Limited Liability Partnership 2008commerce.du.ac.in/web/uploads/e - resources 2020 1st/MBA IB/Ms.S… · The Limited Liability Partnership Act, 2008 2. BODY CORPORATE NO YES 3. SEPARATE

LIMITED LIABILITY

PARTNERSHIP ACT, 2008

-By Sarita Devi

INTRODUCTION

First LLP in INDIA- 2nd April, 2009

www.llp.gov.in – For registration and governance

LLP Rules, 2009 contains administrative

provisions for formation, management,

reconstruction and winding up of LLPs.

Users/Beneficiaries ???

http://www.llp.gov.in/

MEANING AND NATURE (SEC. 3 & 4) SEC. 2(1) (n) – “ An incorporated partnership

formed and registered under the Act”.

FEATURES OF LLP

1) Body corporate (Sec. 3(1))

2) Separate legal entity (Sec. 3(2)) (assets and liabilities)

3) Artificial Legal Person

4) Perpetual succession (Sec. 3(2))

5) Common seal ( name, date, place)

6) Limited Liability

7) Management of Business

8) No Mutual Agency

9) Minimum and Maximum no. of parties

10) Business for profit only

FEATURES (CONTD.)

11) LLP Agreement

12) Annual accounts and Audit

13) Investigation

14) Compromise or Agreement ( Merger and Acquisition)

15) Conversion into LLP

16) Winding up of LLP

17) The Companies Act, 2013

18) Taxation of LLP (Income tax act,1961)

19) E-filing of documents (www.mca.gov.in)

20) Foreign LLPs

21) Non-applicability of the Indian partnership act

BASIS PARTNERSHIP

FIRM

LLP

1. REGULATING

ACT

The Indian Partnership

Act, 1932

The Limited Liability

Partnership Act, 2008

2. BODY

CORPORATE

NO YES

3. SEPARATE

LEGAL ENTITY

NO YES

4. CREATION Agreement between the

partners

Registration under the LLP

Act, 2008

5.

REGISTRATION

Voluntary Mandatory

6. PERPETUAL

SUCCESSION

No Yes

7. NAME No guidelines Contain the word LLP as

suffix

BASIS PARTNERSHIP

FIRM

LLP

8. MAXIMUM

NO. OF

PARTNERS

10- Banking business

20- others

silence

9. LIABILITY Unlimited Limited to the extent of its

agreed contribution

10. MUTUAL

AGENCY

Bind firm as well as other

partners

Can only bind firm

11.

DESIGNATED

PARTNERS

No provision 2 designated partners

Atleast one should be

resident in India

12. COMMON

SEAL

No As official signatures

13. LEGAL

COMPLIANCES

All partners responsible Only designated partners

14. AUDIT OF

ACCOUNTS

Annual turnover exceeds

1 crore

Annual turnover exceeds 60

lakhs or contribution exceeds

25 lakhs

BASIS PARTNERSHIP

FIRM

LLP

15. ANNUAL

FILING OF

DOCUMENTS

No requirement 1) Annual statement of

accounts

2) Statement of solvency

3) Annual return with the

registrar of LLP every yr.

16. FOREIGN

NATIONALS

Cannot become partner Can become

17. MINOR AS

PARTNER

Yes No

18.

DISSOLUTION/

WINDING UP

1) By mutual agreement

2) Death, insolvency etc.

3) By Court order

1) Voluntary

2) By national company law

tribunal

19.

MANAGEMENT

By partners By partners or designated

partners

20. MODE OF

MAINTENANCE

OF ACCOUNTS

No provision On cash or accrual basis

ASSIGNMENT??

State the differences between limited liability

partnership and limited liability company.

INCORPORATION OF NEW LLP

STEP-1

• Deciding the partners and designated partners

STEP-2

• Obtaining the DPIN and digital signature certificate

STEP-3

• Checking the availability of name

INCORPORATION OF NEW LLP

(CONTD.)

STEP-4 • Drafting of LLP Agreement

STEP-5

• Electronic filing of some documents with ROC

STEP-6

• Issuing certificate of Incorporation by ROC

INCORPORATION DOCUMENT (SEC-

11)

e-Form 2

Incorporation document provides for the details

of LLP

Name

Address of partners and designated partners

Amount of Contribution

Consent for forming a LLP to carry on a lawful

business with profit motive.

