limited liability partnership -indian scenariao

R.V.RAO , Last updated: 23 May 2008
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LIMITED LIABILITY PARTNERSHIP

- Indian scenario

Contributed BY R.V.RAO

Mobile 9849436267

1. WHAT IS A LL.P

2. ORIGIN OF LLP IN ADVANCED ECONOMIES

3. LL.P INDIAN SCENARIO

4. INDIAN CABINET APPROVAL FOR LL.P

5. BENEFITS AND OBLIGATIONS OF LL.P

6. TAXING A LL.P

7 HOW OUR PROFESSIONALS VIEW LL.P

8 IMP.AND INTERESTING PROVISIONS OF LL.P

9 CONCLUSION

CHAPTER I

WHAT IS A LLP(LIMITED LIABILITY PARTNERSHIP)

A limited liability partnership (LLP) has elements of partnerships and corporations. In an LLP, all partners have a form of limited liability, similar to that of the shareholders of a corporation. However, the partners have the right to manage the business directly, and a different level of tax liability than in a corporation.

Limited liability partnerships are distinct from limited partnerships, in that limited liability is granted to all partners, not to a subset of non-managing "limited partners." As a result the LLP is more suited for businesses where all investors wish to take an active role in management

ORIGIN OF LLP IN ADVANCED ECONOMIES OF THE WORLD

In the United States, each individual state has its own law governing their formation. Limited liability partnerships emerged in the early 1990s: popular among professionals, particularly lawyers, accountants and architects.

An obligation of a partnership incurred while the partnership is a limited liability partnership, whether arising in contract, tort, or otherwise, is solely the obligation of the partnership. A partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for such an obligation solely by reason of being or so acting as a partner.

As in a partnership or limited liability company (LLC), the profits of an LLP are distributed among the partners for tax purposes, avoiding the problem of "double taxation" often found in corporations.

In the U.K, LLPs are governed by theLL.Pact. A UK Limited Liability Partnership is a Corporate body - that is to say, it has a continuing legal existence independent of its Members, as compared to a partnership which may (in England and Wales they do not) have a legal existence dependent upon its Membership.

A UK LLP is tax transparent or pass-through for tax purposes, that is to say it pays no tax but its Members do in relation to the income or gains they receive through the LLP.

There is in fact no requirement for the LLP agreement even to be in writing because simple partnership-based regulations apply by way of default provisions.

It has to date been closely replicated by Japan and by the financial centres of Dubai and Qatar. It is perhaps closest in nature to the limited liability company although it may be distinguished from that entity by the fact that the LLC, while having an legal existence independent of its Members is not technically a Corporate body because its legal existence is time limited and therefore not "continuing".

Limited liability partnerships were introduced in Japanin 2005 during a large-scale revamp of the country's laws governing business organizations. Japanese LLPs may be formed for any purpose (although the purpose must be clearly stated in the partnership agreement and cannot be general), have full limited liability and are treated as pass-through entities for tax purposes. However, each partner in an LLP must take an active role in the business, so the model is more suitable for joint ventures and small businesses than for companies in which investors plan to take passive roles. Japanese LLPs may not be used by lawyers or accountants, as these professions are required to do business through an unlimited liability entity.

A Japanese LLP is not a corporation, but rather exists as a contractual relationship between the partners, similarly to an American LLP.

A limited liability partnership is a form of organisation which PROTECTS a partner's assets from limitless liabilities . In LLP, every partner will be an agent of the partnership and not of the other partners,

It promises perpetual succession and a distinct legal identity were it to become law. Further, it requires only a minimum of two partners, having no cap on the maximum number of partners a firm can have.

LL.P The Indian scenario

Because of the legal stipulation of unlimited liability among partners, Indian partnerships are mostly restricted to family members and persons who know each other thoroughly. LLP being a form of partnership having characteristics of a company will limit liability in the case of business failure or professional negligence

The LLP form of organization would help the small and medium practitioners WITH networking and specialization of functions.

CABINET APPROVAL FOR LLP IN INDIA

The Union Cabinet IN DEC. 2006 gave its nod for introduction of the Limited Liability Partnership Bill, 2006. The LLP will be an alternative corporate business vehicle that would not only give benefits of limited liability but would allow its members the flexibility of organizing their internal structure as partnership based on an agreement. The concept of LL.P can see two distinctive benefits.

1. Allowmembers the flexibility of organizing their structure as partnership based on an agreement.
2. Enableprofessional expertise and entrepreneurial initiative to combine.

LLP as proposed in the Bill would be a body corporate and a legal entity separate from its partners.

Even as a LLP will be a separate legal entity liable to the full extent of its assets, the liability of the partners will be limited to their agreed contribution in the structure.

