Amit Bachhawat

Chapter 4

Limited Liability
Partnership Act, 2008

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LIMITED LIABILITY PARTNERSHIP

LLP Act 2008

Hybrid Partnership +Company

LLP is having a separate legal entity having features similar to Co as well as Firm. In LLP liability of
partners limited to their agreed contribution in LLP agreement.
In LLP there is no concept of Mutual Agency Each partner in LLP is agent of LLP for the purpose
of business of LLP.
Here partner is not agent of other partners
Contribution Tangible/ Intangible

As per LLP Agreement Cash

Advantages/Benefits
1. Limited Liability
2. Body Corporate
3. Perpetual Succession
4. No restriction on Max. No of partners
5. Cost of formation is low compared to Company
6. Legal formalities areless

Any individual/Body Corporate may be a partnership LLP

➢ But the individual has not found be of unsound mind
➢ Is not an undischarged insolvent
➢ Has not applied to be declared as insolvent and application is pending
➢ Min 2partners

The Ministry of Corporate Affairs and the Registrar of Companies (ROC) are entrusted with the task of
administrating the LLP Act, 2008. The CG has the authority to frame the Rules with regard to the LLP Act,
2008, and can amend them by notifications in the Official Gazette, from time to time.

First Schedule MUTUAL RIGHTS and DUTIES of Partners and LLP in the absence of a formal agreement
amongst them.
Second Schedule Conversion of a firm into LLP.
Third Schedule Conversion of a private company into LLP.
Fourth Schedule Conversion of unlisted public company into LLP.

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Salient Features of LLP

1. LLP is a body corporate: Section 2(1)(d) of the LLP Act, 2008 provides that a LLP is a
body corporate formed and incorporated under this Act and is a legal entity separate
from that of its partners and shall have perpetual succession. Therefore, any change
in the partners of a LLP shall not affect the existence, rights or liabilities of the LLP.
Section 3 of LLP Act provides that a LLP is a body corporate formed and incorporated under
this Act and is a legal entity separate from that of its partners.
2. Perpetual Succession: The LLP can continue its existence irrespective of changes in
partners. Death, insanity, retirement or insolvency of partners has no impact on the
existence of LLP. It is capable of entering into contracts and holding property in its own
name.
3. Separate Legal Entity: The LLP is a separate legal entity, is liable to the full extent
of its assets but liability of the partners is limited to their agreed contribution in the
LLP. In other words, creditors of LLP shall be the creditors of LLP alone.
4. Mutual Agency: Further, no partner is liable on account of the independent or un-
authorized actions of other partners, thus individual partners are shielded from joint
liability created by another partner’s wrongful business decisions or misconduct. In
other words, all partners will be the agents of the LLP alone. No one partner can
bind the other partner by his acts.
5. LLP Agreement: Mutual rights and duties of the partners within a LLP are governed
by an agreement between the partners. The LLP Act, 2008 provides flexibility to
partner to devise the agreement as per their choice. In the absence of any such
agreement, the mutual rights and duties shall be governed by the provisions of the
LLP Act, 2008.
In the absence of any such agreement, the mutual rights and duties shall be
governed by Schedule I of the LLP Act, 2008.
6. Artificial Legal Person: A LLP is an artificial legal person because it is created by a
legal process and is clothed with all rights of an individual. It can do everything which
any natural person can do, except of course that, it cannot be sent to jail, cannot take
an oath, cannot marry or get divorce nor can it practice a learned profession like CA or
Medicine. A LLP is invisible, intangible, immortal (it can be dissolved by law alone)
but not fictitious because it really exists.
7. Common Seal: A LLP being an artificial person can act through its partners and
designated partners. LLP may have a common seal, if it decides to have one [Section
14(c)]. Thus, it is not mandatory for a LLP to have a common seal. It shall remain
under the custody of some responsible official and it shall be affixed in the presence
of at least 2 designated partners of the LLP.
8. Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP,
the agent of the LLP, but not of other partners (Section 26). The liability of the
partners will be limited to their agreed contribution in the LLP. Such contribution
may be of tangible or intangible nature or both.
9. Management of Business: The partners in the LLP are entitled to manage the
business of LLP. But only the designated partners are responsible for legal
compliances.
10. Minimum and Maximum number of Partners: Every LLP shall have least two
partners and shall also have at least 2 individuals as designated partners, of whom at
least one shall be resident in India. There is no maximum limit on the partners in LLP.

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11. Business for Profit Only: The essential requirement for forming
LLP is carrying on a lawful business with a view to earn profit.
Thus LLP cannot be formed for charitable or non-economic
purpose.
12. Investigation: The Central Government shall have powers to investigate the affairs
of an LLP by appointment of competence authority for the purpose.
13. Compromise or Arrangement: Any compromise or agreements including
merger and amalgamation of LLPs shall be in accordance with the provisions of
the LLP |Act, 2008.
14. Conversion into LLP: A firm, private company or an unlisted public company
would be allowed to be converted into LLP in accordance with the provisions of
LLP Act, 2008.
15. E-Filling of Documents: Every form or application of document required to be filed
or delivered under the act and rules made thereunder, shall be filed in computer
readable electronic form on its website www.mca.gov.in and authenticated by a
partner or designated partner of LLP by the use of electronic or digital signature.
16. Foreign LLPs: Section 2(1)(m) defines foreign limited liability partnership “as a
limited liability partnership formed, incorporated, or registered outside India which
established as place of business within India”. Foreign LLP can become a partner in
an Indian LLP.

Very Important:
Every LLP must have atleast 2 designated partners who look after day to day affairs & legal
compliances 1 out of 2 will be resident in India. In case Body Corporate is partner of LLP, their
nominee who is an individual may become DP.
Every LLP shall have the words “Limited Liability Partnership” as the last words in its name
LLP Registration

MCA ROC

Unlimited liability of llp & fraudulent partner in case of fraud by one of its partners

Winding Up of LLP

Voluntary By NCLT

QUESTIONS:
a. Difference between LLP &company
b. Difference between LLP &Firm
c. Timing of filing a return Accounts
d. When is audit of LLP compulsory

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Annual Filing By LLP

Annual Return within 60 days from the close of Financial Year in E-Form-11
Audit- if the turnover exceeds 40 lacs or whose contribution exceeds 25 lacs
Statement of Accounts and solvency to be filed on or before 30th October every year in E-Form-8 i.e within
30days from the expiry of 6 months from the closure of F.Y.

Note- Auditor is appointed every year in LLP if Audit is applicable

• Signing by CS in Practise
• In all other cases, the annual return shall be accompanied with a certificate from a Company
Secretary in practice to the effect that he has verified that particulars from the books and records of
the LLP and found them to be true and correct

Difference Between Limited Liability

Partnership & Company

Basis Limited liability partnership Company

1.Regulating Act The LLP Act,2008. The Companies Act,2013
2.Members/Partners The persons who contributes to LLP The persons who invest the money in the
are known as partners of the LLP. shares are known as members of the
company
3.Internal governance The internal governance structure of a The internal governance structure of a
structure LLP is governed by agreement between company is regulated by statute (I.e.,
the partners Companies Act,2013)
4.Name Name of the LLP to contain the word Name of the public company to contain
“Limited Liability partnership ”or LLP as the word “limited” and Private company
suffix. to contain the word “Private limited “as
suffix.
5.Number of members/ Minimum-2members The Comp Private company Minimum
partners -2 members Maximum- 200 members
Maximum-No such limit on the Public company:
members in the Act .The members of
the LLP can be individuals/or bo by Minimum-7members
corporate through the nominees.
Maximum –No such limit on the members

