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The Limited Liability Partnership (Amendment) Bill 2021:

GS Paper 2:

Topics Covered: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

 

The Limited Liability Partnership (Amendment) Bill 2021:

Context:

The Bill was recently passed by Rajya Sabha. The Bill amends the Limited Liability Partnership (LLP) Act, 2008.

 

Basic objectives, key Provisions and focus of the Bill:

  1. The aim is to facilitate the Ease of Doing Business and encourage startups across the country.
  2. The current law has 24 penal provisions, 21 compoundable offences and 3 non-compoundable ones. The bill seeks to decriminalise 12 of these offences.
  3. Adjudicating Officers: Under the Bill, the central government may appoint adjudicating officers for awarding penalties under the Act.  These will be central government officers not below the rank of Registrar.  Appeals against orders of the Adjudicating Officers will lie with the Regional Director.
  4. Special courts: The Bill allows the central government to establish special courts for ensuring speedy trial of offences under the Act.
  5. Appeals to Appellate Tribunal: Under the Act, appeals against orders of the NCLT lie with the National Company Law Appellate Tribunal (NCLAT). The Bill adds that appeals cannot be made against an order that has been passed with the consent of the parties.  Appeals must be filed within 60 days (extendable by another 60 days) of the order.
  6. The Bill provides for formation of a small LLP where: (i) the contribution from partners is up to Rs 25 lakh (may be increased up to five crore rupees), (ii) turnover for the preceding financial year is up to Rs 40 lakh (may be increased up to Rs 50 crore).
  7. Start-up LLPs: The central government may also notify certain LLPs as start-up LLPs.
  8. Standards of accounting: The central government may prescribe the standards of accounting and auditing for classes of LLPs, in consultation with the National Financial Reporting Authority.

 

What is an LLP?

A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence.

 

Salient features of an LLP:

  • An LLP is a body corporate and legal entity separate from its partners. It has perpetual succession.
  • Being the separate legislation (i.e. LLP Act, 2008), the provisions of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by the contractual agreement between the partners.
  • Every Limited Liability Partnership shall use the words “Limited Liability Partnership” or its acronym “LLP” as the last words of its name.

 

Composition:

Every LLP shall have at least two designated partners being individuals, at least one of them being resident in India and all the partners shall be the agent of the Limited Liability Partnership but not of other partners.

 

Need for and significance LLP:

  • LLP format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
  • This format would be quite useful for small and medium enterprises in general and for the enterprises in the services sector in particular.
  • Internationally, LLPs are the preferred vehicle of business particularly for service industry or for activities involving professionals.

 

Insta Curious:

Do you know about the Company Law Committee (CLC), setup by the Corporate Affairs Ministry (MCA)? What were its objectives? Reference: 

 

InstaLinks:

Prelims Link:

  1. Difference between LLP and companies.
  2. Difference between LP and LLP.
  3. What is a body corporate?
  4. Roles and functions of LLP partners.

Mains Link:

Write a note on limited liability partnerships.

Sources: the Hindu.