Besides, no partner would be liable on account of independent or unauthorized action of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful business decision or misconduct.

With the increasing role of services sector and growing diversity in the range of services being offered, a need was felt for a new corporate form that would enable professional expertise and entrepreneurial initiative to combine, organise and operate in an innovative and efficient manner, official sources said.

The LLP form would allow professionals and enterprises engaged in I.T, science and technology sector, and venture capital business among others to create vehicles for providing business and services of high quality.

The Bill envisages that a LLP will have perpetual succession. It further stipulates that the Indian Partnership Act, 1932, shall not be applicable to LLPs.

BENEFITS AND OBLIGATIONS OF LL.P

The proposed Bill does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise, which fulfils the requirements of the Act.

Further, an LLP shall be under obligation to maintain annual accounts

Taxing an LL.P

As regards tax issues, the Bill stipulates that tax matters of all entities are addressed in the Income-Tax Act, and the taxation of LLPs would also be addressed in that Act. The income tax act is yet to come out with details and specifics in this regard.

On the issue of mergers, amalgamations, winding up and dissolution, the Bill envisages that suitable provisions would be provided by way of rules under the LLP Act.

HOW our professionals and public view the LLP

The Limited Liability Partnership (LLP) Bill will work to the advantage of small-scale industries (SSIs) as it can increase their channels of funding. The SSIs can get investment from inactive partners whose liability will be limited to the extent of their investment. They can receive profits without being engaged in the enterprise. Also, it will be a boost for entrepreneurs, with its combined benefits of a company and a partnership firm. The cap of 20 partners (in a partnership firm) is not applicable to an LLP. Being a partnership, management of the company would be simpler. The legal and procedural requirements of an LLP will not be as complex as that of a company.

It should be noted that apart from the services industry, small businesses are also included in this bracket.

Eashwar Natarajan, Chennai

There is nothing wrong in implementing a suitably modified Act in India. That will pave the way for healthy growth of partnership concerns.

S. Krithivasan,

LLPs or `multi-disciplinary' partnerships are being introduced in the corporate sector as part of the liberalisation of the service sector. LLPs permit independence of the profession, confidentiality of the client relationship and privileged communication. Accountants and other professionals can afford to act as independent advisers rather than mere representatives of the client.

LLPs do not have authorised capital stock-in-trade or closing stock. So, the government may prescribe a simpler balance-sheet. Every partner in an LLP is also its agent. Therefore, the status of a minor who acts as an agent or shareholder of a company or a partner should be clarified in the context of LLPs.

T. S. Sundareswaran, New Delhi

The LLP Bill will fill the vacuum in the Companies Act; it will benefit domestic and multinational companies.

The salient features of the Bill such as limited liability and the partners not being held responsible for the wrong-doings of other partners, etc., are progressive steps.

It is a progressive step in mitigating structural hurdles of running a business

Organization.

SOME OF THE IMPORTANT AND INTERESTING PROVISIONS OF THE LLP. BILL PASSED IN INDIA IN DEC. 2006 ARE AS FOLLOWS.

"financial year" in relation to a limited liability partnership means the period from 1st day of April of a year to the 31st day of March of the following year:

"limited liability partnership agreement" means any written agreement between the partners of the limited liability partnership or between the limited liability partnership and its partners which determines the mutual rights and duties of the partners and their rights and duties in relation to limited liability partnership;

"name", in relation to a partner of a limited liability partnership, means— (i) if an individual, his forename, middle name and surname; and (ii) if a body corporate, its registered name;

"partner", in relation to a limited liability partnership, means any person who has been admitted as a partner in the limited liability partnership in accordance with the limited liability partnership agreement;

"Registrar" means a Registrar, or an Additional, a Joint, a Deputy or an Assistant Registrar, having the duty of registering companies under the Companies Act, 1956;

"Tribunal" means the National Company Law Tribunal constituted under sub-section (1) of section 10 FB of the Companies Act, 1956.

CHAPTER II

Applicability

Limited Liability Partnership

3. (1) A limited liability partnership is a body corporate formed and incorporated under this Act and which has legal entity separate from that of its partners.

(2) A limited liability partnership shall have perpetual succession.

(3) Any change in the partners of a limited liability partnership shall not affect the existence, rights or liabilities of the limited liability partnership.

Non-applicability of the Indian Partnership Act, 1932

4. Save as otherwise provided, the provisions of the Indian Partnership Act, 1932 shall not apply to a limited liability partnership.

Partners and their Identification Number

5. (1) Any individual or body corporate may be a partner in a limited liability partnership

(2) Every designated partner of a limited liability partnership shall obtain a Partner Identification Number (PIN) from the Central Government and the provisions of section 266A to 266G (both inclusive) of the Companies Act, 1956 shall apply mutatis mutandis for the said purpose.

