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03 May 2021
Limited liability partnerships (LLPs) are partnerships in which the partners have limited liability. Therefore, LLPs exhibit elements of both partnerships and companies.
The Ministry of Corporate Affairs (MCA) introduced the concept of the LLP to help small and medium-sized enterprises in general and enterprises in the service sector in particular. Internationally, LLPs are the preferred vehicle for doing business in the service industry and for activities involving professionals. LLPs in India are governed by the Limited Liability Partnership Act 2008. In recent years, there has been a sharp increase in the registration of LLPs.
In order to improve LLP compliance and regulate the designated partners of LLPs, the MCA has stated that it will extend certain sections of the Companies Act 2013 to the Limited Liability Partnership Act and therefore LLPs. As such, the following provisions of the Companies Act will soon apply to LLPs:
The MCA will implement the proposed changes under Section 67 of the Limited Liability Partnership Act. The provisions relating to the condonation of delay provided under Section 460 of the Companies Act have applied to LLPs since 30 January 2020 in a similar manner.
While the regulatory authorities' attention is shifting towards LLPs, it is surprising that the LLP structure, which was introduced by the government to relax and ease the process of setting up small businesses, is now pushing the same small enterprises towards a stricter compliance regime. The introduction of various provisions of the Companies Act to LLPs will not only increase the compliance burden but also result in LLPs becoming similar to companies.
Once the MCA provides an effective date for the proposed amendment, the actual manner of extending and implementing the provisions will be clear. The update published on the MCA's website is merely an advance notice of what is proposed to be implemented soon regarding LLPs. The actual implementation may require certain exceptions and modifications.
For further information on this topic please contact Neetika Ahuja or Jatin Oberoi at Clasis Law by telephone (+91 11 4213 0000) or email (email@example.com or firstname.lastname@example.org). The Clasis Law website can be accessed at www.clasislaw.com.
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