Declaration regarding all legal compliances .

REGISTERED OFFICE OF LLP AND

CHANGE THEREIN (SEC.13)

Place where all correspondence related to LLP would be

sent.

CHANGE-

1) File the notice with registrar in Form 15

2) Where LLP Agreement silent about conditions- Consent

of all partners required.

3) Where change from one state to another- if having

creditors, consent of creditors also required.

4) In this case, notice in daily newspaper not less than 21

days before filing any notice with registrar.

5) Penalty- LLP and every partner (RS. 2000 TO Rs.

25000)

NAME OF LLP AND CHANGE

THEREIN

Last words of Approved Name

Desirable name in the opinion of CG

Reservation of Name

Change of name of

LLP

Penalty for Improper

use of words

Publication of Name

and Limited Liability

DESIRABLE NAME

LLP WITH

IDENTICAL

NAME

1. PROHIB

ITED WORDS

2. WORDS BASED

ON APPROV

AL

3.

RESERVATION OF NAME

APPLICATION 1.

RESERVATION FOR 3

MONTHS 2.

RESERVATION

OF NAME

OF FOREIGN LLP

3.

CHANGE OF NAME OF LLP

DIRECTIONS

ISSUED BY

CENTRAL

GOVT.

1. REGISTRAR 2. LLP

ITSELF 3.

PARTNER

SEC. 2 (1) (q)- Any person who has become a

partner in the LLP in accordance with the LLP

agreement.

Who can become a partner??

An individual

An Indian company ( Private or Public)

A LLP registered in India

A LLP registered outside India

A foreign Company

DESIGNATED PARTNERS

Any partner designated as such pursuant to

Sec.7 of the Act.

Provisions-

1. No. of designated partners

2. Who will be designated Partner ?

3. Prior consent to act as DP

4. Filing of Particulars with

the Registrar

5. Eligibility conditions for

the appointment of DP

Obtaining DPIN

DESIGNATED PARTNERS

7. Role of designated partners

8. Liabilities of designated

Partners

9. Changes in DP

10. Penalty for Contravention

PARTNERS AND THEIR RELATIONS

Determined by LLP Agreement

In absence of LLP Agreement, Determined by First Schedule to the Act

1) Equal share in profits, capital and losses

2) LLP shall indemnify partners in respect of payments

3) Partner shall indemnify LLP for any loss caused to it by his fraud.

4) Every partner may take part in management

5) No entitlement to remuneration to any partner

6) No new partner can be introduced without the consent of all the existing partners

7) Any issue is resolved by voting and majority

8) Every decision taken needs to be recorded as minutes and kept in Registered office within 30 days.

PARTNERS AND THEIR RELATIONS

(CONTD.)

Every partner shall render true accounts and full

information to LLP and partners.

If any partner runs the same nature of business

of LLP and competing against it , then all profits

need to be returned to LLP.

Benefit derived from the LLP without the

consent of partners or LLP needs to be returned .

No partner can be expelled by majority of

partners .

Disputes which cannot be resolved referred to

Arbitration and Conciliation Act, 1996

EXTENT AND LIMITATION OF LIABILITY OF

LLP (SECS. 26 AND 27)

Every partner agent of LLP.

Liable to the full extent of its assets

Cannot bound by the acts of partners not

authorized for it.

Bound by the acts of partners (For any wrongful

act or omissions) authorized for it.

Obligation of LLP- Obligation of LLP only

Liabilities of LLP met from properties of LLP

only.

EXTENT AND LIMITATION OF LIABILITY OF

PARTNERS (SECS. 28-30)

Agency relationship

No personal liability for obligations of LLP

Personal liability in case:

A) For his wrongful act or omission

B) Acts undertaken beyond his authority

C) where no. of partners falls below statutory limit

Liability in case of „ Holding Out‟

No liability after the death of a partner

Unlimited in case of fraud (Penalty- 50,000 to 5,00,000 or jail for 2 years)

Liability for compensation

CONTRIBUTION (SECS. 32 AND 33)

MEANING- What a partner intends to contribute

towards the LLP for running of his business.

