Amendments to the LLP Act- Effective from 1st April, 2022

On July 30, 2021, the Limited Liability Partnership (Amendment) Bill, 2021 was introduced in the Rajya Sabha and will come into force from 1st April 2022. The Limited Liability Partnership Act, 2008 is being amended by this bill. The Act regulates limited liability partnerships (LLPs). A limited liability partnership is a type of corporation that differs from ordinary partnership organisations. A partner’s liability in an LLP limits their interest in the company. Moreover, the bill changes the nature of punishment for some offences by converting them to civil defaults. It also creates special courts, specifies tiny limited liability partnerships, and names adjudicating officers.

Amendment Made

The government has announced the Limited Liability Partnership (Amendment) Rules, 2022. Likewise, the amendment of rules 5, 18, 19, and 37 also, takes place. According to an official announcement issued on Saturday, the ministry of corporate affairs has decriminalised procedural lapses and technical defaults by limited liability partnerships (LLPs) with effect from April 1st, 2022.

The revisions to the LLP Act adopted last year take effect as a result of the announcement. The limited liability partnership (LLP) is the preferred legal form in the service industry and among start-ups. Also, there exist around 200,000 limited liability partnerships (LLPs) in the United States.

The Amendment Act has added the notion of Small LLP, which intends to align with the Corporations Act, 2013, concept of small companies. Small LLP is a limited liability partnership as defined by the Amendment Act. For the preceding financial year, the contribution is up to INR 2,500,000 or such other amount as may be prescribe, but not more than INR 5,00,00,000; and the turnover is up to INR 40,00,000 or such other amount as may be prescribe, but not more than INR 500,000,000.

Decriminalization of Errors

The LLP (Amendment) Act of 2021 lowered the number of penal provisions from 24 to 22, while decriminalising 12 others. The errors that were decriminalised were of a technical or procedural character, and there will be no need to bring them before business law courts for adjudication because no criminal intent is suspected. The ministry also appointed registrars of companies (RoCs) as adjudicating authorities under the Act. This will likewise take effect on April 1st, 2022. Regional Directors in charge of their respective regions will handle appeals.

Penalty Imposed

The Amendment Act stipulates the penalty for non-compliance with the LLP Act by Small LLP/Start-Up LLP. Or by its partner or designated partner, shall be one-half of the penalty specified; up to a maximum of INR 1, 00,000 for a limited liability partnership and INR 50,000 for each partner/designated partner; or any other person, as the case may be. According to the LLP Act, every LLP must have at least two authorised partners; one of whom must be a resident of India. Previously, the LLP Act defined a resident of India as someone who spent at least 182 days in India. A person who has lived in India for at least 120 days during the financial year is also eligible to become a designated partner of an LLP, according to the Amendment Act.

Further, the Regional Director has the authority under the Act to aggregate offences. Those were only liable to get punishment by a fine. It also empowered the Centre to establish accounting and auditing standards for certain types of LLPs. It also empowered the Centre to establish special courts to deal with violations of the law quickly.

Amendments in the Fees for LLPs

The Limited Liability Partnership (Amendment) Rules, 2022, also replaced the current Annexure A with revised fee requirements for LLPs.

Fees Applicable for LLP Registration

The charge for registering a Limited Liability Partnership, as well as converting a business, a private company, or an unlisted public company into a Limited Liability Partnership, is announced in the (Amendment) Rules, 2022 below:

Fees Applicable for filing LLP Forms

Fees that apply For filing, registering, or recording any document, form, statement, notice, Statement of Accounts and Solvency, annual return, and application for conversion of a firm, a private company, or an unlisted public company into an LLP required or authorised to be filed, registered, or recorded by the Act or by these rules:

Fees Applicable for Recording of Appointment of a Partner

In LLP Form No. 4, there is a fee for submitting, registering, or recording notice of appointment, cessation, change of name, address, designation of a partner or designated partner, intimation of Designated Partner Identification Number, and agreement to become a partner or designated partner.

Fees Applicable for Conversion of Firm into LLPs

Fees for all applications save those for converting a firm, a private company, or an unlisted public corporation into an LLP are as follows:

Fees Applicable for an application under Rule 18(3)

Fee for document inspection or getting a certified copy

Any form filed by a foreign limited liability partnership is subject to a fee.

Fee for filing any form, Statement of Accounts and Solvency, notification, or document by a foreign limited liability partnership.

An additional cost will be charged if the LLP forms are not filed on time on the below-mentioned rates

Endnote

In contrast with the same, we can conclude that the goal of this amendment is to make doing business easier. Also, to lower the rigours of compliance and increase ease of doing business. The government has previously revised the Companies Act twice to legalize and regulate technical or procedural violations.