LIMITED LIABILITY PARTNERSHIP

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					LIMITED LIABILITY PARTNERSHIP

         RECENT DEVELOPMENTS

                               By
    Dr.B RAVI M.B.A.,F.C.S.,Ph.D.,
PRACTISING COMPANY SECRETARY
  OLD NO 16, NEW NO 42, RATHINAM STREET
         GOPALAPURAM, CHENNAI 600 086.
       044-28350517/1055 / 98400 82545
              E MAIL bravi@md5.vsnl.net.in
                        bravics@gmail.com
   LLP – A NEW BUSINESS MODEL

      NEED AND THE NECESSITY TO HAVE THE NEW
                  BUSINESS MODEL

                      KEY FACTORS:
    EXPECTATION FROM THE CLIENT IS ON THE INCREASE
    COST VERSUS BENEFIT IN RENDERING SERVICE
    INCREASED VISIBILITY
    COMPREHENSIVE VALUE BASED ADVICE
    SHARING OF EXPERTISE
 MULTIDISCIPLINARY PRACTICE

             Vs

MULTIDISCIPLINARY PARTNERSHIP
THE      ACTIVITIES     OF    A
PROFESSIONAL     SERVICE   FIRM
WITH COMPETENCIES IN MORE
THAN ONE DISCIPLINE OR THE
CO-ORDINATED ACTIVITIES OF
PROFESSIONALS     IN   SEPARATE
ENTITIES.
THE LEGAL RELATIONSHIP AMONG
THE     PRINCIPALS    OF     A
PROFESSIONAL SERVICES FIRM,
SERVING ESSENTIALLY AS A PROXY
FOR OWNERSHIP AND CONTROL
   MCA HAS SPECIFIED FIVE NEW CATEGORIES OF
    PROFESSIONALS APART FROM CA, CS AND
    CMA WHO ARE ELIGIBLE FOR FORMING FIRMS
    UNDER THE LLP ACT VIZ, ENGINEERS,
    LAWYERS, ARCHTECHS, ACTUARIES AND
    FINANCIAL MANAGEMENT CONSULTANTS.
   THE     PROFESSIONAL    BODIES    WHICH
    REGULATES THE PROFESSION ARE READY.
    PARLIAMENT HAS ACCORDED ITS APPROVAL
    ON 8TH JANUARY 2012 .
   INSTITUTUES GUIDELINES AND THE CREATION
    OF MDP TO FOLLOW SUIT.
   A LONG WAY TO GO FOR RECIPROCAL
    RECOGNITION FROM COUNTIRES OUTSIDE
    INDIA.
POWER OF REGISTRATION OF LLP AND ALL
MATTERS CONNECTED WITH LLP WILL BE
DELEGATED TO ROC – EXPECTED FROM
01.06.2012

NEW FORMS AND RULES TO MEET THE
PROPOSED DECENTRALIZATION IS IN PLACE
AND NOTIFICATION WILL BE ISSUED SHORTLY.
 EFFECTIVE 21ST MAY 2011 THE
 LLP SITE WILL NOT ACCEPT NAME
 AVAILABILITY APPLICATION AND
 WILL BE KEPT SUSPENDED FOR THE
 DECENTRALIZATION PROCESS
   First LLP registered on 02.04.2009

   9200 APPROX. AS ON DATE (9009 LLPs are
    registered as of 01-05-2012 10:00:00Hrs)

   36 COMPANIES      NOTIFIED    FOR    STRIKE
    OFF!!!!!
   THE MAIN REASON FOR THE GROWTH AND
    FALL OF LLP.



   INCENTIVES OFFERED – SUBSEQUENTLY
    WITHDRAWN – WAREHOUSING AND LOGISTICS
   WHEN CONVERSION TO TAKE PLACE?

   LACK OF AWARENESS AMONG
    BANKS/BANKERS.

   MISCONEPTION OF THE PROMOTERS

   MCA INITIATIVES JOINTLY WITH RBI.
   FILING OF FORM NO 8 – OPTIONAL – IF
    PROPOSE TO FILE THEN MANNER OF FILING
    AND TIMING LIMIT WITHIN WHICH TO BE
    FILED ARE PRESCRIBED.

   FILING OF FORM NO 8 – DETAILS OF SECURED
    LOANS PARTICULARS – MANDATORY –
    ANNUALLY.

   DUE DATE: 30TH OCTOBER FOR FORM 8 AND
    30TH MAY IS FOR FORM NO 11.
                    FDI IN LLP
  The Cabinet Committee of Economic Affairs (CCEA)
  approved Foreign Direct Investment (FDI) in Limited
  Liability Partnership (LLP) firms on 11th May 2011.