Members can be organizations,

trusts, another business form or
AniesAct,2013
6.Liability of members/ Liability of a partner is limited to the Liability of a members is limited to the
partners extent of agreed contribution except in amount unpaid on the shares held by
case of willful fraud. them.
7.Management The business of the LLP is managed by The affairs of the company are managed
the partner including the designated by board of directors elected by the
partner. shareholders.
8.AGM No requirement of AGM AGM of Shareholders Mandatory
9. Audit Audit is not compulsory. It is required Audit of Co is Compulsory.
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when turnover> 40 crores, OR C> 25

lacs
10. Shares to public LLP cannot issue shares to public Public Co can issue shares to public

Difference Between Limited Liability Partnership &

Partnership Firm
Basis Limited Liability Partnership Partnership Firm
1.Regulating Act The LLP Act,2008. The Indian Partnership Act,1932
2.Body corporate It is a Body corporate It is not a Body corporate
3.Seperate legal entity It is a legal entity separate from its It Is a group of persons with no
members separate legal entity
4.Creation It is created by legal persons called It is created by agreement between the
registration under the LLP Act ,2008. partners.
5.Registration Registration is mandatory, LLP can sue Registration is voluntary, Only the
and be sued in its own name registered partnership firm can sue
the third party.
6.Perpetual succession The death, insanity, retirement or The death, insanity, retirement or
insolvency of the partner(s)does not insolvency of the partner(s) may
affect its existence of LLP .Members affect its existence of LLP.It has no
may join or leave but its existence perpetual succession.
continue forever.
7.Name Name of the LLP to contain the word No guidelines the partners can have
limited liability partners (LLP) as suflx. any name as per their choice.
8.Liability Liability of each partner limited to the Liability of each partner is unlimited
extent to agree contribution except in can be extended upto their personal
case of willful fraud. assets of the partners.
9.Mutual agency Each partners is agent of LLP and not Each partners is agent of other partner
of other partners and as well as of the firm
10.Financial Statements Accounts, Solvency Statement and No filing of Accounts or Solvency
Annual Return are to be filed with RoC statement or Annual Return with
each year Registrar of firms
11.Dissolution LLP to be wound up and dissolved as Partnership firm can be dissolved as
per LLP Act per Act/Partnership Deed
12. Number of Partners Limit on MAX No partners Max No of partners is 50. According to
Companies Act.

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INCORPORATION OF LLP
(September 18, 2018)
Step-1 Ministry of Corporate affairs Regulates LLP
LLP is Incorporated with Min 2 partners.
2 partners must be designated partners.
Designated partner must be 2 individuals who take responsibility for legal compliance & 1 must
be Resident in India: DPs must have Designated partner Identification number.
Step-2 Use RUN-LLP service to reserve the name by proposing 2 names Within 60 days of
approval of names/File the Fillip form with MCA Portal
Step-3 Alternatively one name can be proposed in Fillip form & directly proceed for
incorporation. DPIN application through FiLLip
FiLLip has been introduced with the feature of applying DPIN for designated partners.
Only upto two individuals can make application for DPIN in the Form FiLLip.
Step 3A- A compliance Certificate to be filed with Fillip form Certificating that all
registration formalities for LLP have been complied with this Certificate can be from a
a) Practicing CA or
b) Practicing CS or
c) Practicing Cost Accountant or
d) An Advocate
Step-4 Central Registration Centre(CRC): Forms will be Processed by CRC and certificate of
Incorporation will be given after the payment of Registration fees
Step-5 LLP Agreement must be filed with ROC Within 30 days of Incorporation in Form-3
Incorporation by Registration (Section 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 14 days—
(a) register the incorporation document; and
(b) give a certificate that the LLP is incorporated by the name specified therein.
(2) The Registrar may accept 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 issued under clause (b) of sub-section (1) shall be signed by the
Registrar and authenticated by his official seal.
(4) The certificate shall be conclusive evidence that the LLP is incorporated by the name
specified therein.

Incorporation of Document Shall

(a) be in a form as may be prescribed (Form FiLLIP);
(b) state the name of the LLP;

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(c) state the proposed business of the LLP;

(d) state the address of the registered office of the LLP;
(e) state the name and address of each of the persons who are to be PARTNERS of the LLP on
incorporation;
(f) state the name and address of the persons who are to be DESIGNATED PARTNERS
of the LLP on incorporation;
(g) contain such other information concerning the proposed LLP as may be prescribed.

Punishment for False Declaration (Section 11(3)]

If a person makes a statement as discussed above which he -

(a) knows to be false; or
(b) does not believe to be true, shall be punishable as follows: -
Punishment on the Person
Imprisonment ≤ 2 Years AND
10,000 ≤ Fine≤ 5,00,000

Partners (Section5):
Any individual or body corporate may be a partner in a LLP .However ,an individual shall not
be capable of becoming a partner of a LLP, if—
(a) he has been found to be of unsound mind by a Court of competent jurisdiction and
the finding is in force;
(b) he is an undischarged insolvent;or
(c) he has applied to be adjudicated as an insolvent and his application is pending
Note: FDI in LLP allowed subject to compliances
Note: Cooperative society cannot become partner in LLP.
The following persons can become partner in LLP:
(i) Individuals (Resident Indians including Non Resident Indians & Overseas Citizen of India as well
as foreign nationals)
(ii) Limited Liability Partnerships
(iii) Companies (including foreign companies)
(iv) Foreign Limited Liability Partnerships
(v) Limited Liability Partnerships incorporated outside India
(vi) Foreign Companies.
Co-operative society and corporation sole cannot become partner in a LLP.
In case of introduction of capital / acquisition of existing stake in LLP by Persons resident outside
India (other than NRIs & OCIs investing on a non-repatriation basis), the Foreign Direct Investment
(FDI) compliances shall have to be undertaken by the LLP in which such investment is made.
Minimum number of partners (Section 6):
(i) Every LLP shall have at least two partners.
(ii) If at any time the number of partners of a LLP is reduced below two and the LLP carries
on business for more than six months while the number is so reduced, the person,
who is the only partner of the LLP 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
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him alone, shall be liable personally for the obligations of the LLP incurred during
that period.
Designated partners (Section 7):
1. Every limited liability partnership shall have at least two designated partners who are
individuals and at least one of them shall be a resident in India:
Provided that in case of a limited liability partnership 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 limited liability partnership or nominees of such
bodies corporate shall act as designated partners.
Explanation. For the purposes of this section, the term resident in India means a person who
has stayed in India for a period of not less than one hundred and twenty days during the
financial year.
Example: A LLP has 3 partners, one individual i.e., Mr. Y and 2 bodies corporates viz. M/s PQR
Ltd and M/s STV Ltd. In this case Mr. Y and one nominee of any body's corporate shall be
designated partners.
2. Subject to the provisions of sub-section (1),
i. if the incorporation document
a) specifies who are to be designated partners, such persons shall be
designated partners on incorporation; or
b) states that each of the partners from time to time of limited liability
partnership is to be designated partner, every partner shall be a designated
partner;
ii. any partner may become a designated partner by and in accordance with the limited liability partnership
agreement and a partner may cease to be a designated partner in accordance with limited liability
partnership agreement.
3. An individual shall not become a designated partner in any limited liability
partnership unless he has given his prior consent to act as such to the limited liability
partnership in such form and manner as may be prescribed.
4. Every limited liability partnership shall file with the Registrar the particulars of every
individual who has given his consent to act as designated partner in such form and
manner as may be prescribed within thirty days of his appointment.
5. An individual eligible to be a designated partner shall satisfy such conditions and
requirements as may be prescribed.
Every designated partner of a limited liability partnership shall obtain a Designated
Partners Identification Number (DPIN) from the Central Government and the provisions of
sections 153 to 159 (both inclusive) of the Companies Act, 2013 shall apply mutatis
mutandis for the said purpose.
Liabilities of Designated Partners (Section 8):
Unless expressly provided otherwise in this Act, a designated partner shall be—
(a) responsible for the doing of all acts, matters and things as are required to be done by the
limited liability partnership 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 Act and as may be specified in the limited liability partnership agreement; and
(b) liable to all penalties imposed on the limited liability partnership for any contravention of

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those provisions.

