Latest Amendments to LLP Act and LLP Rules to Ease Doing Business, Effective April 1

Posted by Written by Naina Bhardwaj Reading Time: 12 minutes

We list out the latest amendments to the LLP Act as well LLP Rules, effective April 1, 2022. The changes are expected to further ease doing business in India and include a new definition for small LLPs (which can include start-ups), change the residency requirements for designated partners, and reduce reporting norms. Additionally, the amendments aim to enhance transparency and will decriminalize many offences under the LLP Act. Penal provisions for fraudulent activities, however, have been increased. This is the first time amendments have been made to the LLP Act, which came in effect in 2009. Meanwhile, changes to the LLP Rules – separately notified on February 11 and March 4, 2022, respectively, will assist in the implementation of the amended LLP law.


Following the much-required demand for business reforms among stakeholders in India, the central government has made a series of amendments to the Limited Liability Partnership Act, 2008 (LLP Act) through the LLP (Amendment) Act, 2021, as notified on February 11, 2022.

It must be noted that this is the first time that amendments have been made to the LLP Act, ever since it came in to force in 2009. 

In addition, two simultaneous amendments to the LLP Rules, 2009 have also notified by the Ministry of Corporate Affairs (MCA) recently. Together, these changes will streamline administration and reporting procedures, making it an investor friendly process. 

All the changes introduced by these amendments to the LLP Act as well as LLP rules will be effective from April 1, 2022.

For any queries on doing business in India or reporting requirements, please reach out to our business advisory services team at india@dezshira.com.

Amendments to LLP Act, 2008

Decriminalization of monetary offences

The amendment to the LLP Act has reduced the monetary penalty for several compoundable offences. Accordingly, minor, technical, or compliance related offences have been moved to the ‘In-house Adjudication Mechanism’ framework with modified penal provisions. 

Compounding of offences

As per the amendment Act, the regional directors appointed by the central government may compound any offence under the LLP Act, which is punishable with an imposition of a fine only. The scope of the earlier section of the LLP Act is broadened to include the process for such compounding.

While the maximum sum to be collected upon compounding may extend to the maximum fine provided for such offence under the LLP Act, it is clarified that such limit would not apply to any subsequent offence committed by the LLP/ partner/ designated partner, if such offence is committed within a period of three years from the date of the first offence. 

Changing the name of LLP

Earlier, the 2008 Act empowered the central government to direct an LLP to change its name in certain circumstances like the name being undesirable or identical to a trademark pending registration and imposed a fine ranging from INR 10,000 to INR 500,000 on non-compliance. The amendments to the LLP Act remove some of these grounds and empower the government to allot a new name to such an LLP instead of imposing a fine.

Non-compliance with order of appellate tribunal no longer an offense

The 2022 amendments to the LLP Act have removed the offence of non-compliance with an order of the National Company Law Appellate Tribunal (NCLAT). Earlier this offence was punishable with imprisonment up to six months and fine up to INR 50,000.

Imprisonment duration increased in case of fraudulent activities

The LLP Amendment Act has increased the imprisonment term from two years earlier to five years for defrauding partners or committing any act with fraudulent intention.

Introduction of the concept of ‘small LLP’

The Amendment Act provides for the formation of a small LLP where:

  • The contribution from partners is up to INR 2.5 million. This limit may be increased up to INR 50 million.
  • Turnover for the preceding financial year is up to INR 4 million. This limit may further be increased up to INR 500 million.

The central government may also notify certain LLPs as start-up LLPs.

Accounting standards for classes of LLP

The central government may, in consultation with the National Financial Reporting Authority, prescribe the standards of accounting and auditing. These standards shall be recommended by the Institute of Chartered Accountants of India. This will encourage transparency in reporting and avoid manipulations and fraud.

Formation of special courts

The 2022 amendments to LLP Act recommend establishing special courts for speedy trial of criminal offences, including fraud. They also lay down the procedures and powers of such special courts, including the power to conduct summary trials for offences punishable with imprisonment not exceeding three years.

The special courts will consist of a sessions judge or an additional sessions judge, for offenses punishable with imprisonment of three years or more and a metropolitan magistrate or a judicial magistrate for other offenses. The decision of these special courts can be appealed in high courts.

Registration offices

The Amendment Act proposes establishment of registration offices by the central government at such places as it may deem fit for discharge of various functions under the LLP Act, including registration of new LLPs. Additionally, the earlier time limit of 300 days for late filing has been removed.

