LIMITED LIABILITY PARTNERSHIP Act 2008

LIMITED LIABILITY PARTNERSHIP ACT 2008

CONCEPT

Existing in other countries.

J. J Irani Committee – 2005

Introduced in Rajya Sabha – 24^th October 2008

Passed on – 12^th December 2008

Presidents assent – 27^th January 2009

Came into force on 31^st March 2009

Definition : Section 2(n)

“A partnership formed and registered under the Limited Liability Partnership Act 2008”

Section 3 – Nature of Limited Liability Partnership.

“A body corporate formed and incorporated under the Limited Liability Partnership Act 2008 and a legal entity saperate from its partners.

The term "body corporate" is defined in Section 2(11) of the Companies Act, 2013. This includes a private company, public company, one personal company, small company, Limited Liability Partnerships, foreign company etc.
“body corporate” or “corporation” also includes a company incorporated outside India.
However, body corporate does not include—
(i) a co-operative society registered under any law relating to co-operative societies; and
(ii) any other body corporate (not being a company as defined in the Companies Act 2013), which the Central Government may, by notification, specify in this behalf;

CHARACTERISTICS        

     

NATURE AND SALIENT FEATURES

1.       Body corporate.

2.       Rights and duties – agreement.

3.       Separate legal entity.

4.       Two partners / Two partners – Designated partners.

5.       Maintain Annual Account.

6.       Central Government – Power to investigate.

7.       A firm, private company or unlisted public company – LLP.

8.       Winding up – voluntary / by tribunal.

9.       Power – Government to apply provisions of Companies Act 2013.

10.   Indian Partnership Act 1932

ADVANTAGES AND DISADVANTAGES

ADVANTAGES

1.       Separate legal entity.

2.       Easy to establish.

3.       Procedural flexibility & requirements.

4.       Perpetual existence.

5.       Globally accepted form of business.

6.       No requirement of minimum capital contribution.

7.       No restriction as to maximum number of partners.

8.       Partners are not liable for the negligent or fraudulent act of other partners.

9.       LLP & its partners are separate from one another.

10.   Personal partners are considered only in case of fraudulent acts of the partners.

11.   Only books of accounts are required to be maintained. No other statutory requirement are imposed.

12.   Less cost of formation of LLP.

DISADVANTAGES

1.       Cannot raise from the public.

2.       Any act of the partner without the other may bind the LLP.

3.       No separation of management from the owners.

4.       Under certain circumstances the liability may extend to the personal property of the designated partners.

PROCEDURE FOR INCORPORATION

INCORPORATION PROCESS OF LLP

1.       PRE – REQUISITES :

a.       Acquire DSC for Designated Partners.

b.      Obtain DIN for Designated Partners.

2.       Incorporation process

a.       Name approval application.

b.      Application for certificate of incorporation.

c.       Registration of LLP agreement.

d.      On approval of the same.

EXTENT OF LLP –

CONVERSION OF LLP

Process of Conversion of LLP into Company

 

♦ Publish newspaper notice in form URC-2 A notice seeking objections for conversion of LLP into company must be published in form URC-2 in atleast 2 newspapers one in local language wherein registered office is situated and another in english language newspaper. 

♦ File RUN Name Approval has to be obtained from the ROC by submitting an application in RUN. Object clause of Company must be attached. 

♦ Filing form No URC – 1 & SPICe & SPICe MOA and SPICe AOA After getting the approval of name from Registrar of Companies and after 21 days from the publication of newspaper advertisement, the applicant should file the form No URC-1 & SPICe along with the following documents. 

Attachments to URC-1 

1. List of the members with details viz. names, address, occupation, shares held by them appropriately, etc.

2. List of the first directors of the private company with details viz. names, address, the DIN etc. 

3. An affidavit from every person proposed as first directors, that he is not banned to be a director under section-164 

4. A list including the names & addresses of partners of LLP 

5. A copy of LLP agreement & certificate of registration duly verified by two designated partners 

6. A statement indicating the following specifications 

a) the nominal share capital of firm & the number of shares into which it is separated 

b) the number of shares taken & the amount paid for every share 

c) the name of the firm, with the addition of word Limited or private limited is required. 