Changes in Designated Partners (Section 9):

A limited liability partnership may appoint a designated partner within 30 days of a vacancy
arising for any reason and provisions of sub-section (4) and sub-section (5) of section 7 shall
apply in respect of such new designated partner, provided that if no designated partner is
appointed, or if at any time there is only one designated partner, each partner shall be
deemed to be a designated partner.
Punishment for contravention of sections 7 and 9 [Section 10] 1. If the LLP contravenes the
provisions of sub-section
(1) of section 7 (meaning that the number of designated partners are less than two or none
of the designated partner is a resident in India), the LLP and its every partner shall be liable
to a penalty of `10,000 and in case of continuing contravention, with further penalty of `100
per day subject to maximum `1,00,000 for LLP and `50,000 for every partner of such LLP.
2. If the LLP contravenes the provisions of sub-section (4) of section 7 (failure to file the
consent of appointment of designated partner within 30 days of his appointment), the LLP
and its every designated partner shall be liable to a penalty of `5,000 and in case of
continuing contravention, with further penalty of `100 per day subject to maximum `50,000
for LLP and `25,000 for every designated partner.
3. If the LLP contravenes the provisions of sub-section (5) of section 7 or section 9, the LLP
and its every partner shall be liable to a penalty of `10,000 and in case of continuing
contravention, with further penalty of `100 per day subject to maximum `1,00,000 for LLP
and `50,000 for every partner of such LLP.
Registered office of LLP and change therein (Section 13):
(i) Every limited liability partnership shall have a registered office to which all
communications and notices may be addressed and where they shall be received.
(ii) 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 manner, as may be prescribed, at the registered office and any other address
specifically declared by the limited liability partnership for the purpose in such form and
manner as may be prescribed.
(iii) A limited liability partnership may change the place of its registered office and file the
notice of such change with the Registrar in such form and manner and subject to such
conditions as may be prescribed and any such change shall take effect only upon such
filing.
If any default is made in complying with the requirements of this section, the limited liability
partnership and its every partner shall be liable to a penalty of five hundred rupees for each
day during which the default continues, subject to a maximum of fifty thousand rupees for
the limited liability partnership and its every partner.
Effect of registration [Section 14] On Registration, LLP shall by its name, be capable of –
i. Suing and being sued;
ii. Acquiring, owning, holding and developing or disposing of property, whether movable or
immovable, tangible or intangible;
iii. Having a common seal, if it decides to have one; and

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iv. Doing and suffering other acts and things as bodies corporate may lawfully do and suffer.

Note-
Change of Registered Office
Action to be taken Change of Registered Change of Registered Change of registered
office within the same Office within the same office from one state
State and within State from the to another
jurisdiction of same jurisdiction of one
Registrar Registrar to another
Registrar

1- Usually the procedure is mentioned in the LLP Agreement

2- If not, then unanimous consent of all partners
3- No objection from secured creditors to be taken in case of change from one state to
another
4- Inform ROC About the change in Registered office within prescribed Time.
Name (Section 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 LLP shall be registered by an ame which,in the opinion of the Central Government
is—
(a) undesirable; or
(b) identical or too nearly resembles to that of any other LLP or Company or a registered
trademark, or a trade mark which is the subject matter of an application for
registration of any other person under the Trade Marks Act,1999.
Reservation of name (Section 16):
(1) A person may apply in such form (RUN-LLP) and manner and accompanied by such fee
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 LLP;or
(b) the name to which a LLP proposes to change itsname.
(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 section15,reserve the name for
a period of 3 months from the date of intimation by the Registrar.
Change of name of LLP (Section 17):
(1) Notwithstanding anything contained in sections 15 and 16, if through inadvertence or
otherwise, a limited liability partnership, on its first registration or on its registration
by a new body corporate, its registered name;">name, is registered by a name which is
identical with or too nearly resembles to—
(a) that of any other limited liability partnership or a company; or
(b) a registered trade mark of a proprietor under the Trade Marks Act, 1999, as is likely to
be mistaken for it, then on an application of such limited liability partnership or
proprietor referred to in clauses (a) and (b) respectively or a company, the Central
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Government may direct that such limited liability partnership to change its name or new
name within a period of three months from the date of issue of such direction:
Provided that an application of the proprietor of the registered trade marks shall be
maintainable within a period of three years from the date of incorporation or registration
or change of name of the limited liability partnership under this Act.
(2) Where a limited liability partnership changes its name or obtains a new name under
sub-section (1), it shall within a period of fifteen days from the date of such change,
give notice of the change to Registrar along with the order of the Central
Government, who shall carry out necessary changes in the certificate of incorporation
and within thirty days of such change in the certificate of incorporation, such limited
liability partnership shall change its name in the limited liability partnership
agreement.
(3) If the limited liability partnership is in default in complying with any direction given
under sub-section (1), the Central Government shall allot a new name to the limited
liability partnership in such manner as may be prescribed and the Registrar shall
enter the new name in the register of limited liability partnerships in place of the old
name and issue a fresh certificate of incorporation with new name, which the limited
liability partnership shall use thereafter:
Provided that nothing contained in this sub-section shall prevent a limited liability
partnership from subsequently changing its name in accordance with the provisions of
section 16.
Eligibility to be partners (Section 22):
On the incorporation of aLLP, the persons who subscribed their names to the incorporation
document shall be its partners and any other person may become a partner of the LLP by
and in accordance with the LLP agreement.
Relationship of partners (Section 23):
(1) Save as otherwise provided by this Act, the mutual rights and duties of the partners of
a LLP, and the mutual rights and duties of a LLP and its partners, shall be governed by
the LLP agreement between the partners, or between the LLP and its partners.
(2) The LLP agreement and any changes, if any, made there in shall be filed with the
Registrar in such Form-3 manner and accompanied by such fees as may be prescribed.
(3) An agreement in writing made before the incorporation of a LLP between the persons
who subscribe their names to the incorporation document may impose obligations on
the LLP, provided such agreement is ratified by all the partners after the incorporation
of the LLP.
(4) In the absence of agreement as to any matter, the mutual rights and duties of the
partners and the mutual rights and duties of the LLP and the partners shall be
determined by the provisions relating to that matter as are set-out in the First
Schedule.
Cessation of partnership interest (Section 24):
(1) A person may cease to be a partner of a LLP in accordance with an agreement with
the other partners or, in the absence of agreement with the other partners as to
cessation of being a partner, by giving a notice in writing of not less than 30days to the
other partners of his intention to resign as partner.
(2) A person shall cease to be a partner of a LLP—
(a) on his death or dissolution of the LLP; or

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(b) if he is declared to be of unsound mind by a competent court; or