Minimum number of partners

6. (1) Every limited liability partnership shall have at least two partners.

(2) If at any time the number of partners of a limited liability partnership is reduced below two and the limited liability partnership 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 and has the knowledge of the fact that it is carrying on business with him alone, shall be liable personally for the obligations of the limited liability partnership incurred during that period.

(3) Every limited liability partnership shall ensure that the particulars of every individual who agrees to act as a designated partner of the limited liability partnership and his consent to act as such is filed with the Registrar in such form and manner as may be prescribed within thirty days of the appointment of the designated partner.

Incorporation of Document

11. (1) For a limited liability partnership to be incorporated,—

(a) two or more persons associated for carrying on a lawful business with a view to profit shall have subscribed their names to an incorporation document;

(b)the incorporation document shall be filed in such manner and with such fees, as may be prescribed with the Registrar of the State in which the registered office of the limited liability partnership is to be situated; and

(c) there shall be filed with a statement in the prescribed form made by either an advocate or a Company Secretary or a Chartered Accountant, who is engaged in the formation of the limited liability partnership and by anyone who subscribed his name to the incorporation document, that all the requirements of this Act and the rules made thereunder have been complied with, in respect of incorporation and matters precedent and incidental thereto.

(2) The incorporation document shall —

(a) be in a form as may be prescribed;

(b) state the name of the limited liability partnership;

(d) state the address of the registered office of the limited liability partnership;

(e) state the name and address of each of the persons who are to be partners of the limited liability partnership on incorporation;

(f) state the name and address of the persons who are to be designated partners of the limited liability partnership on incorporation;

(g) contain such other information concerning the proposed limited liability partnership as may be prescribed.

(3) If a person makes a statement under clause (c) of sub-section (1) which he—

(a) knows to be false; or

(b) does not believe to be true,

he shall be punishable with imprisonment for a term which may extend to two years and with fine which shall not be less than ten thousand rupees but which may extend to five lakh rupees.

Incorporation by registration

12. (1) When the requirements imposed by clauses (b) and (c) of sub-section (1) of section 11 have been complied with, the Registrar shall retain the incorporation document and, unless the requirement imposed by clause (a) of that sub-section has not been complied with, he shall within a period of fourteen days -

(a) register the incorporation document; and

(b) give a certificate that the limited liability partnership is incorporated by the name specified in the incorporation document.

(2)The Registrar may aceept the statement delivered under clause (c) of sub-section (1) of section 11 as sufficient evidence that the requirement imposed by clause (a) of that sub-section has been complied with.

(3)The certificate shall be signed by the Registrar and authenticated by his official seal.

(4)The certificate is conclusive evidence that the limited liability partnership incorporated by the name specified in the incorporation document.

13. (1) Every limited liability partnership shall have a registered office to which all communications and notices may be addressed and where they shall be received.

(2) A document may be served on a limited liability partnership or a partner or designated partner thereof by sending it by post under a certificate of posting or by registered post or by any other mode, which may be prescribed, or by leaving at its registered office.

(3) A limited liability partnership may change the address of its registered office by filing with the Registrar notice of such change in such form and manner as may be prescribed and any such change shall take effect only upon such filing.

(4) If the limited liability partnership contravenes any provisions of this section, the limited liability partnership and its every partner shall be punishable with fine which shall be less than two thousand rupees but which may extend to twenty-five thousand rupees.

Effect of incorporation

14. A limited liability partnership shall, by its name have the power of—

(a) suing and being sued;

(b) acquiring, owning, holding and developing or disposing of property, both
movable and immovable;

(d) doing and suffering such other acts and things as bodies corporate may lawfully do and suffer.

Name

15. (1) Every limited liability partnership shall have either the words "limited liability
partnership" or the acronym "LLP" as the last words of its name.

(2) No limited liability partnership shall be registered by a name which, in the opinion of the Central Government is —

(a) undesirable:

(b) identical or too nearly resembles to that of any other partnership firm or
limited liability partnership or body corporate or a registered trade mark, or a trade mark which is subject of an application for registration, of any other person under the Trade Marks Act, 1999.

Reservation of name

16. (1) A person may apply in such form and manner and accompanied by such fees
as may be prescribed to the Registrar for the reservation of a name set out in the application as -

(a) the name of a proposed limited liability partnership; or

(b) the name to which a limited liability partnership proposes to change its name,

(2) Upon receipt of an application under sub-section (1) and on payment of the prescribed fee, the Registrar may, if he is satisfied, subject to the rules prescribed by the Central Government in the matter, that the name to be reserved is not one which may be rejected on any ground referred to in sub-section (2) of section 15, reserve the name for a period of three months from the date of intimation by the Registrar.