Residency requirement for designated partners

The earlier provision required every LLP to have at least one designated partner who is a ‘resident in India’ and to meet this requirement, such designated partner had to stay in India for a period of not less than 182 days during the immediately preceding one year.

In the 2022 Amendment LLP Act, this tenure has been relaxed and the resident designated partner is now required to stay not less than 120 days during the financial year.

First amendment to LLP Rules, 2009

These LLP (Amendment) Rules, 2022 aim to bring the existing rules at par with the amendments to the LLP Act, 2008.

The LLP (Amendment) Rules, 2022 were notified by the MCA on February 11, 2022. The amendments to the LLP rules make changes to the existing rules as well as introduce new rules. Additionally, two new forms have also been introduced. Further, LLP norms with respect to the fees have also been revised.

 

Substitutions made to LLP Rules

Substitutions Made to LLP Rules, 2009 by the LLP Amendment Rules, 2022

Amendment

Effect

Omission, Substitution: Rule 5(2)

  • The first and second provisos shall be omitted
  • In the third proviso, for the words “Provided also” the word “Provided” shall be substituted

This amendment is made to remove the following modes of payment from the provisions of the LLP, which are used to make payments in pursuance of the Act or any rule made or notification issued thereunder.

Omitted provisos:

Provided that the fees payable to the Registrar may be paid also through postal orders (where the amount involved does not exceed fifty rupees) or through bank drafts payable at and/or drawn on post offices or banks, as the case may be, located at the same city or town where the office of the Registrar is situated.

Provided further that, where a fee payable to the Registrar is paid through postal orders or bank drafts as aforesaid, it shall not be deemed to have been paid unless and until the relevant postal orders or drafts are cashed and the amount credited.

Substitution: Rule 18(2)(xi)

The proposed name is identical with or too nearly resembles the name of any other LLP or a company.

Amended provision:

The proposed name is identical with or too nearly resembles the name of any other LLP or a company a firm or LLP or company incorporated outside India and reserved by such firm, LLP or company with the registrar in accordance with these rules.

Substitution: Rule 19(1)

An LLP or a company or a proprietor of a registered trade mark under the Trade Marks Act, 1999 (47 of 1999) which already has a name or trade mark which is similar to or which too nearly resembles the name or new name of a LLP incorporated subsequently, may apply to the Regional Director in Form 23 to give a direction to that LLP incorporated subsequently to change its name or new name, as the case may be:

Provided that an application of the proprietor of the registered trade mark shall be maintainable within a period of three years from the date of incorporation or registration or change of name of LLP under the Act.

In the existing provisions, the right to apply to the RD was vested in the hands of LLP, body corporate or any other entity which already has a name which is similar to or which too nearly resembles the name of an LLP incorporated subsequently. Also, no such limitation period was prescribed.

Vide this amendment, the rights are concentrated in the hands of LLP, company and a proprietor of a registered trade mark. Also, the cases of change of name are now covered in the ambit of this Rule.

Furthermore, it is also provided that an application of the proprietor of the registered trade mark shall be maintainable within a period of three years from the date of incorporation or registration or change of name of LLP.

Insertions made in LLP Rules

Additionally, following insertions have been made in the LLP Amendment Rules, 2022:

Rule 5(3)

The NCLAT Rules, 2016 mutatis mutandis shall be applicable for filing an appeal under sub-sections (2) and (3) of section 72.

After Rule 37

37A – Adjudication of penalties

The new Rule 37A provides that the central government will appoint any officer, not below the rank of a Registrar as the adjudicating officer for adjudicating penalty under the LLP Act. The adjudicating officer will issue a written notice to an LLP, partner, designated partner of an LLP, or any other person who has defaulted or committed non-compliance under the LLP Act before adjudicating a penalty.

The notice will specify the period (not less than 15 days but not more than 30 days) within which the notice receiver should show cause as to why the penalty should not be imposed. The notice must also clearly specify the nature of default or non-compliance alleged to have been committed, relevant penal provisions and the maximum penalty that can be imposed on the LLP, partner, designated partner of an LLP, or any other person under the LLP Act.

The LLP, partner, designated partner of an LLP, or any other person should reply to the notice only in electronic mode. The adjudicating officer can extend the period provided in the notice for replying/showing cause by a further period not exceeding 15 days. The adjudicating officer can extend the period of notice when the LLP, partner, designated partner of an LLP, or any other person shows sufficient cause for not responding to the notice after recording the reasons in writing. 

After considering the reply, if the adjudicating officer believes that the physical appearance of the LLP, partner, designated partner of an LLP, or any other person is required, they will issue a notice. The adjudication officer will issue a notice within 10 days from the receipt of reply and fix a date for the appearance of the such LLP, partner, designated partner of an LLP, or any other person.