(c) if he has applied to be adjudged as an insolvent or declared as aninsolvent.
(3) Where a person has ceased to be a partner of a LLP (hereinafter referred to as “former
partner”), the former partner is to be regarded (in relation to any person dealing with the
LLP) as still being a partner of the LLP unless—
(a) The person has notice that the former partner has ceased to be a partner of the LLP; or
(b) Notice in Form-4 that the former partner has ceased to be a partner of the LLP has been
delivered to the Registrar.
(4) The cessation of a partner from the LLP does not by itself discharge the partner from
any obligation to the LLP or to the other partners or to any other person which he
incurred while being a partner i.e liable for old liabilities
(5) Where a partner of a LLP ceases to be a partner, unless otherwise provided in the LLP
agreement, the former partner or a person entitled to his share legal heir in
consequence of the death or insolvency of the former partner, shall been titled to
receive from the LLP—
(a) an amount equal to the capital contribution of the former partner actually made to the
LLP;and
(b) his right to share in the accumulated profits of the LLP, after the deduction of
accumulated losses of the LLP, determined as at the date the former partner ceased to
be a partner.
A former partner or a person entitled to his share in consequence of the death or
insolvency of the former partner shall not have any right to interfere in the management
of the LLP.
Registration of changes in partners (Section 25):
(1) Every partner shall inform the LLP of any change in his name or address within a
period of 15 days of such change in Form-6
(2) A LLP shall—
(a) Where a person becomes or ceases to be a partner, file a notice with the Registrar
within 30 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, file a notice with the
Registrar within 30 days of such change.
(3) A notice filed with the Registrar under sub-section (2)—
(a) Shall be in such form-4 and accompanied by such fees as may be prescribed;
(b) shall be signed by the designated partner of the LLP and authenticated in a
manner as may be prescribed; and
(c) if it relates to an incoming partner, shall contain a statement by such partner that
he consents to becoming a partner, signed by him and authenticated in the
manner as may be prescribed.
(4) If the limited liability partnership contravenes the provisions of sub- section (2), the
limited liability partnership and its every designated partner shall be liable to a penalty of
ten thousand rupees.
(5) If the contravention referred to in sub- section (1) is made by any partner of the limited
liability partnership, such partner shall be liable to a penalty of ten thousand rupees.

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(6) Any person who ceases to be a partner of a LLP may himself file with the Registrar the
notice referred to in sub-section (3) if he has reasonable cause to believe that the LLP may
not file the notice with the Registrar and in case of any such notice filed by a partner, the
Registrar shall obtain a confirmation to this effect from the LLP unless the LLP has also filed
such notice.
However, where no confirmation is given by the LLP within 15 days, the registrar shall
register the notice made by a person ceasing to be a partner under this section.
4. EXTENT AND LIMITATION OF LIABILITY OF LLP AND PARTNER
Partner as agent (Section 26):

Every partner of a LLP is, for the purpose of the business of the LLP, the agent of the LLP, but
not of other partners.

Extent of liability of LLP (Section 27):

(1) A LLP 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 LLP 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 LLP.
(2) The LLP is liable if a partner of a LLP 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 LLP or with its authority.
(3) An obligation of the LLP whether arising in contractor otherwise, shall be solely the
obligation of the LLP.
(4) The liabilities of the LLP shall be met out of the property of the LLP.
Extent of liability of partner (Section 28):
(1) A partner is not personally liable, directly or indirectly for an obligation referred to in
sub-section(3)of section27 solely by reason of being a partner of the LLP.
(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 LLP.
Holding out (Section 29):
(1) Any person,
• Who by words spoken or written or by conduct,
• represents himself, or knowingly permits himself to be represented to be a partner in a
LLP
• is liable to any person
• who has on the faith of any such representation
• given credit to the LLP, whether the person representing himself or represented to be
a partner does or does not know that the representation has reached the person so
giving credit. However,
• where any credit is received by the LLP as a result of such representation,
• the LLP shall, without prejudice to the liability of the person so representing himself or
represented to be a partner,

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• be liable to the extent of credit received by it or any financial benefit derived thereon.
(2) Where after a partner’s death the business is continued in the same LLP name, the
continued use of that name or of the deceased partner’s name as a part there of shall not
of itself make his legal representative or his estate liable for any act of the LLP done after
his death.

Unlimited liability in case of fraud (Section 30):

(1) In case of fraud:
• In the even to an act carried out by a LLP, or any of its partners,
• With intent to defraud creditors of the LLP or any other person, or for any fraudulent
purpose,
• the liability of the LLP 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 LLP.
However, in case any such act is carried out by a partner, the LLP 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 punishablewith
• imprisonment for a term which may extend to 2 years and (After Amendment upto 5
years)
• with fine which shall not be less than `50,000 but which may extend to`5 Lakhs.
(3) Where a LLP or any partner or designated partner or employee of such LLP has
conducted the affairs of the LLP in a fraudulent manner, then without prejudice to any
criminal proceedings which may arise under any law for the time being in force,the LLP
and any such partner or designated partner or employee shall be liable to pay
compensation to any person who has suffered any loss or damage by reason of
suchconduct.
However, such LLP shall not be liable if any such partner or designated partner or employee
has acted fraudulently without knowledge of the LLP.

Whistle blowing (Section 31):

(1) The Court or Tribunal may reduce or waive any penalty leviable against any partner or
employee of a LLP, if it is satisfied that—
• such partner or employee of a LLP has provided useful information during
investigation of such LLP;or
• when any information given by any partner or employee (whether or not during
investigation) leads to LLP or any partner or employee of such LLP being convicted
under this Act or any other Act.
(2) No partner or employee of any LLP may be discharged, demoted, suspended,
threatened, harassed or in any other manner discriminated against the terms and
conditions of his LLP or employment merely because of his providing information or

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causing information to be provided pursuant to sub-section(1).

FINANCIAL DISCLOSURES
Maintenance of books of account, other records and audit, etc. (Section 34):

(1) Proper Books of account:

• The LLP shall maintain such proper books of account 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) Statement of Account and Solvency in Form-8
• Every LLP shall,
• within a period of 6 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
• in such form as may be prescribed, and
• such statement shall be signed by the designated partners of the LLP.
(3) Every LLP shall file within the prescribed time, 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 fees as may be prescribed.
(4) The accounts of LLP shall be audited in accordance with such rules as may be
prescribed. However, the Central Government may, by notification in the Official
Gazette, exempt any class or classes of LLP from the requirements of thissub-section.
(5) Any LLP which fails to comply with the provisions of this section shall be punishable
• Any limited liability partnership which fails to comply with the provisions of
sub-section (3), such limited liability partnership and its designated partners
shall be liable to a penalty of one hundred rupees for each day during which
such failure continues, subject to a maximum of one lakh rupees for the
limited liability partnership and fifty thousand rupees for every designated
partner.
• Any limited liability partnership which fails to comply with the provisions of
sub-section (1), sub-section (2) and sub-section (4), such limited liability
partnership shall be punishable with fine which shall not be less than twenty-
five thousand rupees, but may extend to five lakh rupees and every
designated partner of such limited liability partnership shall be punishable
with fine which shall not be less than ten thousand rupees, but may extend to
one lakh rupees.
Qualification of Auditor
A person shall not be qualified for appointment as an auditor of a LLP unless he is a
Chartered Accountant in practice.

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Appointment of Auditor by DP
The designated partners may appoint an auditor or auditors –
(a) at any time for the first FY but before the end of the first FY,
(b) at least 30 days prior to the end of each FY (other than the first FY),
(c) to fill a casual vacancy in the office of auditor, or
(d) to fill up the vacancy caused by removal of an auditor.

Appointment of Auditor by Partners where the DP fails to do so

The partners may appoint an auditor or auditors where the designated partners have power
to appoint and have failed to appoint.

Tenure of Auditors
An auditor or auditors of an LLP shall hold office in accordance with the terms of his or their
appointment and shall continue to hold such office till the period -
(a) the new auditors are appointed, or
(b) they are re-appointed.
Removal of Auditor
Where the LLP agreement does not provide for removal of an auditor, consent of ALL the
partners shall be required for removal of the auditor from his office.

34A. Accounting and auditing standards.