Registration of changes in partners

(1) A limited liability partnership shall ensure that—

(a) where a person becomes or ceases to be a partner, notice is filed with the
Registrar within thirty days from the date he becomes or ceases to be a partner; and

(b) where there is any change in the name or address of a partner, notice is filed
with the Registrar within thirty days of such change.

(2) A notice filed with the Registrar under sub-section (1)—

(a) shall be in such form and accompanied by such fees as may be prescribed;

(b) shall be signed by the designated partner of the limited liability partnership
and authenticated in a manner as may be prescribed; and

(c) if it relates to admission of a partner, shall contain a statement by the
incoming partner that he consents to becoming a partner, signed by him and
authenticated in a manner as may be prescribed.

(3) If the limited liability partnership contravenes the provisions of sub-section (1),
the limited liability partnership and every designated partner of the limited liability partnership
shall be punishable with fine which shall not be less than two thousand rupees but which
may extend to twenty-five thousand rupees.

(4) Any person who ceases to be a partner of a limited liability partnership may
himself file with the Registrar the statement referred to in sub-section (2) if he has reasonable
cause to believe that the limited liability partnership may not file the statement with the
Registrar and in case of any such statement filed by a partner, the Registrar shall obtain a
confirmation to this effect from the limited liability partnership unless the limited liability
partnership has also filed such statement.

CHAPTER III

EXTENT AND LIMITATION OF LIABILITY

Partner as agent

26. Every partner of a limited liability partnership is the agent of the limited liability partnership, but not of other partners.

Extent of liability of limited liability partnership

27. (1) A limited liability partnership is not bound by anything done by a partner in
dealing with a person if—-

(a) the partner in fact has no authority to act for the limited liability partnership
in doing a particular act; and

(b) the person knows that he has no authority or does not know or believe him
to be a partner of the limited liability partnership.

(2) The limited liability partnership is liable if a partner of a limited liability partnership
is liable to any person as a result of a wrongful act or omission on his part in the course of
the business of the limited liability partnership or with its authority.

(3) An obligation of the limited liability partnership whether arising in contract or otherwise, is solely the obligation of the limited liability partnership.

(4) The liabilities of the limited liability partnership shall be met out of the property of
the limited liability partnership.

Extent of liability of a partner

28, (1) A partner is not personally liable, directly or indirectly for an obligation referred to in sub-section (3) of section 27 solely by reason of being a partner of the limited liability partnership.

(2) The provisions of sub-section (3) of section 27 and sub-section (1) of this section shall not affect the personal liability of a partner for his own wrongful act or omission, but a partner shall not be personally liable for the wrongful act or omission of any other partner of the limited liability partnership.

Unlimited liability in case of fraud

29. (1) In the event of an act carried out by a limited liability partnership, or any of its partners, with intent to defraud creditors of the limited liability partnership or any other person, or for any fraudulent purpose, the liability of the limited liability partnership and partners who acted with intent to defraud creditors or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the limited liability partnership:

Provided that in case any such act is carried out by a partner, the limited liability partnership is liable to the same extent as the partner unless it is established by the LLP that such act was without the knowledge or the authority of the LLP.

(2) Where any business is carried on with such intent or for such purpose as mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid shall be punishable with imprisonment for a term which may extend to two years and with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

Whistle blowing

30. (1) The Court or Tribunal may reduce or waive any penalty leviable against any
partner or employee of a limited liability partnership, if it is satisfied that,—

(a) such partner or employee of a limited liability partnership has provided useful information during investigation of such limited liability partnership; or

(b) when any information given by any partner or employee (whether or not during investigation) leads to limited liability partnership or any partner or employee of such limited liability partnership being convicted under this Act or any other Act.

(2) No limited liability partnership or any partner or any employee of any limited liability partnership may be discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against the terms and conditions of his partnership or employment merely because of his providing information or causing information to be provided pursuant to sub-section (1).

CHAPTER IV

Contributions

Form of contribution

31. (1) A contribution of a partner may consist of tangible or intangible property or
other benefit to the limited liability partnership, including money, promissory notes, other
agreements to contribute cash or property, and contracts for services performed or to be performed.

(2) The monetary value of contribution of each partner shall be accounted for and disclosed in the accounts of the limited liability partnership in the manner as may be prescribed.

Liability for contribution

32. (1) The obligation of a partner to contribute money or other property or other benefit or to perform services for a limited liability partnership shall be as per the limited liability partnership agreement.

(2) A creditor of a limited liability partnership, which extends credit or otherwise acts in reliance on an obligation described in that agreement, without notice of any compromise between partners, may enforce the original obligation against such partner.

CHAPTER V

Financial Disclosures

Maintenance of books of accounts, other records and audit, etc.