No requirements of minimum contribution

Form of Contribution

Obligation to contribute

A) Acc to partnership agreement

B) In absence, Equal share

C) Can be increased by amendment in the

agreement

D) Can be withdrawn like drawings

FINANCIAL DISCLOSURES

1) Maintenance of Books of Account (Sec. 34)

2) Statement of Account and Solvency (Sec. 34)

3) Auditing of Accounts of LLP (Sec. 34 (4))

4) Annual Return (Sec. 35)

MAINTENANCE OF BOOKS OF ACCOUNT

(SEC. 34)

Obligation to maintain proper books

Financial year

Basis of Accounting

Form and Content

a) All receipts and expenditures

b) Record of assets and liabilities

c) Statements of cost of goods purchased,

Inventories, WIP, FG, COGS

o Period of Preservation- 8 years from the date of

their preparation

STATEMENT OF ACCOUNT AND SOLVENCY

(SEC. 34)

Obligation to prepare

Time period for preparation- within 6 months

from the end of FY

Time period for filing – in FORM 8 within 60

days from the end of 6 months of the FY to

which such statement relates

Form and Contents

a) Statement of Solvency

b) Statement of Account

AUDITING OF ACCOUNTS OF LLP (SEC. 34

(4)) Not mandatory

Qualification and appointment

Remuneration of auditors

Removal of auditors

Resignation of auditors

Power and duties of Auditors

a) Can access books of accounts

b) Can obtain any information from DP

c) Must act honestly and diligently without neglecting his duties

d) Should see the interest of owners

e) Bring irregularities to the notice of partners

f) Direct verification

g) Report- true and fair view

ANNUAL RETURN (SEC. 35)

File with registrar within 60 days of closure of FY i.e., 30th May in FORM 11. Penalty – 100 per day

Contents of Annual Return

a) Name and address of RO

b) Date of closure of FY

c) Details of Business classification

d) Principal business activities of the LLP

e) Partners, DP and DPIN

f) Individuals and Body corporate

g) Contribution

h) Penalties

i) Offences

j) Certificates signed

TAXATION OF LLP

Treated at par with partnership firm

Eligibility

1) Written LLP Agreement

2) Specification of shares of Partners

3) Certified copy of LLP agreement and return of

income

4) Submission of revised LLP agreement in case of

changes

5) No failure to attend to IT notices

TAXATION TREATMENT OF LLP

Rate of TAX

In the hands of LLP

Filing and signing of ITR

Partner‟s liability to pay TAX

Intangible contribution

AMT

Benefits of Presumptive Taxation not available to LLP

Submission of Audit Report

Interest on capital and Remuneration

Share of Profit

No capital gain on conversion

CONVERSION

Listed Public Company cannot be converted.

CONVERSION OF PARTNERSHIP FIRM INTO LLP

(SEC.55)

Chapter X – Second Schedule

MEANING- The conversion of the partnership firm into

LLP means the automatic transfer of the property,

whether tangible or intangible, assets, interests , rights,

privileges, liabilities, obligations and whole of the

undertaking of partnership firm to the LLP as a going

concern.

ELIGIBILITY FOR CONVERSION

Apply to ROC

All the partners of the converting partnership firm

become the partners of the proposed LLP

PROCEDURE FOR CONVERSION

1. Deciding The Partners And DP‟s

2. Obtaining The DPIN And Digital Signature Of DP‟s

3. Checking the name availability of LLP from ROC

4. Getting LLP Agreement And Incorporation Document Drafted And Printed


(CONTD.)

5. FILING OF CONVERSION APPLICATION (RULE 38 (1))

E-form 17 (Part A)

i) Incorporation document and subscription statement (Sec. 11 )

ii) A statement by all of its partners in Form 17 (Part B)

iii) A statement prescribing compliances

iv) Statement of assets and liabilities of the partnership firm. Not preceding 30 days from the date of application

v) List of all creditors with their consent

vi)Approval from concerned authority, if required.

vii) Prescribed filing and registration fees

PROCEDURE FOR CONVERSION (CONTD.)

6. Obtaining Certificate Of Registration From ROC

(Rule 38 (2))

i) Issue of certificate by ROC in FORM 19

ii) Power of ROC to refuse conversion

iii) Appeal to the Tribunal in case of refusal (within

60 days)

7. Informing the Registrar of Firms about

Conversion (Rule 38 (3))- FORM 14- within 15

days

Penalty u/s-69 Rs. 100 per day

EFFECTS OF REGISTRATION OF

CONVERSION OF PARTNERSHIP INTO

LLP (SEC. 58)

1.