The Central Government may, in consultation with the National Financial Reporting Authority
constituted under section 132 of the Companies Act, 2013,—
• Prescribe the standards of accounting; and
• prescribe the standards of auditing, as recommended by the Institute of
Chartered Accountants of India constituted under section 3 of the Chartered
Accountants Act, 1949, for a class or classes of limited liability partnerships.]
Annual return (Section 35) in FORM-11
(1) Every LLP shall file an annual return duly authenticated with the Registrar within 60
days of closure of its financial year in such form and manner and accompanied by
such fee as may be prescribed.
(2) If any limited liability partnership fails to file its annual return under sub- section (1)
before the expiry of the period specified therein, such limited liability partnership and
its designated partners shall be liable to a penalty of one hundred rupees for each day
during which such failure continues, subject to a maximum of one lakh rupees for the
limited liability partnership and fifty thousand rupees for designated partners.
Inspection of documents kept by registrar [section 36]

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The incorporation document, name of partners and changes, if any, made therein, Statement
of Account and Solvency and annual return filed by each LLP with the Registrar shall be
available for inspection by any person in such manner and on payment of such fee as may be
prescribed.
Penalty for false statement (section 37):
If in any return, statement or other document required by or for the purposes of any of the
provisions of this Act, any person makes a statement—
(a) which is false in any material particular, knowing it to be false; or
(b) which omits any material fact knowing it to be material,
he shall, save as otherwise expressly provided in this Act, be punishable with imprisonment
for a term which may extend to 2 years, and shall also be liable to fine which may extend to 5
lakh rupees but which shall not be less than 1 lakh rupees.
Power of registrar to obtain information (section 38):
(1) In order to obtain such information as the Registrar may consider necessary for the
purposes of carrying out the provisions of this Act, the Registrar may require any person
including any present or former partner or designated partner or employee of a limited
liability partnership to answer any question or make any declaration or supply any details or
particulars in writing to him within a reasonable period.
(2) In case any person referred to in sub-section (1) does not answer such question or make
such declaration or supply such details or particulars asked for by the Registrar within a
reasonable time or time given by the Registrar or when the Registrar is not satisfied with the
reply or declaration or details or particulars provided by such person, the Registrar shall have
power to summon that person to appear before him or an inspector or any other public
officer whom the Registrar may designate, to answer any such question or make such
declaration or supply such details, as the case may be.
(3) Any person who, without lawful excuse, fails to comply with any summons or requisition
of the Registrar under this section shall be punishable with fine which shall not be less than
two thousand rupees but which may extend to twenty-five thousand rupees.
Conversion from firm into LLP (Section55):

A firm may convert into a LLP in accordance with the provisions of this Chapter and the Second
Schedule.

Conversion from private company into LLP (Section 56):

A private company may convert into a LLP in accordance with the provisions of this Chapter and
the Third Schedule.

Conversion from unlisted public company into LLP (Section57):

An unlisted public company may convert into a LLP in accordance with the provisions of this
Chapter and the Fourth Schedule. Note: Listed Co cannot convert itself into a LLP

Registration and effect of conversion (Section 58):

Registration:
(i) The Registrar, on satisfying that a firm, private company or an unlisted public company, as
the case may be, has complied with the provisions of the various Schedules, provisions of
this Act and the rules made thereunder, register the documents issue a certificate of
registration in such form as the Registrar may determine stating that the LLP is, on and

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from the date specified in the certificate, registered under this Act.
(ii) The LLP shall, within 15 days of the date of registration, inform the concerned Registrar
of Firms or Registrar of Companies, as the case may be,with which it was registered under
the provisions of the Indian Partnership Act, 1932 or the Companies Act, 1956 (Now
Companies Act, 2013) as the case may be, about the conversion and of the particulars of
the LLP in such form and manner as may be prescribed.
(iii) Upon such conversion, the partners of the firm, the shareholders of private company or
unlisted public company, as the case may be, the LLP to which such firm or such company
has converted, and the partners of the LLP shall be bound by the provisions of the various
Schedules, as the case may be, applicable to them.
(iv) Upon such conversion, on and from the date of certificate of registration, the effects of the
conversion shall be such as specified in the various schedules, as the case maybe.
Effect of Registration
Notwithstanding anything contained in any other law for the time being in force, on and
from the date of registration specified in the certificate of registration issued under the
various Schedule, as the case may be,—
(a) There shall be a LLP by the name specified in the certificate of registration registered under
this Act;
(b) all tangible (movable or immovable) and intangible property vested in the firm or the
company, as the case may be, all assets, interests, rights, privileges, liabilities, obligations
relating to the firm or the company, as the case may be, and the whole of the undertaking
of the firm or the company, as the case may be, shall be transferred to and shall vest in the
limited liability partnership without further assurance, act or deed; and
(c) the firm or the company, as the case may be, shall be deemed to be dissolved and
removed from the records of the Registrar of Firms or Registrar of Companies, as the case
may be.
FOREIGN LLP
Foreign limited liability partnerships (Section 59): The Central Government may
make rules for provisions in relation to establishment of place of business by foreign
LLP within India and carrying on their business there in by applying or incorporating,
with such modifications, as appear appropriate, the provisions of the Companies
Act,1956 or such regulatory mechanism with such composition as may be prescribed.

WINDING UP AND DISSOLUTION

Winding up and dissolution (Section 63): The winding up of a LLP may be either
voluntary or by the Tribunal and LLP, so wound up may be dissolved.

Circumstances in which LLP may be wound up by Tribunal (Section64): A LLP may

be wound up by the Tribunal:

(a) If the LLP decides that LLP be wound up by the Tribunal;

(b) if, for a period of more than six months, the number of partners of the LLP is reduced
below two;
(c) if the LLP is unable to pay its debts, (Removed)
(d) if the LLP has acted against the interests of the sovereignty and integrity of India,
the security of the State or public order;

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(e) if the LLP has made a default in filing with the Registrar the Statement of Account
and Solvency or annual return for any five consecutive financial years; or
(f) if the Tribunal is of the opinion that it is just and equitable that the LLP be wound
up.

The LLP (Amendment) Act, 2021 (herein after referred to as ‘the Amendment Act’) got the assent of
Hon’ble President as on 13th August, 2021 and is thus operative since that date. It was introduced in
the Rajya Sabha on July 30, 2021 and was passed by Rajya Sabha on 4th August, 2021 and by Lok
Sabha on 09th August, 2021. In view of the constant endeavour of the Central Government to
facilitate greater ease of living to law abiding corporates and to decriminalise certain provisions of
the Act, it became necessary to amend certain provisions of the Act. Hence the Act, namely, the
Limited Liability Partnership (Amendment) Act, 2021 is enacted.

The Act has converted certain offences into civil defaults and has changed the nature of punishment
for these offences. It has also defined small LLP, provides for appointment of certain adjudicating
officers, and establishment of special courts.

Small LLP
• Definition of Small LLP: The Amendment Act has introduced the concept of small LLP in line
with the concept of small companies as prescribed under the Companies Act, 2013. It has
defined the small limited liability partnership as LLP having contribution up to Rs. 25 lakh
(which could be increased by the Government upto maximum of Rs 5 Crores) and a turnover
upto Rs. 40 lakhs in the immediately preceding financial year as per the Statement of
Accounts and Solvency (the limit of which can be hiked upto Rs. 50 crores by the Govt.) or
which meets such other requirements as may be prescribed, and fulfils such terms and
conditions as may be prescribed. The concept has been introduced to create a class of LLP
which is subject to lesser compliances, lesser fee or additional fee to promote ease of doing
business in the Country particularly for micro and small enterprises.
START UP LLP
• Recognition to Start-Up LLP: Start-up is one of the most popular forms of doing business
these days. To facilitate the Ease of Doing Business and encourage startups across the
country; the concept of start-up has been recognized under the LLP Act, 2008 as well, this
will help in extending the benefit of simplified regulation and ease of practice under
proprietorship to the start-up LLPs.
• Prescription of Accounting and Auditing Standards as recommended by the Institute of
Chartered Accountants of India: It has inserted Sec 34A in the Act to empower the Central
Government to prescribe the “Accounting Standards” or “Auditing Standards” for a class or
classes of limited liability partnerships; the responsibility of formulation and
recommendation of which has been assigned to the Institute of Chartered Accountants of
India.
67A. Establishment of Special Courts.