Key features of the FDI policy for LLPs:

1. Permitted Sectors: FDI in LLP is permitted only in
   those sectors/ activities where 100% FDI is
   permitted through automatic route.
2. Prohibited Sectors
  a) Sectors which are prohibited for FDI like -
     agriculture, plantation, print media, real estate
  b) Sectors which are restricted with caps like telecom
  c) Sectors which are under the FIPB approval route
  d) FDI under automatic route with conditions

3. Approvals Required: Prior approval from the Foreign
   Investment Promotion Board (FIPB) will be required
   for FDI in LLP.
4. External Commercial Borrowings: LLPs will not be
   permitted to avail external commercial borrowings

5. Downstream investments
    a) LLPs with FDI are not being eligible for making
       any downstream investment.

   b) However, an Indian Company with foreign
      investment can make downstream investment
      into LLP, provided both the Company and LLP,
      operate in sectors where 100% FDI is allowed,
      through the automatic route.
6. Designated Partner

  a) A “person resident in India” as defined under the Foreign
    Exchange Management Act, 1999 or
  b) If the LLP has a body corporate as a designated partner, the
     body corporate should only be a Company registered under
     the Companies Act and not any other body, such as an LLP
     or a trust.

7. Transition from Company to LLP
  Conversion of a Company with FDI into an LLP will be allowed
  only if the above stipulations are met and with the prior
  approval of FIPB/government.
    REALITY

     •MCA
•DO NOT PERMIT
  •FDI IN LLP
     LACK OF HARMONIZATION
• FDI POLICY STATES – FIPB APPROVAL –
  AUTOMATIC ROUTE ETC.,
• RBI HAS ISSUED A CIRCULAR EARLIER AND
  ALSO ADVISED MCA NOT TO REGISTER LLP
  WITH FDI – NOT TO PERMIT FDI IN LLP UNLESS
  IT IS IN ACCORDANCE WITH FEMA
  NOTIFICIATIONS AND FIPB APPROVAL.
• FDI POLICY HAS COVERED THE FIPB PART.
• RBI YET TO NOTIFY FEMA REGULATIONS.
          BIRTH CHART OF LLP
15.12.2006 – BILL INTRODUCED IN RAJYA SABHA
REFERRED TO: PARLIMENT STANDING COMMITTEE.
27.11.2007-REPORT SUBMITTED BY THE COMMITTEE
  BEFORE LOK SABHA AND RAJYA SABHA.
21.10.2008-REVISED BILL AFTER COMMITTEE’S REPORT
  – INTRODUCED IN RAJYA SABHA. LIMITED LIABILITY
  PARTNERSHIP BILL 2008. EARLIER BILL 2006 WAS
  WITHDRAWN.
24.10.2008 : RAJYA SABHA PASSED THE BILL
12.12.2008 : LOK SABHA PASSED THE BILL
07.01.2009 : RECEIVED THE ASSENT OF THE PRESIDENT
09.01.2009:PUBLISHED IN THE GAZETTE OF INDIA
31.03.2009: ACT WAS NOTIFIED
01.04.2009: RULES WERE NOTIFIED
                WHY LLP

NEED WAS FELT TO HAVE AN ALTERNATIVE
CORPORATE BUSINESS VEHICLE – WITH THE
BENEFITS   OF    LIMITED   LIABILITY   AND
FLEXIBILITY TO MEMBERS TO ORGANIZE THEIR
INTERNAL STRUCTURE AS A PARTNERSHIP
BASED ON MUTUALLY ARRIVED AGREEMENT.
                 SCHEME OF THE ACT
• NUMBER OF CHAPTER/SECTIONS : 14/81
• NUMBER OF SCHEDULES              :4
• NUMBER OF RULES                  : 2 (LLP RULES 2009) AND (LLP
  WINDING UP AND DISSOLUTION RULES 2010)
Except Secs. 2(1)(c) & (u), 51, 55-58, 63-65, 72 & 73 Act came
  into force on 31.3.2009
Secs.55-58, Second, third and fourth schedule came into force
  on 31.5.2009
Rules 1-31, 34-37 & 41 came into force on 01.04.2009
Rules 32 and 33 and 38 to 40 came into force on 31.5.2009.
Winding up rules came into force from 30.03.2010.
                WHEN LLP IS ALIVE: 31 FORMS.
             WHEN LLP WANTS TO DIE: 91 FORMS
             APPLICABILITY
• INDIAN PARTNERSHIP ACT SHALL NOT APPLY

• PROVISIONS OF COMPANIES ACT TO THE EXTENT
  NOTIFIED BY CENTRAL GOVERNMENT SHALL
  APPLY AS IT IS OR WITH MODIFICATIONS.

• PROVISIONS OF OTHER LAWS ARE NOT BARRED.
  THEY ARE APPLICABLE TO LLP IN ADDITION TO
  LLP ACT.
                     JURISDICTION


   OF THE ACT    OF TRIBUNAL            OF COURT
                 and APPELLATE
                 TRIBUNAL

Act extends to   Tribunal shall         Judicial Magistrate of the
Whole of India   exercise such          First Class as the case may
                 powers and functions   be the Metropolitan
                 conferred on it        Magistrate shall have
                 Under this act         jurisdiction to try any
                 Or under other laws.   Offence under this Act.
                 Aggrieved by the       Have power to impose
                 order of Tribunal      punishment in respect of
                 appeal before          of such offence.
                 Appellate Tribunal
                 10FQ/FZA/G/GD/GE/GF
                 of the Companies Act
                 will apply.
                     NATURE OF LLP
ON INCORPORATION :
                     BODY CORPORATE
                     SEPARATE LEGAL ENTITY
                     PERPETUAL SUCCESSION
                     CAPABLE OF SUING AND BEING SUED.
                     CAN HOLD PROPERTY.
                     HAVE A COMMON SEAL

                     DOING AND SUFFERING OTHER
                     THINGS AND ACTS AS THE BODIES
                     CORPORATE MAY LAWFULLY DO
                     AND SUFFER.