• Existence of LLP

2.

• Automatic transfer and vesting of Assets and Liabilities in LLP

3.

• Dissolution of the converting entity

CONVERSION FROM PRIVATE

COMPANY INTO LLP (SEC.55)

Chapter X – Third Schedule

MEANING- The conversion of the private company into

LLP means the automatic transfer of the property,

whether tangible or intangible, assets, interests , rights,

privileges, liabilities, obligations and whole of the

undertaking of the private company to the LLP as a

going concern.


Apply to ROC

No security interest should be there in its assets

subsisting or in force at the time of application

Partners of LLP should be the shareholders of private

company and no one else.







(CONTD.)

5. Filing of conversion application (RULE 39)

E-form 18 (Part A)


ii) A statement by all of its shareholders in Form 18 (Part B)


iv) Statement of assets and liabilities of the private company


vi)Approval from concerned authority






iii) Appeal to the Tribunal in case of refusal

7. Informing the Registrar of Companies about

Conversion (Rule 38 (3))- FORM 14



LLP (SEC. 58)

1.


2.


3.


CONVERSION FROM UNLISTED PUBLIC

COMPANY INTO LLP (SEC.55)

Chapter X – Fourth Schedule

MEANING- The conversion of an unlisted public

company into LLP means the automatic transfer of the

property, whether tangible or intangible, assets,

interests , rights, privileges, liabilities, obligations and

whole of the undertaking of the company to the LLP as a

going concern.


Apply to ROC

No security interest should be there in its assets

subsisting or in force at the time of application

Partners of LLP should be the shareholders of public

limited company and no one else.







(CONTD.)

5. Filing of conversion application (RULE 40)

E-form 18 (Part A)


ii) A statement by all of its shareholders in Form 18 (Part B)


iv) Statement of assets and liabilities of the partnership firm


vi)Approval from concerned authority






iii) Appeal to the Tribunal in case of refusal

7. Informing the Registrar of Companies about

Conversion (Rule 38 (3))- FORM 14



LLP (SEC. 58)

1.


2.


3.


WINDING UP AND

DISSOLUTION OF

LLP

TERMS

LLP Liquidator

Provisional Liquidator

Officer

Tribunal

Registrar

WINDING UP VS. DISSOLUTION

BASIS WINDING UP DISSOLUTION

1.

Meaning

Process which brings an

end to the life of LLP

and creditors are paid off

out of the proceeds

realized from the sale of

assets.

Last stage of Liquidation.

After many legal

compliances the liquidator

applies to the court for

dissolution order of LLP and

then the LLP is dissolved.

2. Legal

entity

Long process. After

winding up and prior to

dissolution the legal

existence of the LLP

continues and it can be

sued by others in a court

of law.

On dissolution, LLP ceases

to exist and its name is

struck off from the records of

ROC and the fact is notified

in the official gazette.

MODES OF WINDING UP

VOLUNTARY WINDING UP

1. Passing of Resolution

(Rule 5)

2. Declaration of Solvency by

DP (Rule 6)

3. Approval of creditors

(Rule 7)

4. Publication of Resolution (Rule 9)

5. Appointment of Liquidator (Rule

10)

MODES OF WINDING UP

VOLUNTARY WINDING UP

6. Performance of duties and discharge of

liabilities

7. Convening of General Meeting

and reporting to the Partner/Creditors

(Rule 17)

8. Preparation of final report

by the liquidator

(Rule 19)

9. Filing of documents with ROC

10. Passing of Dissolution Order

1. PASSING OF RESOLUTION (RULE 5)

Approval of at least ¾th (in number) of the total number of partners

Approval of creditors (secured and unsecured)

Copy of resolution filed with registrar within 30 days of passing of the resolution.

Process begins from the date of resolution

2. DECLARATION OF SOLVENCY BY DP (RULE 6)

By majority of DPs (not less than 2) – In form 2

Verified by an affidavit – Not exceeding 1 year from the date of its commencement

Registered with ROC in FORM 3 within 15 days of passing of resolution

DOCUMENTS- FORM 4 Statement of assets and liabilities, Report of the valuation of assets by Valuer.