7. A written consent of all partners of LLP 

8. A written consent or No objection certificate from all creditors. 

9. Copy of newspaper advertisement, 

10. Statement of accounts of the company which must not be 30 days preceding the date of the application and it must be duly certified by the auditor. 

11. A copy of latest income tax return 

12. Undertaking by proposed first directors with regard to compliance with Stamp Act 

Attachments to SPICe 

1. Consent & Declaration by first Directors in form DIR-2; (On Plain Paper) 

2. Self-Declaration by first directors and subscribers in form INC-9; (On Plain Paper) 

3. ID Proof and Address Proof of Directors; (PAN card and Aadhar card) 

4. Resolution of Partners for conversion of LLP into Company; 

5. Proof of regd. Office like Rent Agreement/Sale deed 

6. Latest Electricity bill (Not older than 2 Months) 

7. NOC of Owner of Office, If Regd office is rented. 

♦ Issue Share Certificates to the members. 

Conclusion Recently, Government slashed the corporate tax rate of Companies from 30% to 22% while tax rate on LLPs are unchanged and continue to attract tax @ 30%. So, many existing LLPs are now planning to convert themselves into Companies for multiple reasons like Growth and Expansion, Infusing equity capital, reducing tax liabilities, receiving foreign investment, attracting VCs and HNIs etc.

Source : https://taxguru.in/company-law/process-conversion-llp-company.html

MUTUAL RIGHTS AND DUTIES OF PARTNERS

Chapter IV - Partners And their Relationships

Top of Form Bottom of Form

Summary

The mutual rights and duties of the partners of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its partners, shall be governed by the limited liability partnership agreement. In the absence of agreement as to any matter, the mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and the partners shall be determined by the provisions relating to that matter as are set out in the First Schedule. LLP Agreement can also be amended. A partner can also cease to be partner of the firm Cessations , not by itself discharge the partner from any obligation to the limited liability partnership or to the other partners or to any other person which he incurred while being a partner the obligation for acts. Partner to notify change in address or name to the LLP , which in turn will notify the same to the Registrar Consent is necessary to become a partner in LLP Any person ceasing to be partner of the LLP, can himself file the intimation of his cessation to the Registrar of Companies

23. (1) Save as otherwise provided by this Act, the mutual rights and duties of the partners of a limited liability partnership, and the mutual rights and duties of a limited liability partner­ship and its partners, shall be governed by the limited liability partnership agreement between the partners, or between the limit­ed liability partnership and its partners.

(2) The limited liability partnership agreement and any changes, if any, made therein shall be filed with the Registrar in such form, manner and accompanied by such fees as may be prescribed.

(3) An agreement in writing made before the incorporation of a limited liability partnership between the persons who subscribe their names to the incorporation document may impose obligations on the limited liability partnership, provided such agreement is ratified by all the partners after the incorporation of the limited liability partnership.

(4) In the absence of agreement as to any matter, the mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and the partners shall be determined by the provisions relating to that matter as are set out in the First Schedule

http://www.llponline.in/llp_chapter4.php

WINDING UP OF LLP

1.       Winding up and dissolution Voluntary or by tribunal.

2.       Winding up voluntarily under three circumstances.

a.       Expiry of period.

b.      Happening of specified event.

c.       LLP passes special resolution.

3.       Winding up by the tribunal under six circumstances.

a.       LLP decides.

b.      Six months – below two.

c.       Unable to pay debts.

d.      Acted against the interest of the sovereignty and integrity of India.

e.      Default in filing of accounts.

f.        Just and equitable..

4.       A petition to the tribunal for winding up by it.

a.       LLP or any of its partners

b.      Any creditor

c.       The registrar of companies.

d.      The central / State government.

Tribunal – 90 days

DISTINCTION BETWEEN LLP AND PARTNERSHIP

1.       Governing Act.

2.       Traditional or New.

3.       No. Of Partners.

4.       Separate Legal Entity.

5.       Body Corporate.

6.       Administrative Authority.

7.       Designated Partners.

8.       Liability for Statutory Provisions.

9.       Property in whose name ?

10.   Filing of Accounts Statement.

11.   Mutual Agency.

12.   Liability.

13.   Giving of Loans.

14.   Dissolution.