                     NAME OF EVERY LLP SHALL END WITH THE WORDS
                     ‘LIMITED LIABILITY PARTNERSHIP’ OR’LLP’
      IMPORTANT DEFINITIONS
• BODY CORPORATE(LLP, LLP/outside India/
  company incorporated outside India.) does not
  include..

• BUSINESS – INCLUSIVE DEFINITION (every trade,
  profession, service and occupation)

• FINANCIAL YEAR – 1/4 TO 31/3. IF
  INCOROPORATED AFTER 30/9 FINANCIAL YEAR
  MAY END ON THE 31/3 OF THE YEAR NEXT
  FOLLOWING THAT YEAR.

• FOREIGN LLP – EXHAUSTIVE DEFINITION.
             LLP AGREEMENT
• WRITTEN AGREEMENT
• BETWEEN PARTNERS OF LLP OR
• LLP AND ITS PARTNERS – DETERMINES THE MUTUAL
  RIGHTS AND DUTIES OF PARTNERS AND THEIR RIGHTS
  AND DUTIES IN RELATION TO THAT LLP.
• FIRST SCHEDULE TO LLP ACT
• TWO OPTIONS: OWN AGREEMENT OR ADOPT LLP
  AGREEMENT
• AGREEMENT IN WRITING WHEN EXISTS BEFORE
  INCORPORATION OF LLP – IMPOSE ON LLP WHEN
  RATIFIED BY ALL THE PARTNERS OF LLP.
• PIERCING THE LLP VEIL:

 THE     PROCESS   OF   IMPOSING
 INDIVIDUAL AND PERSONAL LIABILITY
 ON THE PRINCIPALS IN A LLP IS
 REFERRED TO AS ‘PIERCING OF
 CORPORATE (PARTNERHIP) VEIL OR
 ‘DISREGARDING   THE   CORPORATE
 ENTITY’
                PARTNERS
• INDIVIDUAL – OTHER THAN UNSOUND
  MIND/UNDISCHARGED INSOLVENT/APPLIED TO BE
  ADJUDICATED AS AN INSOLVENT AND APPLICATION
  PENDING.
• BODY CORPORATE
• MINIMUM : TWO PARTNERS
• MAXIMUM: NO LIMIT
• IMPACT OF PARTNERSHIP ACT AND COMPANIES ACT.
• WHEN THE MINIMUM FALLS BELOW TWO – AND LLP
  CARRIES ON BUSINESS FOR MORE THAN 6 MONTHS -
  PERSONALLY LIABLE FOR THE OBLIGATIONS OF LLP
  DURING THAT PERIOD.
            PARTNERS CONTD…
• ADMISSION OF MINOR TO BENEFIT OF
  PARNERSHIP: No specific provision in the LLP act.
  a partner has to sign the LLP agreement and is
  bound by it and is entitled to vote. thus, a minor
  cannot be a partner.
• DEEMED/SHADOW PARTNER: Similar to the
  concept of SHADOW DIRECTOR. If the partners
  are collectively accustomed to act in accordance
  with the instructions of particular person (except
  for professional advisory capacity)– that person is
  a deemed or shadow partner
ADMISSION AND CESSATION OF PARTNERS

TWO MODES TO BECOME A PARTNER:
A) BY BEING A SUBSCRIBER
B) IN ACCORDANCE WITH LLP AGREEMENT.

TWO MODES OF CEASING TO BE A PARTNER:
A) OPTIONAL – AS PER AGREEMENT OR NOTICE IN WRITING
   NOT LESS THAN 30 DAYS TO THE OTHER PARTNERS –
   INTENTION TO RESIGN.
B) COMPULSORY: DEALTH OR DISSOLUTION OF LLP OR ON
   BECOMING DISQUALIFIED TO BE A PARTNER.

   IMPORTANCE OF NOTICE OF CESSATION AND THE
   OBLIGATIONS OF OUTGOING PARTNER/S.
    ENTITLEMENT ON CESSATION
• IN ACCORDANCE WITH LLP AGREEMENT.

• ENTITLED TO REECEIVE FROM LLP AN AMOUNT
  EQUAL TO THE CONTRIBUTION ACTUALLY MADE
  AND SHARE IN ACCUMULATED PROFITS AFTER
  DEDUCTING THE ACCUMULATED LOSSES AS ON
  THE DATE OF CESSATION.