(1) The Central Government may, for the purpose of providing speedy trial of offences under this
Act, by notification, establish or designate as many Special Courts as may be necessary for such area
or areas, as may be specified in the notification.

(2) The Special Court shall consist of—

(a) a single Judge holding office as Sessions Judge or Additional Sessions Judge, in case of offences
punishable under thisAct with imprisonment of threeyears or more; and
(b) a Metropolitan Magistrate or a Judicial Magistrate of the first class, in the case of other offences, who
shall be appointed by the Central Government with the concurrence of the Chief Justice of the High
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Court:

Provided that until Special Courts are designated or established under sub- section (1), the Courts
designated as Special Courts in terms of section 435 of the Companies Act, 2013 shall be deemed to
be Special Courts for the purpose of trial of offences punishable under this Act:

Provided further that notwithstanding anything contained in the Code of Criminal Procedure, 1973,
any offence committed under this Act, which is triable by a Special Court shall, until a Special Court is
established under this Act or the Companies Act, 2013, be tried by a Court of Sessions or the Court
of Metropolitan Magistrate or a Judicial Magistrate of the first class, as the case may be, exercising
jurisdiction over the area.
67B. Procedure and powers of Special Court.

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences
specified under sub- section (1) of section 67A shall be triable only by the Special Court established
or designated for the area in which the registered office of the limited liability partnership is
situated in relation to which the offence is committed or where there are more than one Special
Courts for such area, by such one of them as may be specified in this behalf by the High Court
concerned.

(2) While trying an offence under this Act, a Special Court may also try an offence other than an
offence under this Act with which the accused may, under the Code of Criminal Procedure, 1973 be
charged at the same trial.

(3) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Special Court
may, if it thinks fit, try in a summary way any offence under this Act which is punishable with
imprisonment for a term not exceeding three years:

Provided that in the case of any conviction in a summary trial, no sentence of imprisonment for a
term exceeding one year shall be passed:

Provided further that, when at the commencement of or in the course of a summary trial, it appears
to the Special Court that the nature of the case is such that the sentence of imprisonment for a term
exceeding one year may have to be passed or that it is, for any other reason, undesirable to try the
case summarily, the Special Court shall, after hearing the parties, record an order to that effect and
thereafter recall any witnesses who may have been

examined and proceed to hear or re- hear the case in accordance with the procedure for the regular
trial. 67C. Appeal and revision.

The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters XXIX
and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a Special Court within the
local limits of the jurisdiction of the High Court were a Court of Sessions trying cases within the local
limits of the jurisdiction of the High Court.]

CONTRIBUTIONS
Form of contribution [Section 32]
1. A contribution of a partner may consist of tangible, movable or immovable 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.

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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.

Obligation to contribute [Section 33]

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.

FINANCIAL DISCLOSURES
1. Penalty for non-compliance of provisions of sub-section 3-

LLP – `100 per day subject to maximum `1,00,000

Every Designated Partners - `100 per day subject to maximum `50,000.

2. Penalty for non-compliance of provisions of sub-section 1, 2 & 4 –

LLP – not less than `25,000 which may extend to ` 5 Lakhs.

Every designated partner –not less than `10,000 which may extend to `1 Lakh.

Accounting and auditing standards [Section 34A]

Central Government may, in consultation with the National Financial Reporting Authority
constituted under Section 132 of the Companies Act 2013 —
(a) Prescribe the standards of accounting; and

(b) Prescribe the standards of auditing, as recommended by ICAI.

INSPECTION OF DOCUMENTS KEPT BY REGISTRAR [SECTION 36]

The incorporation document, name of partners and changes, if any, made therein, Statement of
Account and Solvency and annual return filed by each LLP with the Registrar shall be available for
inspection by any person in such manner and on payment of such fee as may be prescribed.

PENALTY FOR FALSE STATEMENT [SECTION 37]

If in any return, statement or other document required by or for the purposes of any of the
provisions of this Act, any person makes a statement—
(a) which is false in any material particular, knowing it to be false; or

(b) which omits any material fact knowing it to be material,

he shall, save as otherwise expressly provided in this Act, be punishable with imprisonment for a
term which may extend to 2 years, and shall also be liable to fine which may extend to 5 lakh
rupees but which shall not be less than 1 lakh rupees.

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POWER OF REGISTRAR TO OBTAIN INFORMATION [SECTION 38]

(1) In order to obtain such information as the Registrar may consider necessary for the purposes
of carrying out the provisions of this Act, the Registrar may require any person including any
present or former partner or designated partner or employee of a limited liability
partnership to answer any question or make any declaration or supply any details or
particulars in writing to him within a reasonable period.

(2) In case any person referred to in sub-section (1) does not answer such question or make
such declaration or supply such details or particulars asked for by the Registrar within a
reasonable time or time given by the Registrar or when the Registrar is not satisfied with the
reply or declaration or details or particulars provided by such person, the Registrar shall
have power to summon that person to appear before him or an inspector or any other
public officer whom the Registrar may designate, to answer any such question or make such
declaration or supply such details, as the case may be.

(3) Any person who, without lawful excuse, fails to comply with any summons or requisition of
the Registrar under this section shall be punishable with fine which shall not be less than
two thousand rupees but which may extend to twenty-five thousand rupees.

COMPOUNDING OF OFFENCES [SECTION 39]

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Regional
Director or any other officer not below the rank of Regional Director authorised by the
Central Government may compound any offence under this Act which is punishable with
fine only, by collecting from a person reasonably suspected of having committed the
offence, a sum which may extend to the amount of the maximum fine provided for the
offence but shall not be lower than the minimum amount provided for the offence.

(2) Nothing contained in sub-section (1) shall apply to an offence committed by a limited
liability partnership or its partner or its designated partner within a period of three years
from the date on which similar offence committed by it or him was compounded under this
section.

Explanation.—For the removal of doubts, it is hereby clarified that any second or subsequent
offence committed after the expiry of the period of three years from the date on which the
offence was previously compounded, shall be deemed to be the first offence.

(3) Every application for the compounding of an offence shall be made to the Registrar who
shall forward the same, together with his comments thereon, to the Regional Director or
any other officer not below the rank of Regional Director authorised by the Central
Government, as the case may be.

(4) Where any offence is compounded under this section, whether before or after the
institution of any prosecution, intimation thereof shall be given to the Registrar within a
period of seven days from the date on which the offence is so compounded.

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(5) Where any offence is compounded before the institution of any prosecution, no
prosecution shall be instituted in relation to such offence.

(6) Where the compounding of any offence is made after the institution of any prosecution,
such compounding shall be brought by the Registrar in writing, to the notice of the court in
which prosecution is pending and on such notice of the compounding of the offence being
given, the offender in relation to which the offence is so compounded shall be discharged.

(7) The Regional Director or any other officer not below the rank of Regional Director
authorised by the Central Government, while dealing with the proposal for compounding of
an offence may, by an order, direct any partner, designated partner or other employee of
the LLP to file or register, or on payment of fee or additional fee as required to be paid under
this Act, such return, account or other document within such time as may be specified in the
order.