33. (1) The limited liabilitypartnership shall maintain such proper books of accounts as may be prescribed relating to its affairs for each year of its existence on cash basis or accrual basis and according to double entry system of accounting and shall maintain the same at its registered office for such period as may be prescribed.

(2) Every limited liability partnership shall, within a period of six months from the end
of each financial year, prepare a Statement of Account and Solvency for the said financial
year as at the last day of the said financial year and the designated partners of the limited
liability partnership shall put their signature on such statement evidencing their acceptance
thereof.

(3)       Every limited liability partnership shall file the Statement of Account and Solvency
prepared pursuant to sub-section (2) with the Registrar every year in such form and manner
and accompanied by such fee as may be prescribed.

(4) The accounts of limited liability partnerships shall be audited in accordance with
the rules as may be prescribed:

Provided that the Central Government may, by notification, exempt any class or classes of limited liability partnerships from the requirements of this sub-section.

(5) Any limited liability partnership which fails to comply with the provisions of this
section shall be punishable with fine which shall not be less than one lakh rupees but which
may extend to five lakh rupees and the designated partners of such limited liability partnership
shall be punishable with fine which shall not be less than ten thousand rupees but which
may extend to one lakh rupees.

Annual return

34. (1) Every limited liability partnership shall be required to file an annual return with
the Registrar within sixtydays of closure of its financia! year in such form and manner and
accompanied by such fee as may be prescribed.

(2) Any limited liability partnership which fails to comply with the provisions of this
section shall be punishable with fine which shall not be less than one lakh rupees but which
may extend to five Iakh rupees.

If the limited liability partnership contravenes the provisions of this section, the
designated partner of such limited liability partnership shallbe punishable with fine which
shall not be less than ten thousand rupees but which may extend to one Iakh rupees.

Assignment and transfer of partnership rights

Partner’s transferable interest

41. (1) The rights of a partner to a share of the profits and losses of the limited liability partnership and to receive distributions in accordance with the limited liability partnership agreement are transferable either wholly or in part.

(2) The transfer of any right by any partner pursuant to sub-section (1) does not by itself cause the disassociation of the partner or a dissolution and winding up of the limited liability partnership.

(3)The transfer of right pursuant to this section does not, by itself, entitle the transferee or assignee to participate in the management or conduct of the activities of the limited liability partnership, or access information concerning the transactions of the limited liability partnership.

Application for winding up of limited liability partnership

50. If any such limited liability partnership is liable to be wound up under this Act or
any other law for the time being in force, and it appears to the Central Government from any
such report under section 48 that it is expedient to do so by reason of any such circumstances as are referred to in sub-clause (i) or (ii) of clause (c) of sub-section (3) of section 42, the Central Government may, unless the limited liability partnership is already being wound up by the Tribunal, cause to be presented to the Tribunal by any person authorised by the Central Government in this behalf, a petition for the winding up of the limited liability partnership on the ground that

51.

52. it is just and equitable that it should be wound up.

Conversion to limited liability partnership

Conversion from firm to limited liability partnership

54. The provisions of the Second Schedule shall apply to the conversion from firm to a limited liability partnership.

Conversion from private company to limited liability partnership

55. The provisions of the Third Schedule shall apply to the conversion from private company to a limited liability partnership.

Conversion from unlisted public company to limited liability partnership

56. The provisions of the Fourth Schedule shall apply to the conversion from unlisted public company to a limited liability partnership.

CHAPTER VI

Foreign limited liability partnership

Foreign limited liability partnership

57. The Central Government shall make rules for provisions in relation to establishment
of place of business by foreign limited liability partnership within India and carrying on
their business therein by -

(a) applying or incorporating, with such modifications, as appear appropriate,
the provisions of the Companies Act, 1956; and

(b) in all other respect the provisions of this Act shall apply.

Winding up and dissolution

Winding up

59. The winding up of a limited liability partnership may be either voluntary or by the Tribunal.

Circumstances in which limited liability partnership may be wound up by Tribunal

60. A limited liability partnership may be wound up by the Tribunal, — .

if the limited liability partnership decides that limited liability partnership be wound up by the Tribunal;

if the number of partners of the limited liability partnership is reduced below two;

if the limited liability partnership is unable to pay its debts;

if the limited liability partnership has acted against the interests of the sovereignty and integrity of India, the security of the State or public order;

if the limited liability partnership has made a default in filing with the Registrar the Statement of Account and Solvency or annual return for any five consecutive financial years;

if the Tribunal is of the opinion that it is just and equitable that the limited liability partnership be wound up.

Rules for winding up

61. The Central Government shall make rules for provisions in relation to winding up and dissolution of limited liability partnerships.