• NO RIGHT TO INTERFERE IN THE MANAGEMENT
  OF LLP.
       CHANGES AND INTIMATION
• Change in the name and address of partner/s:
  Obligation on the partner to intimate – LLP – within
  15 days of change.
• LLP to intimate the change to ROC – within 30 days of
  such change.
• Appointment / cessation – LLP – intimate ROC within
  30 days of the event. Consent letter from the
  incoming partner is mandatory.
• Designated partner shall sign the forms of intimation.
• Outgoing partner right to intimate ROC of his
  cessation.
           DESIGNATED PARTNERS
• Minimum two designated partners who are individuals is
  mandatory.
• One of them shall be a resident in India. (Resident means a
  person who has stayed in India for a period of not less than
  182 days during the immediately preceding one year).
• One should necessarily be a partner to become a
  designated partner.
• Prior consent to act as such should be given in Form No: 9
  to LLP.
• The incorporation document shall specify the name of the
  designated partners. In the alternate the incorporation
  document may state that each of the partners from time to
  time of LLP is to be designated partners and in which event
  every partner shall be a designated partner.
        INTERGRATION OF DIN WITH DPIN
• With effect from 9.7.2011, no fresh DPIN will be
  issued. Any person, who desires to become a
  designated partner in a Limited Liability
  Partnership, has to obtain DIN by filing e-form
  DIN-1.

• If a person has been allotted DIN, the said DIN
  shall also be used as DPIN for all purposes under
  Limited Liability Partnership Act, 2008.
• If a person has been allotted DPIN, the said
  DPIN will also be used as DIN for all the
  purposes under Companies Act, 1956.

• If a person has been allotted both DIN and
  DPIN, his DPIN will stand cancelled and his DIN
  will be used as DIN as well as DPIN for all
  purposes under Limited Liability Partnership
  Act, 2008 and Companies Act, 1956.
• As per Circular no. 32/2011 dated
  31.05.2011, the Ministry has made
  Income Tax Permanent Account Number
  (PAN) mandatory for obtaining DIN for
  Indian nationals. Further, all existing DIN
  holders, who have not furnished their
  PAN at the time of obtaining DIN, are
  required to furnish their PAN to the
  Ministry by filing e-form DIN-4 by 30th
  September, 2011.
• Similarly, all DPIN holders, who had not furnished
  their PAN at the time of obtaining DPIN, are
  required to furnish their PAN to the Ministry by
  filing e-form DIN-4 by 30th September, 2011,
  failing which their DPIN/DIN will be disabled and
  they will also be liable for heavy penalty.

• The time limit from 30th September, 2011 has
  been extended from time to time and the last
  date of extension as per General Circular
  No:4/2012 dated 09.03.2012 is upto 30.04.2012.
• Vacancy in the office of Designated partner shall be
  filled in, within 30 days of the vacancy, default of
  which or there is only one designated partner, then
  each partner shall be deemed to be a designated
  partner.

• In case of LLP in which all the partners are bodies
  corporate or in which one or more partners are
  individuals and bodies corporate, at least two
  individuals who are partners of such LLP or
  nominees of such bodies corporate shall act as
  designated partners.
   DESIGNATED PARTNERS – LIABILITIES
• Responsible for doing all the acts, matters and
  things as are required to be done by the LLP in
  respect of compliance of the provisions of this Act
  including filing of any document, return,
  statement and the like report pursuant to the
  provisions of this LLP law and as may be specified
  in the LLP agreement.

• Liable for all penalties imposed on the LLP for any
  contravention of those provisions.
      LLP AND PARTNERS - LIABILITY
• Every partner is an agent of LLP and not of other
  partners – fundamental departure from partnership
  law.
• LLP NOT liable – when the act of the partner is
  without authority.
• LLP is liable – for wrongful act or omission on the part
  of the partner in the course of business of LLP or with
  its authority. PARTNER IS NOT PERSONALLY LIABLE
  AND THE LIABILITIES OF LLP MET OUT OF PROPERTY
  OF LLP. – DISTINCT ADVANTAGE .
• PARTNER – Personally liable – for his own wrongful
  act or omission and not that of other partners.
          UNLIMITED LIABILITY
• IF THE INTEND IS TO DEFRAUD CREDITORS/ANY
  OTHER PERSON OR ANY FRADULENT PURPOSE –
  NOTE THE LIABILITY IS RESTRICTED TO LLP AND
  THE CONCERNED PARTNER.
• LLP WILL NOT BECOME LIABLE IF THE PARTNER
  HAS DONE WITHOUT AUTHORITY.
• AFFAIRS – FRADULENT MANNER – LIABLE TO PAY
  COMPENSATION TO THE AGGREIVED PERSON –
  INDEPENDENT OF CRIMINAL PROCEEDINGS.
           RIGHTS OF PARTNERS
• SHARE IN THE PROFITS AND LOSSES
• TO RECEIVE DISTRIBUTION AS PER LLP AGREEMENT.
• RIGHT TO TRANSFER ANY OF THE ABOVE OR BOTH –
  IN WHOLE OR IN PART.
• TRANSFER – DOES NOT RESULT IN DISASSOCIATION OF
  PARTNER OR DISSOLUTION OF LLP AND WINDING UP.
• THE TRANSFEREE IN THE ABOVE CASE GETS NO RIGHT
  TO PARTICIPATE IN THE MANAGEMENT OR ACCESS
  INFORMATION ABOUT LLP.
            SPECIAL ATTRACTION
• WHISTLE BLOWING.
• HOLDING OUT.
• LIABILITY OF A PARTNER AFTER HIS DEATH.
• CONVERSION FROM FIRM TO LLP; PRIVATE COMPANY
  TO LLP AND PUBLIC COMPANY TO LLP.
• EFFECT OF CONVERSION – IMPACT OF EXISTENCE OF
  SECURED    CREIDTORS   BEFORE    CONVERSION   –
  SIGNIFICANCE OF TRANFER AND VESTING.
    SPECIAL ATTRACTION – CONTD.,
• COMPOUNDING OF OFFENCES
• DESTRUCTION OF RECORDS
• GENERAL PENALTIES
• ENFORCEMENT OF DUTY TO MAKE RETURNS
• POWER OF REGISTRAR TO STRIKE THE
  DEFUCNT LLP
• FOREIGN LIMITED LIABILITY PARTNERSHIPS.
• TRIBUNAL
        INCORPORATION OF LLP
• CENTRAL REGISTRATION – IMPACT OF
  SEC.11(1)(b) of the Act.