The adjudicating officer will pass an order in writing after giving a reasonable opportunity of being heard to the LLP, partner, designated partner of an LLP, or any other person. They will pass an order within:

  • 30 days of the expiry of the period mentioned in the notice where the physical appearance of the party is not required
  • 90 days from the date of issue of notice where any the concerned person appeared before the adjudicating officer

The order passed by the adjudicating officer should be dated and signed by him/her. The adjudicating officer will send the order copy to the Regional Director and the LLP, partner, designated partner of an LLP, or any other person. The order copy will also be uploaded on the website.

The penalty should be paid through the MCA portal, and the amount realized by way of penalty under the LLP Act will be credited to the Consolidated Fund of India.

37B – Appeal against order of adjudicating officer

The new Rule 37B  provides that the person against whom the adjudicating officer passes an order of penalty (aggrieved party) can file an appeal against such order with the Regional Director having jurisdiction in the matter. The aggrieved party must file the appeal within 60 days from the date of receiving the order copy in Form 33 – LLP ADJ. 

The appeal must set forth the grounds for appealing and be accompanied by a certified copy of the order. It should also be accompanied by a fee of INR 1,000 in the case of small LLPs and INR 2,500 in the case of other than small LLPs.

37C – Registration of appeal

The new Rule 37C  provides that the office of the Regional Director will endorse the appeal date and sign such endorsement upon receipt of an appeal. The appeal will be registered and given a serial number if it is found to be in order after scrutiny.

When the appeal is found defective by the Regional Director, they can grant time to rectify the defects in the appeal. The Regional Director can grant time not being less than 14 days from the date of intimating the defects to the appellant. When the appellant fails to rectify the defect within the specified time, the Regional Director will decline to register the appeal through an order.

37D – Disposal of appeal by Regional Director

The new Rule 37D states that upon the admission of the appeal, the Regional Director will give the appeal copy to the adjudicating officer against whose order the appeal is filed. They will also issue a notice to the adjudicating officer to file a reply within the period specified in the notice (not exceeding 21 days).

The adjudicating officer should send the reply copy or application filed to the appellant and the Regional Director. The Regional Director will state a hearing date of the appeal to the parties. The Regional Director will pass an order upon the appeal in writing on the hearing date.

The Regional Director should duly sign the order passed by him/her. The certified copy of the order passed by the Regional Director should be communicated to the adjudicating officer, appellant, and central government.

Revised fee norms

The LLP Amendment Rules 2022 have substituted the Annexure A of the LLP Rules, 2009. The revised fee norms are as follows:

Fees for registration of LLP

LLP contribution

Fee (in INR)

LLP contribution does not exceed INR 1,00,000

INR 500

LLP contribution is more than INR 1,00,000 but below INR 5,00,000

INR 2,000

LLP contribution is more than INR 5,00,000 lakh but below INR 1 million

INR 4,000

LLP contribution is more than INR 1 million but below INR 2.5 million

INR 5,000

LLP contribution is more than INR 2.5 million but below INR 10 million

INR 10,000

LLP contribution exceeds INR 10 million

INR 25,000

Fees for filing LLP forms

LLP contribution

Fee (in INR)

LLP contribution does not exceed INR 1,00,000

INR 50

LLP contribution is more than INR 1,00,000but below INR 5,00,000

INR 100

LLP contribution is more than INR 5,00,000 lakh but below INR 1 million

INR 150

LLP contribution is more than INR 1 million but below INR 2.5 million

INR 200

LLP contribution is more than INR 2.5 million but below INR 10 million

INR 400

LLP contribution exceeds INR 10 million

INR 600

Fees for filing LLP Form 4

LLP type

Fee (in INR)

For small LLPs

INR 50

For other than small LLPs

INR 150

Fees for filing LLP applications

LLP application

Fee for small LLPs (in INR)

Fee for other than small LLPs (in INR)

For name reservation under Section 16 of LLP Act

INR 200

INR 200

For direction to change the name as per Section 17 of the LLP Act

INR 5,000

INR 5,000

For striking off the name of a defunct LLP under Rule 37

INR 500

INR 1,000

 

Fees for Filing LLP Applications Under Rule 18(3)

Application under Rule 18(3)

Fee (in INR)

For name reservation under Rule 18(3)

INR 10,000

For name renewal under Rule 18(3)

INR 5,000

Fee for inspection of documents or obtaining a certified copy

Application type

Fee (in INR)