CHAPTER VII

Miscellaneous

Business transactions of partner with limited liability partnership

62. A partner may lend money to and transact other business with the limited liability
partnership and has the same rights and obligations with respect to the loan or other

transactions as a person who is not a partner.

Application of company law

63. (1) The Central Government may, by notification in the Official Gazette, direct that any of the provisions of the Companies Act, 1956 specified in the notification—

(a) shall apply to any limited liability partnership; or

(b) shall apply to any limited liability partnership with such exception,
modification and adaptation as may be specified in the notification.

(2) A copy of every notification proposed to be issued under sub-section (1) shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses.

Electronic filing of documents

64. (1) Any document required to be filed, recorded or registered under this Act may be filed, recorded or registered in such manner and subject to such conditions as may be prescribed.

(2) A copy of or an extract from any document electronically filed with or submitted to the Registrar which is supplied or issued by the Registrar and certified through digital signature to be a true copy of or extract from such document shall, in any proceedings, be admissible in evidence as of equal validity with the original document.

(3) Any information supplied by the Registrar that is certified by the Registrar through digital signature to be a true extract from any document filed or filed with or submitted to the Registrar shall, in any proceedings, be admissible in evidence and be presumed, unless evidence to the contrary is adduced, to be a true extract from such document.

Payment of default fee

65. Subject to the provisions of this Act, if any document or return required to be filedor registered under this Act with the Registrar, is not filed or registered in time and is allowed to be filed or registered after that time, then, without prejudice to any other action or liability under this Act, such document or return may be filed or registered with the Registrar on payment of a default fee of five hundred rupees for every day of such delay in addition to any fee as is payable for filing of such document or return, as the case may be.

Application of other laws not barred

66. The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.

Jurisdiction of Tribunal and Appellate Tribunal

67. (1) The Tribunal shall discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.

(2) Any person aggrieved by an order or decision of Tribunal may prefer an appeal to the Appellate Tribunal and the provisions of sections 10FQ, 10FZA, 10G, 10GD, 10GE and 10 GF of the Companies Act, 1956 shall be applicable in respect of such appeal.

General penalties

68. Any person guilty of an offence under this Act for which no punishment is
expressly provided shall be liable to a fine which may extend to five lakh rupees and with a
further fine which may extend to fifty rupees for every day after the first day after which the
default continues.

Power of Registrar to strike defunct limited liability partnership off register

69. Where the Registrar has reasonable cause to believe that a limited liability
partnership is not carrying on business or its operation, in accordance with the provisions
of this Act, the name of limited liability partnership may be struck off the register of limited
liability partnerships in such manner and following such procedure as may be prescribed.

Offences by limited liability partnerships

70. Where an offence under this Act committed by a limited liability partnership is
proved —

(a) to have been committed with the consent or connivance of a partner or partners or designated partner or designated partners of the limited liability partnership; or

(b) to be attributable to any neglect on the part of the partner or partners or designated partner of that limited liability partnership,

the partner or partners or designated partner or designated partners of the limited liability partnership, as the case may be, as well as that limited liability partnership shall be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Jurisdiction of the court

71. Notwithstanding any provision to the contrary in any Act for the time being in
force, the Judicial Magistrate of the first class or, as the case may be, the Metropolitan Magistrate shall have jurisdiction to try any offence under this Act and shall have power to
impose punishment in respect of the offence.

Power to make rules

72. (1) The Central Government may, by notification, in the Official Gazette, make
rules for carrying out the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing powers, such rules may provide for all or any of the following matter, namely:—

(a) the particulars of every individual agreeing to act as designated partner of
limited liability partnership under sub-section (3) of section 7;

(b) the conditions and requirements under sub-section (4) of section 7;

(c) the manner of filing the incorporation document and payment of fees payable
thereof under clause (b) of sub-section (1) of section 11;

(d) the form of statement to be filed under clause (c) of sub-section (1) of
section 11;

Default provisions for limited liability partnerships

1. The mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and its partners shall be determined, subject to the terms of any limited liability partnership agreement or in the absence of any such agreement, by the provisions in this Schedule.

All the partners of a limited liability partnership are entitled to share equally in the capital, profits and losses of the limited liability partnership.

The limited liability partnership shall indemnify each partner in respect of payments made and personal liabilities incurred by him —

(a) in the ordinary and proper conduct of the business of the limited liability partnership; or

(b) in or about anything necessarily done for the preservation of the business or property of the limited liability partnership.

4. Every partner may take part in the management of the limited liability partnership.

5. No partner shall be entitled to remuneration for acting in the business or manage ment of the limited liability partnership.

6. No person may be introduced as a partner without the consent of all the existing partners.

7. Any matter or issue relating to the limited liability partnership shall be decided by resolution passed by a majority in number of the partners, and for this purpose, each partner shall have one vote. However, no change may be made in the nature of business of the limited liability partnership without the consent of all the partners.