• Definition of the term Registrar: Sec.2(s)

• Usage of the term State.

• LEGALITY OF THE CENTRAL REGISTRATION –
  DEBATABLE.
             BULLET POINTS
• Minimum two partners
• Lawful business with a view to profit (can
  sec.25 company be formed as LLP)
• Incorporation document submission with ROC
  of state in which registered office is to be
  situated.
• Statement of declaration.
• Registrar issuing certificate – conclusive
  evidence.
• Name to end with the words LIMITED
  LIABILITY PARTNERSHIP OR LLP .
           BULLETS - CONTD.,
• RESERVATION OF NAME

• CHANGE OF NAME

• RECTIFICATION OF NAME. (24 MONTHS)

• REGISTERED OFFICE MANDATORY – COMMUNICATION

  TO BE ADDRESSED TO THE SAID ADDRESS – CHANGE

  POSSIBLE – INTIMATION REQUIRED.
       FINANCIAL DISCLOSURES
• Can follow cash basis or accrual basis
• Books shall be maintained at the Registered
  office.
• Statement of Account and Solvency – within 6
  months from the end of the financial year –
  signed by designated partners – filed with Roc.
• Accounts shall be audited as per rules –
  Chapter VII of the Rules - Rule no 24 (23
  points)
  FINANCIAL DISCLOSURES – CONTD.,
• Accounting records to disclose with reasonable
  accuracy the financial position of LLP.
• To be preserved for 8 years.
• Accounts shall be audited – exemption – if the
  turnover does not exceed in any financial year
  Rs.40 lacs or its contribution does not exceed
  Rs.25 lacs. (partners are at liberty to have the
  audit as may be decided by them in respect of
  exempted categories.) – Statement from partners
  mandatory for enjoying the exemption.
                     AUDITORS
• TO BE APPOINTED WITHIN 30 DAYS BEFORE THE END OF THE
  FINANCIAL YEAR. (BY DP)
• FOR THE FIRST FINANCIAL YEAR – AT ANY TIME BEFORE THE END
  OF THE FIRST FY.
• DESIGNATED PARTNER HAS THE POWER TO FILL UP CASUAL
  VACANCY IN THE OFFICE OF AUDITOR AND ALSO TO FILLUP THE
  VACANCY CASUED BY REMOVAL OF AUDITOR. - WHERE DP
  DEFAULTS PARTNERS MAY APPOINT. (When)
• CA IN PRACTICE ALONE CAN BE APPOINTED. (FIRM?)
• REMUNERATION – DP TO FIX OR AS PER LLP AGREEMENT
• REMOVAL – LLP AGREEMENT OTHERWISE CONSENT OF ALL
  PARTNERS.
• RESIGNATION – NOTICE TO BE DEPOSITED AT THE REGISGTERED
  OFFICE WITH STATEMENT OF REASONS.
• LLPS CAN NOW ACT AS STATUTORY AUDITORS
 Section 266(3)(a) of Companies Act, 1956
 disqualifies a Body corporate from being
 appointed as statutory auditor. MCA, vide
 circular no: 30A/2011 dated 26.05.2011 has
 clarified the term Body corporate for the
 purposes of Section 266(3)(a) of Companies
 Act, 1956. By virtue of the circular LLPs of
 Chartered Accountants are detached from the
 definition of ‘body corporate’ for the limited
 purpose of Section 226(3)(a) of the
 Companies Act.
          ANNUAL RETURN

