bill – the Limited Liability Partnership (Amendment) Bill 2021 – was introduced in the upper house by Rao Inderjit Singh, Minister of State for Corporate Affairs.

Besides introducing the concept of “small limited liability partnership” in line with the concept of “small company” under the Companies Act 2013, the Bill also seeks to convert several offences specified in the LLP Act 2008 into civil defaults and convert the nature of punishment provided in these sections from fines to monetary penalties.

Small LLP

The Bill defines a “small LLP” as a limited liability partnership where the contribution does not exceed ₹25 lakh or such higher amount – not exceeding ₹5 crore – as may be prescribed ; and the turnover in the preceding financial year does not exceed ₹40 lakh or such higher amount – not exceeding ₹50 crore – as maybe prescribed.

Also, the Centre is now proposed to be empowered to prescribe “accounting standards” or “auditing standards” for a class or classes of LLPs. The Centre is also proposed to be empowered to establish or designate as many “special courts” as may be necessary for the purposes of providing speedy trial of offences under the LLP Act.

This is the first time that Centre is looking to amend the LLP Act since its enactment in 2008. The latest set of amendments are expected to bring LLPs on an equal playing field as compared to large corporates, which are now enjoying ease of doing business due to government’s recent efforts in decriminalising several provisions of the Companies Act.

As many as 12 offences in the exiting law are proposed to be decriminalised through the latest set of amendments.

Once the proposed changes to LLP Act 2008 are effected, the number of compoundable offences under the legislation will come down from 21 now to just seven, the total number of penal provisions will get reduced to 22 from 24 now and there will be only three non compoundable offences,

Sampath K Rajagopalan, Partner & National Leader - Entity Compliance & Governance, EY India, said, “The amendments to the LLP Act have been anticipated for some time. The changes in improving governance, ease of doing business and relaxation in compliance obligations should make LLPs an more attractive business vehicle specifically for start-ups and small businesses”.

Gaurav Dayal, Partner, Lakshimkumaran and Sridharan Attorneys, said the proposed amendments shall serve as a game changer for the start-up players and reduce the burden of compliances on them.

“Incorporating a limited liability partnership will become considerably more attractive and introduction of the definition of small LLPs will further widen the scope of coverage for considerably smaller startups based on their turnover size and contributions to be made by partners or proprietors of such LLPs,” Dayal said.

Published on July 31, 2021

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