09 March 2023
Dear Friends, 1. Can a LLP firm with the activity of online commodity trading, pay fixed returns ranging from 8% to 12%, in advance for a period of 1,2 or 5 years, as per choice of their Limited Silent Partners, who are the investing partners of the firm, and will be silent partners in profit only, with no liability for losses if any & no role in the management of the LLP? 2. We see ads on TV by SEBI that it is illegal to promise fixed returns on investments, why is this so and does it apply to partners of an LLP, if formed with this written condition? My doubt/query is that, if an LLP is formed with the above mentioned earlier condition written in the agreement deed, depending upon the limited silent partner's choice, will it violate the above SEBI's law or any other law of India? Requesting answers to the above, as I'm a senior commodity trader with over 13 years of experience in the markets and want to start an LLP firm for this, with interested individuals, with minimum investments of Rs 1 lakh and above. May also respond personally, if required: bsboffice24attherategmaildotcom. Thanks & Regards to all. B Singh
06 July 2024
Let's address your queries regarding an LLP firm engaging in online commodity trading and offering fixed returns to limited silent partners:
1. **Fixed Returns to Silent Partners**: - Yes, an LLP can pay fixed returns to its limited silent partners, provided this arrangement is clearly stated in the LLP agreement. Silent partners are typically investors who do not participate in the management of the LLP and are liable only to the extent of their agreed investment. - It's crucial that the LLP agreement explicitly outlines the terms and conditions of the fixed returns, including the duration, percentage, and the nature of the investment.
2. **Legality of Fixed Returns**: - SEBI regulations and other financial laws in India restrict entities from guaranteeing fixed returns on investments in various forms. This is primarily to protect investors from fraudulent schemes and to ensure that investments are made with full understanding of associated risks. - While LLPs have flexibility in structuring agreements with silent partners, any promise of fixed returns must comply with applicable laws. SEBI's regulations typically apply to collective investment schemes and other regulated financial activities. As an LLP, you should ensure that the offering does not resemble a collective investment scheme or violate SEBI's guidelines on such matters.
3. **Compliance and Legal Advice**: - It's highly recommended to consult with legal and financial advisors to structure the LLP agreement in compliance with all relevant laws and regulations. - Specifically, seek advice on SEBI regulations regarding the offering of fixed returns, ensuring that your LLP's activities do not inadvertently fall under prohibited schemes.
4. **Personal Consultation**: - For specific legal and regulatory advice tailored to your proposed LLP structure, especially concerning commodity trading and investment schemes, it's advisable to engage directly with legal professionals who specialize in financial regulations and corporate law.
Starting an LLP for commodity trading can be a viable option, provided all legal aspects are carefully considered and compliance is maintained. Ensure transparency and clarity in your agreements to build trust with your silent partners and to operate within the boundaries of the law.
If you have further questions or need more detailed advice, please feel free to consult with a legal expert who can provide guidance specific to your situation.
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