• MANDATORY – WITHIN 60 DAYS FROM THE END

 OF THE FINANCIAL YEAR – CERTIFICATE FROM

 COMPANY SECRETARY – VERFIED THE BOOKS

 AND RECORDS OF THE LLP AND FOUND THEM TO

 BE TRUE AND CORRECT.
          TAXATION OF LLPS
DISTINCT FEATURES
• Tax provisions for LLPs were introduced
  by the union budget 2009-10.
• Section 2(23) of the Income Tax Act has
  been amended by the Finance Act, 2009
  to include to include ‘LLP’ & its ‘Partners
  under the Income Tax Act, 1961.
• Tax treatment of LLPs to be same as that
  of ‘Partnership Firms’.
• Partner’s share of profit would be
  exempt in the hands of the partners[S.10
  (2A) of Income Tax Act, 1961].
• Set off and carry forward of losses are
  allowed as normally allowed to
  partnership firms.
• Partner’s remuneration is subject to proposed
  limits:

             Slab of Book Profit                  Remuneration Allowable
 On first Rs. 3 lacs or in case of loss
                                          Rs. 1.5 lacs or 90% of book profits,
                                          whichever is higher
 On balance of book profit                60% of book profits
      APPLICABLE TAX RATE

• 30% flat tax rate + 3% education cess
• No Dividend Distribution Tax
• Minimum Alternate Tax (MAT) is
  applicable as per Finance Act, 2011.
APPLICABILITY OF SECTION 184
  Limited Liability Partnership to be assessed as
  “firm” under Income Tax Act, following criteria
  under Section 184 of the Income Tax Act, 1961
  should be satisfied:
• There should be a written LLP Agreement.
• The individual shares of the partners are very
  clearly specified in the deed.
• A certified copy of LLP Agreement must
  accompany the return of income of the LLP of
  the previous year in which the partnership
  was formed.
• If during a previous year, a change takes place
  in the constitution of the LLP or in the profit
  sharing ratio of the partners, a certified copy
  of the revised LLP Agreement shall be
  submitted along with the return of income of
  the previous years in question.

• There should not be any failure on the part of
  the LLP while attending to notices given by the
  Income Tax Officer for completion of the
  assessment of the LLP.
 MCA – CIRCULARS & NOTIFICATIONS
1. The Ministry is in process of integration of
   LLP system into MCA-21 in the month of June
   2012 by allowing filing & approval of LLP
   forms at MCA-21 website (www.mca.gov.in)
   for better e-governance facility for
   stakeholders, by making necessary changes in
   e-forms. On post integration, old e-forms of
   the existing LLP system lying in "Pending User
   Clarification" (PUCL) status cannot be re
   opened.
2. LLPs and designated partners are also
  advised to reopen/ resubmit the LLP
  form, if any lying in "Pending User
  Clarification"     (PUCL)       /     Under
  Resubmission (RESUB) mode by 21-05-
  2012 after complying with the
  requirements failing which the pending
  forms will be liable for rejection or will be
  marked as invalid and LLP shall be
  required to file of fresh e-forms with fees
  & additional fees.
3. As per the Department Notification dated 4th
  November, 2011 it has been clarified that , if the LLP
  has closed the financial year on 31st March, 2011, it
  shall file Statement of Accounts and Solvency in
  Form 8 with the Registrar, within a period of 60 days
  from the end of 6 months of the financial year to
  which Statement of Accounts and Solvency relates.

4. Notice for filing Form-8 & 11 for the Financial Year
   ended 31-03-2012
• All LLPs registered upto 30-September-2011 have to
   mandatorily close the financial year as on
   31-03-2012 and file Form-11 by 30-May-2012 and
   Form-8 by 30- October-2012.
• LLPs registered from 01-10-2011 to 31-
  03-2012 have option either to close
  financial year as on 31-03-2012 or 31-03-
  2013 and to file Form-8 & 11 accordingly.

• Please note that if LLP fails to file Form-8
  & 11 within time, an additional fees of
  Rs. 100/- is payable per day till date of
  filing.
• Hints for successful DSC association of Designated
  Partners

  1. On LLP website (www.llp.gov.in ), every designated
  partner has to associate his/her digital signature
  under the tab "Associate DSC" along with personal
  information like name, father's name, PAN, Date of
  Birth & email address.

  2. If you have allotted DPIN under LLP system then
  Before associating DSC, please check the new
  DIN/DPIN under the tab "Check Unique DPIN".
3. Spelling of name & father's name, and other
  particulars should be exactly same as
  approved in DIN/DPIN application.

4. If in the DIN was approved without email id
  and PAN, then Designated Partner should first
  file DIN4 (in MCA-21) to update email id &
  PAN and next day try for DSC association.

5.Name in the DSC and DIN /DPIN should be
  same otherwise name in the DSC or DIN/DPIN
  should be rectified.
6.At present, LLP system is not
  allowing name with the single word
  because of LLP forms validation.
  Either user should wait for resolution
  of the issue or file DIN4 for adding
  2nd word in the name known as last
  name.
• COMPROMISE, ARRANGEMENT OR
       RECONSTRUCTIONS.