(8) Notwithstanding anything contained in this section, if any partner or designated partner or
other employee of the LLP who fails to comply with any order made by the Regional Director
or any other officer not below the rank of Regional Director authorised by the Central
Government, under sub- section (7), the maximum amount of fine for the offence, which
was under consideration Regional Director or such authorised officer for compounding
under this section shall be twice the amount provided in the corresponding section in
which punishment for such offence is provided.

ASSIGNMENT AND TRANSFER OF PARTNERSHIP RIGHTS

PARTNER'S TRANSFERABLE INTEREST [SECTION 42]

(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.

FOREIGN LLP
Foreign limited liability partnerships [Section 59]
The Central Government may make rules for provisions in relation to establishment of place
of business by foreign LLP within India and carrying on their business therein by applying or
incorporating, with such modifications, as appear appropriate, the provisions of the
Companies Act, 2013 or such regulatory mechanism with such composition as may be
prescribed.

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COMPROMISE, ARRANGEMENT OR RECONSTRUCTION OF LIMITED LIABILITY PARTNERSHIPS

Compromise or arrangement of limited liability partnerships [Section 60]
(1) Where a compromise or arrangement is proposed—

• between a limited liability partnership and its creditors; or

• between a limited liability partnership and its partners,
the Tribunal may, on the application of the limited liability partnership or of any creditor or
partner of the limited liability partnership, or, in the case of a limited liability partnership
which is being wound up, of the liquidator, order a meeting of the creditors or of the
partners, as the case may be, to be called, held and conducted in such manner as may be
prescribed or as the Tribunal directs.
(2) If a majority representing three-fourths in value of the creditors, or partners, as the case
may be, at the meeting, agree to any compromise or arrangement, the compromise or
arrangement shall, if sanctioned by the Tribunal, by order be binding on all the creditors or
all the partners, as the case may be, and also on the limited liability partnership, or in the
case of a limited liability partnership which is being wound up, on the liquidator and
contributories of the limited liability partnership:

Note: Majority in number present & Voting And Having 3/4th of in value of members
creditors present & Voting

Provided that no order sanctioning any compromise or arrangement shall be made by the
Tribunal unless the Tribunal is satisfied that the limited liability partnership or any other
person by whom an application has been made under sub-section (1) has disclosed to the
Tribunal, by affidavit or otherwise, all material facts relating to the limited liability
partnership, including the latest financial position of the limited liability partnership and the
pendency of any investigation proceedings in relation to the limited liability partnership.

(3) An order made by the Tribunal under sub-section (2) shall be filed by the limited liability
partnership with the Registrar within thirty days after making such an order and shall have
effect only after it is so filed.

(4) If default is made in complying with the provisions of sub-section (3), the LLP and its every
designated partner shall be ‘liable to a penalty of `10,000 and in case of continuing default,
with further penalty of `100 for each day after the first during which such default continues,
subject to maximum `1,00,000 for LLP and `50,000 for every designated partner’.

(5) The Tribunal may, at any time after an application has been made to it under this section,
stay the commencement or continuation of any suit or proceeding against the limited
liability partnership on such terms as the Tribunal thinks fit, until the application is finally
disposed of.

Power of Tribunal to enforce compromise or arrangement (Section 61)

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(1) Where the Tribunal makes an order under section 60 sanctioning a compromise or an
arrangement in respect of a limited liability partnership, it—

(a) shall have power to supervise the carrying out of the compromise or an arrangement; and

(b) may, at the time of making such order or at any time thereafter, give such directions in
regard to any matter or make such modifications in the compromise or arrangement as it
may consider necessary for the proper working of the compromise or arrangement.

(2) If the Tribunal aforesaid is satisfied that a compromise or an arrangement sanctioned under
section 60 cannot be worked satisfactorily with or without modifications, it may, either on
its own motion or on the application of any person interested in the affairs of the limited
liability partnership, make an order for winding up the limited liability partnership, and
such an order shall be deemed to be an order made under section 64 of this Act.

Provisions for facilitating reconstruction or amalgamation of limited liability partnerships

[Section 62]
(1) Where an application is made to the Tribunal under section 60 for sanctioning of a
compromise or arrangement proposed between a limited liability partnership and any such
persons as are mentioned in that section, and it is shown to the Tribunal that—

(a) compromise or arrangement has been proposed for the purposes of, or in connection with,
a scheme for the reconstruction of any limited liability partnership or limited liability
partnerships, or the amalgamation of any two or more limited liability partnerships; and
under the scheme the whole or any part of the undertaking, property or liabilities of any
limited liability partnership concerned in the scheme (in this section referred to as a
"transferor limited liability partnership") is to be transferred to another limited liability
partnership (in this section referred to as the "transferee limited liability partnership"), the
Tribunal may, either by the order sanctioning the compromise or arrangement or by a
subsequent order, make provisions for all or any of the following matters,namely:—

(i) the transfer to the transferee limited liability partnership of the whole or any part of the
undertaking, property or liabilities of any transferor limited liability partnership;

(ii) the continuation by or against the transferee limited liability partnership of any legal
proceedings pending by or against any transferor limited liability partnership;

(iii) the dissolution, without winding up, of any transferor limited liability partnership;

(iv) the provision to be made for any person who, within such time and in such manner as the
Tribunal directs, dissent from the compromise or arrangement; and

(v) such incidental, consequential and supplemental matters as are necessary to secure that the
reconstruction or amalgamation shall be fully and effectively carried out:

Provided that no compromise or arrangement proposed for the purposes of, or in connection
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with, a scheme for the amalgamation of a limited liability partnership, which is being wound
up, with any other limited liability partnership or limited liability partnerships, shall be
sanctioned by the Tribunal unless the Tribunal has received a report from the Registrar that
the affairs of the limited liability partnership have not been conducted in a manner
prejudicial to the interests of its partners or to public interest:
Provided further that no order for the dissolution of any transferor limited liability
partnership under clause (iii) shall be made by the Tribunal unless the Official Liquidator has,
on scrutiny of the books and papers of the limited liability partnership, made a report to the
Tribunal that the affairs of the limited liability partnership have not been conducted in a
manner prejudicial to the interests of its partners or to public interest.
(2) Where an order under this section provides for the transfer of any property or liabilities,
then, by virtue of the order, that property shall be transferred to and vest in, and those
liabilities shall be transferred to and become the liabilities of, the transferee limited liability
partnership; and in the case of any property, if the order so directs, freed from any charge
which is, by virtue of the compromise or arrangement, to cease to have effect.

(3) Within thirty days after the making of an order under this section, every limited liability
partnership in relation to which the order is made shall cause a certified copy thereof to be
filed with the Registrar for registration.

(4) If default is made in complying with the provisions of sub-section (3), the LLP and its every
designated partner shall be ‘liable to a penalty of `10,000 and in case of continuing
contravention, with further penalty of `100 for each day after the first during which such
default continues, subject to maximum `1,00,000 for LLP and `50,000 for every designated
partner’.

Explanation: (i) In this section "property" includes property, rights and powers of every
description; and "liabilities" includes duties of every description.
(ii) a LLP shall not be amalgamated with a company.