For inspecting documents of LLP under Section 36

INR 50

For extract or copy of a document under Section 36 to be certified by the Registrar

INR 5 per page or fractional part 

 Fee for filing form by foreign LLP

Application type

Fee (in INR)

For filing a document under Rule 34(1)

INR 5,000

For any other form, notice, statement of account and solvency or document

INR 1,000

Additional fees for delay in filing forms

Period of delay

Fees for small LLPs

Fees for other than small LLPs

Up to 15 days

One-Time

One-Time

Beyond 15 days and within 30 days

Two times of regular filing fees

Four times of regular filing fees

Beyond 30 days and within 60 days

Four times of regular filing fees

Eight times of regular filing fees

Beyond 60 days and within 90 days

Six times of regular filing fees

12 times of regular filing fees

Beyond 90 days and within 180 days

10 times of regular filing fees

20 times of regular filing fees

Beyond 180 days and within 360 days

15 times of regular filing fees

30 times of regular filing fees

Beyond 360 days for forms other than Form 11 and Form 8

25 times of regular filing fees 

50 times of regular filing fees 

Beyond 360 days for filing Form 11 and Form 8

15 times regular filing fees plus 10 per day for delay beyond 360 days

30 times regular filing fees plus 20 per day for delay beyond 360 days

Second amendment to LLP Rules, 2009

The LLP (2nd Amendment) Rules, 2022 were notified by the MCA on March 4, 2022.

Changes Made to LLP Rules 2009 by LLP (2nd Amendment), 2022

Amendment

Effect

Substitution: Rule 11(1)

 

For the word “two”, word “five” shall be substituted.

Provided further that the application for allotment of DPIN shall not be made by more than five individuals in Form FiLLiP.

 

This amendment will ease the procedure of appointing more than two designated partners (not having DPIN/ DIN) subject to maximum of five designated partners at the time of incorporation itself.

Insertion: Rule 11(3)

 

After the words and figures “Form 16” the following words shall be inserted:

 

“and shall mention Permanent Account Number and Tax Deduction Account Number issued by the Income Tax Department.”

The Certificate of Incorporation of LLP shall be issued by the Registrar in Form 16 and shall mention Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) issued by the Income Tax Department.

 

Prior to this amendment, the LLPs were required to apply for PAN and TAN separately and these were not included in the process of incorporation like in the case of Companies wherein PAN and TAN application is a part of SPICE PLUS kit (Simplified Proforma for Incorporating Company electronically).

Substitution: Rule 19(4)

The person making the application shall attach a copy of the incorporation certificate of the LLP or the company or the registration certificate of the entity, as the case may be.

Vide this amendment, the requirement of attaching the authority under which such person is making an application under Rule 19 is done away with.

Substitution: Rule 24(6)

Statement of Account and Solvency shall be signed on behalf of the LLP by its designated partners.

 

Where the Corporate Insolvency Resolution Process has been initiated against the LLP under the Insolvency and Bankruptcy Code, 2016 (IBC) or the LLP Act, 2008), or has come under liquidation under IBC, 2016 or the LLP Act, 2008, the said Statement of Account and Solvency may be signed on behalf of the LLP by interim resolution professional or resolution professional, or liquidator or LLP administrator.

Post to this amendment, in cases where corporate insolvency resolution process has been initiated against an LLP, then the Statement of Account and Solvency may be signed by interim resolution professional or resolution professional, or liquidator or LLP administrator.

Insertion: Rule 25(2) proviso

 

Provided that where the Corporate Insolvency Resolution Process has been initiated against the LLP under the IBC or the LLP Act having turnover up to INR 50 million during the corresponding financial year or contribution up to INR 5 million has come under liquidation under the IBC or LLP Act, the said annual return may be signed on behalf of LLP by interim resolution professional or resolution professional, or liquidator or LLP administrator and no certification by a designated partner shall be required.

Ease of procedure as this amendment eliminates the requirement of certification by a designated partner of the LLP

Substitution: Rule 34(3)(ii)(c) and Rule 34(8)

 

 

For the words and figures “Form 29”, the words and figures “Form 28” shall be substituted.

Form 29 is merged into Form 28.

Insertion: Rule 36(6)

after the word, bracket and figure “sub- rule (7)”, the words and figures “in Form 32” shall be inserted.

Reply to the Registrar under Rule 36(6) shall be given in Form 32.

Substitution: Rule 37(1A)(II)

 

for the words and figures “enclose along with Form 24”, the words and figures “furnish in Form 24” shall be substituted.

 

 


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