        • WINDING UP

• INSPECTION AND INVESTIGATION
     LIMITED LIABILITY PARTNERSHIP
               RULES 2009
1.Notification Number GSR 229 (E) Dated
01.04.2009
2. Rules 1-31, 34-37 and 41 – came into
force from 01.04.2009.
3. Rules 32, 33, 38-40 – came into force
from 31st May 2009.
4. There are in total 41 rules and 31 forms.
There are 4 annexure to the Rules.
5. Every LLP shall specify the LLP in the forms
   annexed to the Rules for the purpose of LLP
   Act.

6. Consent to act as designated partner
   shall be in form no 9

7. Particulars of the individual who has given
   the consent to act as designated partner
   shall be filed in Form no 4.
8. Disqualification to become a designated
partner prescribed – adjudged insolvent
during the preceding five years or suspension
of payment to creditors during the preceding
five years or entered into composition with
them, conviction by a court for an offence
involving moral turpitude and sentenced for
imprisonment for a period of not less than 6
months or has been convicted by a Court for
an offence involving Sec.30 of the Act.
9. Application to obtain DPIN should be in Form No 7 –
(whether an individual or a nominee of body corporate) –
provisional DPIN will be generated – valid for 60 days from
the date of generation – submit the Form 7 with enclosures
mentioned therein together with requisite fee for obtaining
the regular DPIN. Central Government will allot or reject
within one month from the date of receipt of application.
DPIN is valid for the life time of the applicant. Designated
partner to intimate DPIN to the LLP IN FORM NO 9 and
the LLP to intimate to Registrar in Form no 4.

Any change in the particulars intimate within 30 days in
Form no 10 to the Central Government and also the LLP
concerned in which he is a designated partner. NO FEE FOR
SUCH INTIMATION OF CHANGES.
10. Incorporation document shall be
filed in Form no 2 with the Registrar
having jurisdiction over the State in
which the registered office of the LLP
is to be situated along with requisite
fee.
11. Document can be served on LLP or a
partner of DP through electronic transmission
or Courier.
12. LLP can declare address other than
registered office for the purpose of service of
documents in the manner laid down under
LLPA, default of which with the consent of all
the partners and the intimation to that effect
shall be given to Registrar in FORM NO 12.
The new address will take effect only after
intimation to Registrar along with fee.
13. Registered office can be changed as per LLPA ,
default of which with the consent of all the partners is
mandatory. If the change is from one State to another
State, consent of secured creditors, if any is required.
Besides that an advertisement in two newspapers (one
English and one in principal language of the district in
which registered office of LLP is situated) should be
given about the proposed change atleast 21 days before
filing with Registrar the change. Intimate the change to
Registrar within 30 days from the date of the change in
form no 15 with fee along with details of pending
cases, conviction, ruling etc., against LLP.
14. Name of LLP shall not be one prohibited
under the Emblems and Names (prevention of
Improper Use) Act 1950. A long list of guidelines
is provided stating the circumstances under
which a name shall not generally be reserved.
Application for name to be made in form no 1
with fee. Name reserved is valid for three
months.
15. Foreign LLP or a foreign company shall apply
for reserving its existing name in Form no 25 with
fee.
16. LLP/BC/any other entity which
has a name which is similar to the
LLP registered subsequently may
apply to Registrar in Form no 23
with fee for direction to the LLP
formed subsequently to change its
name.
17.LLP can change its name in the manner
   provided in LLP agreement, default of which
   consent of all the partners mandatory.
   Intimate the change in Form no 5 to the
   Registrar within 30 days of completing the
   procedure of change of name along with fee.

18.Registrar will issue fresh certificate of
  incorporation and the new name will take
   effect from the date of the certificate.
19. Every LLP shall file information with
regard to LLP agreement in Form no 3
with Registrar within 30 days of the
date of incorporation along with fee
and where there is change in the
agreement within 30 days from the date
of change in form no 3.
20. where there is a partnership
agreement before incorporation of LLP
between the partners imposing
obligations on LLP will be valid only
when the same is ratified by all the
partners after incorporation of LLP and
intimate the same in form no 3 within
30 days of ratification.
21. Change in name or address of partner
of LLP – intimate LLP in form no 6

