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Highlights of Limited Liability Partnership Bill, 2008 By: Ankesh Gupta.

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Presentation on theme: "Highlights of Limited Liability Partnership Bill, 2008 By: Ankesh Gupta."— Presentation transcript:

1 Highlights of Limited Liability Partnership Bill, 2008 By: Ankesh Gupta

2 Preface We mix Companies Act and Indian Partnership Act, remove all defects of traditional partnership firm, remove all procedural hassles and rigidity in Companies Act keep good points of both Acts and what we have is Limited Liability Partnership! This in brief, is the description of Proposed LLP Bill. Limited Liability Partnership Bill was first introduced in Rajya Sabha in 2006. The Bill was referred to Parliamentary Standing Committee. On basis of their recommendations, changes were made in LLP Bill 2006 and revised LLP Bill 2008 was introduced and passed in Rajya Sabha on 24th October 2008. The Bill is now to be placed in the Lok Sabha for its approval. The Bill makes provisions for the formation and regulation of Limited Liability Partnerships. The Limited Liability Partnership (LLP) will be a new corporate form of doing business.

3 Index 1. Nature of limited liability partnership (LLP) 2. Designated Partners 3. Incorporation of LLP 4. Contribution and Liability 5. Financial disclosures 6. Change in Partners 7. Assignment and Transfer of Partnership Rights 8. Conversion to LLP 9. Foreign limited liability partnerships 10.Compromise, Arrangement or Reconstruction of LLP 11.Winding Up and Dissolution 12.Miscellaneous 13. Conclusion

4 Nature of LLP  The proposed Limited Liability Partnership (LLP) will be a body corporate formed and incorporated under the LLP Act.  It will be a legal entity separate from that of its partners and have perpetual succession.  Any individual or body corporate may be a partner in a LLP  Every LLP shall have at least two partners. If at any time, the number of partners of a limited liability partnership is reduced below two and the LLP carries on business for more than six months while the number is so reduced, the person, who is the only partner of the limited liability partnership during the time that it so carries on business after those six months shall be liable personally for the obligations of the LLP incurred during that period.

5 Designated Partners  Every LLP shall have at least two designated partners who are individuals and at least one of them shall be a resident in India.  However, in case of a LLP in which the partners are bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.  Every designated partner will obtain a Designated Partner Identification Number (DPIN) from the Central Government.  A designated partner shall be responsible for the doing of all acts, matters and things as are required to be done by the limited liability partnership in respect of compliance of the provisions of this Act including filing of any document, return, statement and shall be liable to all penalties imposed on the limited liability partnership for any contravention of those provisions.  LLP will be required to appoint a designated partner within thirty days of a vacancy, if any. However, if no designated partner is appointed, or if at any time there is only one designated partner, each partner shall be deemed to be a designated partner.

6 Incorporation of LLP  Two or more persons associated for carrying on a lawful business with a view to earn profit will be required to subscribe their names to an incorporation document of a LLP to be incorporated.  Every limited liability partnership shall have either the words “limited liability partnership” or the acronym “LLP” as the last words of its name.  After Incorporation LLP may have Limited Liability Partnership Agreement. This Agreement will govern mutual rights and duties of LLP and its partner. The agreement should be filed with ROC. This is similar to Articles of Association of company. Otherwise LLP may adopt first schedule of the Act.  On the incorporation of a LLP, the persons who will subscribe their names to the incorporation document shall be its partners and any other person may become a partner of the LLP by and in accordance with the limited liability partnership agreement.

7 Contribution and Liability  The obligation of a partner to contribute money or other property or other benefit or to perform services for a LLP shall be as per the limited liability partnership agreement.  The Liability of the partners will be limited to their contribution.  Every partner of a limited liability partnership will be an agent of the LLP, for the purpose of the business of the LLP, but not of other partners.  The liabilities of the LLP shall be met out of the property of the LLP.

8 Financial Disclosure  Each LLP is required to maintain Books of accounts.  Accounts should be audited. Central Government may exempt any class of LLP from Audit requirement.  Every year within six months from close of financial year, it is required to file with ROC, Statement of accounts and solvency duly signed by designated partner.  It is also required to file Annual Return with ROC within 60 days from the close of financial year.

9  A partner can resign. He ceases to be partner on his death or if he is declared as of unsound mind or adjudged as insolvent.  A partner can be admitted with the consent of all existing partners or as per Agreement.  Notice of change of partner or even change of his address should be filed with ROC within thirty days. The Partner who has resigned can himself file notice to Registrar of Companies. Change in Partners

10  The right of a partner to share profits and losses of the LLP are transferable either wholly or in part.  However, assignee does not become partner on such assignment and does not get any right to inspect accounts of LLP. Assignment and Transfer of Partnership Rights

11  A firm, a private company, an unlisted company may convert itself into a LLP in accordance with the provisions of the Act and related schedules. Conversion to LLP

12  Foreign LLP can establish business in India and its regulatory mechanism will be as per rules prescribed by Central Government. A foreign LLP can be a partner in Indian Company. Foreign LLP

13  Compromise or arrangement can be made between LLP and it creditors and LLP and its partners with the sanction of NCLT. Compromise, Arrangement or Reconstruction of LLP

14  Winding up of LLP may be either voluntary or by the order of the NCLT and the LLP so wound up may be dissolved. ` Winding Up & Dissolution

15  A partner may lend money to LLP and do the business with it and shall have the same rights and liabilities as a person who is not a partner.  Document or return required to be filed, if is not filed in time provided therein, may be filed within a period of 300 days from the date within which it should have been filed on payment of additional fees of Rs. 100/- for every day of such delay.  Only the Judicial Magistrate of the first class or the Metropolitan Magistrate shall have the power to impose punishment in respect of said offence under this Act.  Central Government can make applicable any provision of Companies Act to LLP with suitable modification by a notification. Miscellaneous

16  Services sector is playing a major role in the national economy and there is a growing diversity in the range of services being offered. The services sector would also find this form very useful. The advantage of the LLP form would be that it will not impose detailed legal and procedural requirements intended for large widely held companies on such enterprises. In this way it would be an important vehicle catering to the needs of professionals, small-scale sector, venture capital funds as well as innovative business models and would lead to setting up of multi- disciplinary partnerships. Conclusion

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