8. Each partner shall render true accounts and full information of all things affecting the limited liability partnership to any partner or his legal representatives.

9. If a partner, without the consent of the limited liability partnership, carries on any business of the same nature as and competing with the limited liability partnership, he must account for and pay over to the limited liability partnership all profits made by him in that business.

10. Every partner shall account to the limited liability partnership for any benefit derived by him without the consent of the limited liability partnership from any transaction concerning the limited liability partnership, or from any use by him of the property, name or any business connection of the limited liability partnership.

11. No majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the partners.

Conversion from firm to limited liability partnership

Conversion of firms to limited liability partnership.

1. (1) A firm may convert to a limited liability partnership by complying with the
requirements as to the conversion set out in this Schedule.

(2) Upon such conversion, the partners of the firm shall be bound by the provisions of this Schedule that are applicable to them.

(3) The Central Government may, by order published in the Official Gazette, amend, add to or vary the provisions of this Schedule.

Explanation.-—In this paragraph, "convert", in relation to a firm converting to a limited liability partnership, means a transfer of the property, assets, interests, rights, privileges, liabilities, obligations and the undertaking of the firm to the limited liability partnership in accordance with the provisions of this Schedule.

Eligibility for conversion

2. A firm may apply to convert to a limited liability partnership in accordance with this Schedule if and only if the partners of the limited liability partnership to which the firm is to be converted, comprise all the partners of the firm and no one else.

Statements to be filed

3. A firm may apply to convert to a limited liability partnership by filing with the
Registrar —

(a) a statement by all of its partners in such medium and form and accompanied
by such fees as the Central Government may prescribe, containing the following
particulars, namely:—

(i) the name and registration number (if applicable) of the firm; and

(ii) the date on which the firm was registered under the Indian Partnership Act, 1932 (9 of 1932) or any written law (if applicable); and

(b) incorporation document and statement referred to in section 11.

Registration of Conversion

4. On receiving the documents referred to in paragraph 3, the Registrar shall subject to the provisions of this Act, register the documents and issue a certificate of registration in such form as the Registrar may determine stating that the limited liability partnership is, on and from the date specified in the certificate, registered under this Act.

Existing agreements

10. Every agreement to which the firm was a party immediately before the date of registration, whether or not of such nature that the rights and liabilities thereunder could be assigned, shall have effect as from that day as if—

(a) the limited liability partnership were a party to such an agreement instead of the firm; and

(b) for any reference to the firm, there were substituted in respect of anything to be done on or after the date of registration a reference to the limited liability partnership.

Existing contracts, etc.

11. All deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements subsisting immediately before the date of registration relating to the firm or to which the firm is a party, shall continue in force on and after that date as if they relate to the limited liability partnership and shall be enforceable by or against the limited liability partnership as if the limited liability partnership were named therein or were a party thereto instead of the firm.

Continuance of employment

12. Every contract of employment to which paragraph 10 or paragraph 11 applies shall continue to be in force on or after the date of registration as if the limited liability partnership were the employer thereunder instead of the firm.

Existing appointment, authority or power

13. (1) Every appointment of the firm in any role or capacity which is in force immediately before the date of registration shall take effect and operate from that date as if the limited liability partnership were appointed.

(2) Any authority or power conferred on the firm which is in force immediately before the date of registration shall take effect and operate from that date as if it were conferred on the limited liability partnership.

Application of paragraphs 6 to 13

14. The provisions of paragraphs 6 to 13 (both inclusive) shall not apply to any approval, permit or licence issued under any written law to the firm which is in force immediately before the date of registration of the limited liability partnership.

Partner liable for liabilities and obligations of firm before conversion

15. (1) Notwithstanding anything in paragraphs 6 to 13 (both inclusive), every partner of a firm that has converted to a limited liability partnership shall continue to be personally liable (jointly and severally with the limited liability partnership) for the liabilities and obligations of the firm which were incurred prior to the conversion or which arose from any contract entered into prior to the conversion.

(2) If any such partner discharges any liability or obligation referred to in sub-paragraph (1), he shall be entitled (subject to any agreement with the limited liability partnership to the contrary) to be fully indemnified by the limited liability partnership in respect of such liability or obligation.

Notice of conversion in correspondence

16. (1) The limited liability partnership shall ensure that for a period of twelve months commencing not later than fourteen days after the date of registration, every official correspondence of the limited liability partnership bears the following:

(a) statement that it was, as from the date of registration, converted from a firm to a limited liability partnership; and (b) the name and registration number (if applicable) of the firm from which it was converted.

(2) Any limited liability partnership which contravenes the provisions of sub-paragraph (1) shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees and with a further fine which shall not be less than fifty rupees but which may extend to five hundred rupees for every day after the first day after which the default continues.