22. Admission / cessation of a partner /
change in name or address of a partner –
LLP to file with Registrar – Notice in Form
4 along with fee.         Consent of the
incoming partner is a mandatory
attachment. Form No. 4 to be certified
by CA / CS / CWA in practice.
23. Chapter VI deals with form
of contribution and disclosure,
Chapter VII deals with financial
disclosures, Chapter VIII deals
with destruction of old records,
Chapter      IX   deals    with
investigations.
24. Chapter X provides for conversion to
LLP. The Registrar on conversion will
issue a Certificate of Registration under
his seal in Form 19. Where Registrar
refuses conversion applicant may apply
to Tribunal within 60 days from the date
of receipt of refusal. On conversion the
earlier form of organisation should
intimate the concerned regulator about
the conversion within 15 days from the
date of conversion in Form No. 14.
25. Chapter XI deals with Foreign
Limited Liability partnership. Chapter
XII     deals     with    Compromise,
arrangement or reconstruction of LLP,
Chapter XIII deals with electronic filing
of documents, Chapter IV deals with
striking off name of defunct LLP.
26. Rule 38 provides that for conversion
from firm to LLP application should be made
in Form 17 along with fee. The Form
consists of two parts – First part is the
format and the second part details the
statement of partners.         Certificate of
Registration is issued in Form No. 19 and the
firm to intimate Registrar of firms about
conversion in Form no. 14.
27. Rule 39 provides that for conversion
from Private Company to LLP application
should be made in Form 18 along with fee.
The Form consists of two parts – First part is
the format and the second part details the
statement of shareholders. Certificate of
Registration is issued in Form No. 19 and the
Private Company to intimate the Registrar of
Companies in Form no. 14.
28. Rule 40 provides that for conversion
from Public Company to LLP application
should be made in Form 18 along with fee.
The Form consists of two parts – First part is
the format and the second part details the
statement of shareholders. Certificate of
Registration is issued in Form No. 19 and
the Public Company to intimate the
Registrar of Companies in Form no. 14.
29. Rule 41 deals with Compounding of Offences –
application to Registrar in Form 31 – Registrar to
forward with his comments to Central
Government. If the offence is compounded before
the institution of prosecution, no prosecution
should be instituted in relation to such offence. If
the offence is compounded after the institution of
prosecutions, composition should be brought to
the notice of the court where prosecution is
pending, by the Registrar. LLP to intimate the
offence compounded in form No. 22 within seven
days from the date of which the offence is so
compounded.
30. Rules relating to
   Foreign LLP,
   Compounding of offences
   are yet to be in place.
      LIMITED LIABILITY PARTNERSHIP
               AGREEMENT
1.   Section 2(1)(o) defines the term Limited
     Liability Partnership Agreement (LLPA).
     According to which LLPA means :-
a. A written agreement
b. Between the partners of LLP or
c. Between LLP and its partners
d. Determining the mutual rights and
   duties of the partners and
e. Rights and duties of the partners in
   relation to that LLP.
3. There is no legal obligation on
 the partners to have a formal
 agreement. Where there is no
 formal agreement the provisions
 enumerated in First Schedule to
 the LLP Act, 2008 shall apply.
3. LLP being a body corporate with separate legal
entity status it would be advisable to have a
formal LLPA in place which will define in detail the
rights, duties, obligations of partners and all other
matters relating to management and decision
making process relating to LLP, including sharing of
profits.

4. Form No. 3 of LLP Rules, 2009 details the
information required to be furnished with
regard to LLPA and changes if any made
therein.
5. Section 23 of the LLP Act, 2008 read
with Rule 21 of the LLP rules, 2009
provides as follows:
a. Mutual rights and duties of the
    partners of LLP and
b. Mutual rights and duties of LLP and
    its partners shall be governed by
c. LLPA between the partners or
d. Between LLP and its partners.
e. LLPA shall be filed with Registrar in Form
No. 3 as per rule 21 within 30 days from the
date of incorporation along with prescribed
fee. It is to be noted that copy of the legal
agreement is not required to be filed but
only the information to the extent required
to be furnished as provided under Form No.
3 is to be given to the Registrar.
f. Any change in LLPA shall also be filed in
Form no. 3 as per rule 21 within 30 days from
the date of change along with prescribed fee.
g. Where an agreement in writing exists
prior to incorporation of LLP between the
parties who are subscribers to LLP and
would like to impose obligations on LLP then
it is mandatory to make it effective only
when the said agreement is ratified by all
the partners of LLP after incorporation. LLP
to file the information within 30 days from
the date of ratification by all the partners
together with prescribed fee.
h. Form No. 3 mandatorily requires the following
information :
i) Name and address of LLP
ii) Business to be carried on by LLP
iii) Address of Registered office
iv) Name of designated partners or mentioning of
the fact whether all partners would be considered as
designated partners, acts, matters and things
required to be done by a designated partner.
Powers in relation to acts, matters, or things which
the designated partner or partners can exercise only
with the consent of all the partners / requisite
number of percentage of partners.
v) Obligation of each partner to contribute
money or property or other benefit or to
perform services.
vi) Partner’s duties : (1) powers, duties and
authority of each partner (2) mutual rights
and duties of partners (3) mutual rights and
duties of LLP and partners.
vii) Restrictions if any, on the partner’s
authority
viii) Management and administration of LLP –
•List of acts matters or things which can be done
only with the consent of all the partners,
•Which can be done with the consent of majority
of the partners,
•Can be done only with the consent of number of
requisite partners,
•Manner, if any, in which the consent of the
partners to be obtained,
•Procedure for calling, holding and conducting
meetings (where the decisions are to be made at
the meetings of the partners).
ix) Whether LLP has a common seal, and if
it has, then name of the person having
power to affix it.
x) Clauses relating to admission, retirement,
cessation, expulsion and resignation of
partners.
xi) Obligations, rights, entitlements of a
partner on retirement, cessation, expulsion
and resignation of partners.
xii) Clauses, if any, relating to resolution of
dispute between the partners or partners
and LLP
xiii) Duration of LLP, if any
xiv) Clauses in relation to voluntary winding
up
xv) Any other information (optional).
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