LLP Rules, 2009 Amended and LLP (SBO) Rules, 2023 Notified as India Tightens Disclosure Requirements
India mandates LLPs to maintain a register of partners and document their beneficial interest in both tangible and intangible contributions. Existing LLPs must maintain their register of partners within 30 days from October 28, 2023, which is when the Limited Liability Partnership (Third Amendment) Rules, 2023 came into force. Additionally, on November 9, the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023 was notified with its own reporting requirements.
Key changes introduced under the LLP (Third Amendment) Rules, 2023
LLPs are now mandated by the Ministry of Corporate Affairs (MCA) to maintain a register that contains information about their partners’ beneficial interests and both tangible and intangible contributions. They must establish and maintain this register at their registered offices within 30 days of incorporation. The Limited Liability Partnership (Third Amendment) Rules, 2023 apply to both existing and upcoming LLPs. The new rules commenced October 28.
Register of partners
Under the LLP (Third Amendment) Rules, 2023, firms are required to maintain the register of partners, which should include extensive details—(a) the amount and type of contribution (indicating tangible, intangible, movable, immovable or other benefit to the LLP, including money, promissory notes, other agreements to contribute cash or property, and contracts for services performed or to be performed) with monetary value; (b) essential professional and personal information like registered office address, email ID, and permanent account number (PAN) or corporate identification number (CIN), unique identification number, if any; father or mother or spouse’s name; occupation; status; Nationality; name and address of nominee; (c) date of becoming partner; (d) date of cessation.
Corrections to the register of partners
In the event of any modifications made in the contribution amount, or in name and details of the partners in the Limited Liability Partnership agreement, or in cases of cessation of partnership interest, the entries in the register must be promptly updated within a seven-day period.
In case the Limited Liability Partnership makes any corrections or amendments to the register in accordance with an order issued by the competent authority under any relevant law, the corresponding reference to such order must be clearly noted in the respective register. This notation should be accompanied by a written explanation of the reasons for the modifications.
Declaration of beneficial interest
Under the new regulations, a partner without beneficial interest—whether in full or part—in any contribution, must formally declare this within 30 days of their inclusion in the register of partners. They must submit a declaration in Form 4B.
Conversely, individuals who hold beneficial interest in the contributions of the LLP but are not listed in the register of partners are required to submit a declaration disclosing this interest in Form 4C to the LLP within a 30-day period after obtaining such a beneficial interest in the contribution of the LLP. They must specify the nature of their interest and provide details regarding the partners in whose names their contributions are recorded in the LLP’s records. Additionally, if there is any change in the beneficial interest, the registered partner must, within 30 days from the date of the change, provide a declaration using Form 4B.
Designated partner responsible for furnishing relevant information on beneficial interest in contributions
Additionally, every LLP is required to designate a partner responsible for providing information about beneficial interests to the Registrar of Companies or other authorized offices. Until such a partner is designated by an LLP, each partner will bear the responsibility of furnishing this information.
Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023
- If such an individual is identified, the LLP must ensure that they submit a declaration using Form No. LLP BEN-I.
- Existing significant beneficial owners are obligated to file their declarations within 90 days from the commencement of these rules.
- Upon receipt of the declaration, the reporting LLP must file a return in Form No. LLP BEN-2 with the Registrar within 30 days along with the prescribed fees.
- The LLP shall maintain a register of significant beneficial owners in Form No. LLP BEN-3.
- Foe seeking information about significant beneficial owners, the LLP shall give notice in Form No. LLP BEN-4.
Push for transparency amid growing LLP incorporation
Designed to enhance transparency in LLP operations within the country, the amended rules coincide with a notable increase in the number of companies and partnership firms being incorporated in FY24.
- In the first half of FY 2024, India recorded a surge in the number of newly incorporated companies and LLPs, reflecting a growing optimism about the country’s business environment.
- Between April and September, a total of 120,966 companies and LLPs were incorporated in India, marking an 11.4 percent increase from the 108,583 entities incorporated in the previous year.
- Between April and July alone, there were 82,628 companies and LLP firms incorporated in the newest version of the MCA21 portal.
- A total of 134,725 companies and LLPs were incorporated by October 18 in the current fiscal year.
Calling regular general meetings of companies
Besides the reporting changes, the MCA is also advocating for the regular convening of general meetings. These gatherings provide shareholders with an opportunity to scrutinize management decisions; shareholder participation also serves to reduce instances of corporate fraud and financial risks.
General meetings play a pivotal role in enabling companies to discharge their responsibility of conveying precise and trustworthy information about their performance to their members. They serve as a mechanism for addressing shareholder grievances and help uphold transparency and accountability within corporate operations.
This article was originally published November 7, 2023. It was last updated November 10, 2023.
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