SCHEDULE

[See Section 55]

Conversion from private company to limited liability partnership

Interpretation

1. In this Schedule, unless the context otherwise requires,—

"company" means a private company as defined in clause (iii) of sub section (1) of section 3 of the Companies Act, 1956,

(b) "convert", in relation to a private company converting to a limited liability
partnership, means a transfer of the property, assets, interests, rights, privileges,
liabilities, obligations and the undertaking of the private company to the limited
liability partnership in accordance with this Schedule.

Amendment of Schedule

2. The Central Government may, by order published in the Gazette, amend, add to or vary the provisions of this Schedule.

Eligibility for conversion of private companies to limited liability partnership

3. (1) A company may convert to a limited

Eligibility for conversion of private companies to limited liability partnership

3. (1) A company may convert to a limited liability partnership by complying with the requirements as to the conversion set out in this Schedule.

(2) A company may apply to convert to a limited liability partnership in accordance with this Schedule if and only if—

(a) there is no securityinterest in its assets subsisting or in force at the time of
application; and (b) the partners of the limited liabilitypartnership to which it converts comprise all the shareholders of the company and no one else.

(3) Upon such conversion, the company, its shareholders, the limited liability partnership to which the company has converted and the partners of that limited liability partnership shall be bound by the provisions of this Schedule that are applicable to them.

Statements to be filed

4. A company may apply to convert to a limited liability partnership by filing with the Registrar-

(a) a statement by all its shareholders in such form and manner to be accompanied by such fees as the Central Government may prescribe, containing the following particulars, namely:—

(1) the name and registration number of the company; and

(ii) the date on which the company was incorporated under the Companies Act, 1956; and

(b) incorporationdocument and statement referred to in section 11.

Registration of conversion

5. On receiving the documents referred to in paragraph 3, the Registrar shall, subject
to the provisions of this Act and the rules made thereunder register the documents and issue a certificate of registration in such form as the Central Government may prescribe stating that the limited liability partnership is, on and from the date specified in the certificate, registered under this Act.

Notice of conversion in correspondence

16. (1) The limited liability partnership shall ensure that for a period of twelve months
commencing not later than fourteen days after the date of registration, every official correspondence of the limited liability partnership bears the following, namely:-

(a) statement that it was, as from the date of registration, converted from a company to a limited liability partnership; and

(b) the name and registration number of the company from which it was converted.

SCHEDULE

[See section 56]

conversion from unlisted public company to limited liability partnership

Interpretation

1. (1) In this Schedule, unless the context otherwise requires,—

(a) "company" means an unlisted public company;

(b) "convert", in relation to a company converting to a limited liability partnership, means a transfer of the property, assets, interests, rights, privileges, liabilities, obligations and the undertaking of the company to the limited liability partnership in accordance with the provision of this Schedule;

(c) "listed company" means a listed company as defined in the SEBI (Disclosure and Investor Protection) Guidelines, 2000 issued by the Securities and Exchange Board of India under section 11 of the Securities and Exchange Board of India Act, 1992.

(d) "unlisted public company", means a company which is not a listed company.

Amendment of Schedule

2. The Central Government may, by order published in the Official Gazette, amend,
add to or vary the provisions of this Schedule.

Conversion of company to a limited liability partnership

3. (1) A company may convert to a limited liability partnership by complying with the
requirements as to the conversion set out in this Schedule.

(2) Upon such conversion, the company, its shareholders, the limited liability partnership to which the company has converted and the partners of that limited liability partnership shall be bound by the provisions of this Schedule that are applicable to them.

Eligibility for conversion

4. A company may apply to convert to a limited liability partnership in accordance
with this Schedule if and only if—

(a) there is no security interest in its assets subsisting or in force at the time of application; and

(b) the partners of the limited liability partnership to which it converts comprise all the shareholders of the company and no one else.

CONCLUSION:

THE LL.P BILL STATES IN ITS OBJECTS AND REASONS THAT “The Limited Liability Partnership (LLP) is viewed as an alternative corporate business vehicle that provides the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.The LLP form would enable entrepreneurs, professionals and enterprises providing servicesof any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation,LLP would also be a suitable vehicle for small enterprises and for investment by venture capital.”

LET ALL OF US FERVENTLY HOPE AND PRAY THAT THE AVOWED OBJECTIVES OF THE LL.P WILL BE ACHIEVED.

CONTRIBUTED BY R.V.RAO-MOBILE NO -9849436267

SOURCES:

LL.P BILL AS GIVEN IN ICSI WEBSITE

BUSINESS LINE NEWS BUREAU AND LEGAL SECTIONS

GOOGLE.COM AND WIKIPEDIA