3. APPROVAL OF CREDITORS (RULE 8)

Forward by registered post/e-mail/website

Creditors given 30 days to send their approval

Consent of atleast 2/3rd in value of creditors

is required

Notice of creditors shall be given in FORM 5

within 15 days from the date of receipt of the

consent of creditors to Registrar.

4. PUBLICATION OF RESOLUTION (RULE 9)

Within 14 days of receipt of creditor‟s consent

Notice by advertisement

5. APPOINTMENT OF LIQUIDATOR (RULE

10) With the consent of majority of partners within 30 days

of filing of consent of creditors

Liquidator- from the panel of CG

Appointment- leads to cessation of the powers of DPs/other partners

Notice to Registrar in FORM 10 within 10 days

6. PERFORMANCE OF DUTIES AND DISCHARGE OF LIABILITIES

As per LLP Act, 2008/LLP (Winding and Dissolution) Rules, 2012

7. CONVENING OF GENERAL MEETING AND

REPORTING TO THE PARTNER/CREDITORS

(RULE 17)

Convened by Liquidator

Report of Progress quarterly-in FORM 8 to partners and creditors

Accounts of the LLP Liquidator audited – Rule 56

8. PREPARATION OF FINAL REPORT BY THE LIQUIDATOR (RULE 19)

After winding up affairs fully wound up- Final report in Form 9

Approval for 2/3rd partners or 2/3rd in the value of creditors – By passing a resolution within 30 days of receipt of report

In case of Disapproval, matter transferred to Tribunal- Rule 23

9. FILING OF DOCUMENTS WITH ROC

By LLP Liquidator – within 15 days of their approval

from partners/creditors along with the MOM in Form

10

10. PASSING OF DISSOLUTION ORDER

If satisfied, Tribunal passes order within 60 days of

the receipt of application.

Liquidator file final copy of order for dissolution to

Registrar within 30 days in Form 11.

Registrar publish a notice in the Official Gazette that

the LLP stands dissolved. (Sub-rule- 4)

COMPULSORY WINDING-UP BY

TRIBUNAL CIRCUMSTANCES:

1. Petition by LLP

2. Number of partners below statutory limit

3. Inability to pay its debts – Rule 25 of the LLP (Winding up and Dissolution) Rules, 2012

3 cases:

a) Amount exceeding Rs. 1,00,000. Fails to pay within a period of 21 days after demand

b) If a decree has been issued by the tribunal in favor of a creditor

c) Proved to the satisfaction of Tribunal

4. Against national interests

5. Default in filing statement of account of solvency or AR with ROC- for consecutive 5 financial years

6. Just and Equitable

WHO MAY FILE PETITION FOR WINDING UP?

By LLP or any of its partners

By any creditor

By the registrar

By any person authorized by central govt.

By central govt. in a case falling under section.51 of the

act.

By central or state govt. in a case falling under clause

(d) of section.64 of the act.

POWERS OF TRIBUNAL

Dismiss the petition with or without costs;

Make any interim order that it thinks fit;

Direct the action for revival or rehabilitation of

the LLP

Appoint a provisional Liquidator

Make an order for winding up

Make any other order that it thinks fit

DUTIES OF LIQUIDATOR To carry on the business of the LLP for beneficial

winding up

To do all acts and to execute all deeds, receipts and other documents and for that purpose use LLP seal

To take custody of property, assets, books of accounts and other documents

To sell property by public auction/tenders/ contracts

To inspect the records and returns of the LLP

To prove rank and claim in the insolvency of any partner for any balance against his estate

To draw, accept, make and endorse negotiable instruments on behalf of LLP

To make all necessary communication in his official name for obtaining payment

To apply to the tribunal for further orders

DUTIES OF LIQUIDATOR (CONTD.)

To make security arrangements for property

To make out an inventory of assets

To appoint valuer/ CA

To give an advertisement to sell the property

Apply to the tribunal for the verification of the statement of affairs

To carry out investigation for fraud

To maintain separate bank account for each LLP

To maintain proper books of accounts

To invite claims from the creditors, examine the proof

To do all such acts which seems necessary

Limited Liability Partnership 2008commerce.du.ac.in/web/uploads/e - resources 2020 1st/MBA IB/Ms.S… · The Limited Liability Partnership Act, 2008 2. BODY CORPORATE NO YES 3. SEPARATE

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