MISCELLANEOUS
Business Transactions of Partner with LLP [Section 66]: A partner may lend money to and
transact other business with the LLP 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 the Provisions of the Companies Act [Section 67]
(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—

• shall apply to any LLP; or

• shall apply to any LLP 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,

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• for a total period of 30 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.
Payment of Additional Fee [Section 69]
Any document or return required to be registered or filed under this Act with Registrar, if, is
not registered or filed in time provided therein, may be registered or filed after that time, on
payment of such additional fee as may be prescribed in addition to any fee as is payable for
filing of such document or return:
Provided that such document or return shall be filed after the due date of filing, without
prejudice to any other action or liability under this Act:
Provided further that a different fee or additional fee may be prescribed for different classes
of limited liability partnerships or for different documents or returns required to be filed
under this Act or rules made thereunder.
Enhanced Punishment [Section 70]
In case a limited liability partnership or any partner or designated partner of such limited
liability partnership commits any offence, the limited liability partnership or any partner or
designated partner shall, for the second or subsequent offence, be punishable with
imprisonment as provided, but in case of offences for which fine is prescribed either along
with or exclusive of imprisonment, with fine which shall be twice the amount of fine for
such offence.

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QUESTIONS

Q 1. State the requirement of minimum partners and designated partners of L L P and provisions
relating to their Consent letter? (4 marks)

Q 2. If a L L P is registered with a name which is identical with the name of an existing L L P. What
is the remedy to the existing Company? (2 marks)

What will be your answer if it is identical with a registered trade marks? (2 marks)

Q 3. Explain the liability of L L P for the acts of a partner? (4 marks)

Q 4. The Liability of L L P and its partners can be unlimited…Comment? (4 marks)

Q 5. (i) Within what time the following documents can be submitted annually by L L P

(a) Annual Return

(b) Statement of Accounts and solvency (2 marks)

(ii) X & Associates L L P wants to maintain books of accounts on cash basis under single entry
system. Comment? (2 marks)

Q 6. (i) Are Accounting standards applicable to L L P? (2 marks)

(ii) Why are Special Courts established under L L P Act? (2 marks)

Q 7. (a) Explain briefly the Concept of small L L P? (2 marks)

(b) Explain briefly the procedure of change of charge of Registered office of L L P from one state
to another state? (2 marks)

Q 8. State the circumstances in which L L P may be wound up? (4 marks)

Q 9. How can a partner cease to be a partner of L L P? What are their rights thereafter? (4 marks)

Q 10. Explain the procedure of L L P Incorporation? (4 marks)

Q11. Is Audit of small LLP Compulsory?

Q12. What is the time Limit for

a) Preparing statement of accounts & solvency

b) Filing statement of accounts
c) Annual return

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Q13. Explain briefly the provisions for rectification of name of LLP?

Q14. Can the Following be converted into LLP & what is the effect of conversion

a) Firm
b) Pvt Co.
c) Unlisted Public Co.

QUESTIONS AND ANSWERS

QUES 1 There is a LLP by the name Ram Infra Development LLP which has 4 partners
Mr. Rahul (Non-Resident),
Mr. Raheem (Resident),
Mr. Kartar (Resident) and
Mr. Albert (Non-Resident).
LLP wants to take Mr. Rahul (Non-Resident) and Mr. Raheem (Resident) as Designated Partner.
Explain in the light of Limited Liability Partnership Act, 2008 whether LLP can do so?

ANS According to Section 7 of LLP Act, 2008 every LLP shall have at least 2 designated partners who
are individuals and at least 1 of them shall be a resident in India. Further, explanation to the
section provides, the term "resident in India" means a person who has stayed in India f or a
period of not less than 120 days during the F.Y.
LLP wants to take Mr. Rahul (Non-Resident) and Mr. Raheem (Resident) as Designated Partner
which is in perfect compliance with Section 7. Hence the LLP can do so.

QUES 2 M/s Vardhman Steels LLP was incorporated on 01.09.2022.

On 01.01.2023, one partner of a partnership firm named M/s Vardhimaan Steels is registered
with Indian Partnership Act, 1932 since 01.01.2000 requested ROC that as the name of
resembles with the name of already registered partnership firm, the name of LLP should be
changed. Explain whether M/s Vardhman Steels LLP is liable to change its name under the
provisions of Limited Liability Act, 2008?

ANS Section 15 of LLP Act, 2008 provides that no LLP shall be registered by a name which, in the
opinion of the CG is-
(a) undesirable; or
(b) identical or too nearly resembles to that of any other LLP or a company or a registered
trademark of any other person under the Trade Marks Act, 1999.
Section 17 provides, if the name of the LLP is identical with or too nearly resembles to-
(a) that of any other LLP or a company; or
(b) a registered trade mark of a proprietor under the Trade Marks Act, 1999
then on an application of such LLP or proprietor referred to in clauses (a) and (b) respectively or
a company, the CG may direct that such LLP to change its name within a period of 3 months
from the date of issue of such direction. LLP need not change its name if its name resembles with
the name of a partnership firm. These provisions are applicable only in case where name is
resembles with LLP, company or a registered trade mark of a proprietor.
Hence, M/s Vardhman Steels LLP need not change its name even it resembles with the name of
partnership firm.

QUES 3 Kanik, Priyansh, Abhinav and Bhawna were partners in Singh Jain & Associates LLP. Abhinav
resigned from the firm w.e.f. 01.11.2022 but this was not informed to ROC by LLP or Abhinav.

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Whether Abhinav will still be liable for the loss of firm of the transactions entered after
01.11.2022?

ANS According to Section 24(3), where a person "former partner"), the former partner is to be
regarded in relation to any person dealing with the LLP) as still being a partner of the LLP unless -
(a) the person has notice that the former partner has ceased to be a partner of the LLP; or
(b) notice that the former partner has ceased to be a partner of the LLP has been delivered to
the Registrar. as no notice of resignation was given to ROC, Abhinav will still be liable for the loss
of firm of the transactions entered after 01.11.2022.
QUES 4 Mr. Mudit is the creditor of Devi Ram Food Circle LLP. He has a claim of 10,00,000 against the
LLP but the worth of the assets of LLP are only 7,00,000. Now Mr. Mudit wants to make the
partners of LLP personally liable for the deficiency of 3,00,000. Whether by virtue of provisions
of Limited Liability Act, 2008, Mr. Mudit can claim the deficiency from the partners of Devi Ram
Food Circle LLP?

ANS A limited liability partnership is a body corporate formed and incorporated under this Act and is a
legal entity separate from that of its partners. The LLP itself will be liable for the full extent of its
assets but the liability of the partners will be limited.
Creditors of LLP shall be the creditors of LLP alone. In other words, creditors of LLP cannot claim
from partners. The liability of the partners will be limited to their agreed contribution in the LLP
agreement. Hence the creditors of Devi Ram Food Circle LLP are the creditors of Devi Ram Food
Circle LLP only. Partners of LLP are not personally liable towards creditors. Mr. Mudit cannot
claim his deficiency of 3,00,000 from the partners of Devi Ram Food Circle LLP.

QUES 5 Mr. Ankit Sharma wants to form a LLP taking him, his wife Mrs. Archika Sharma and One HUF
as partners for that. Whether this LLP can be incorporated under LLP Act, 2008? Explain.

ANS Section 5 of Limited Liability Partnership Act, 2008 provides any individual or body corporate may
be a partner in an LLP. However, an individual shall not be capable of becoming a partner of a
LLP, if—
(a) he has been found to be of unsound mind by a Court of competent jurisdiction and the
finding is in force;
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending.
Further, Section (2)(1)(e) provides that a Body Corporate it means a company as defined in
‘clause (20) of section 2 of the Companies Act, 2013 and includes—
(i) an LLP registered under this Act;
(ii) an LLP incorporated outside India; and
(iii) a company incorporated outside India, but does not include—
(i) a corporation sole;
(ii) a co-operative society registered under any law for the time being in force; and
(iii) any other body corporate (not being a company as defined in ‘clause (20) of section 2 of the
Companies Act, 20132’ or a limited liability partnership as defined in this Act), which the Central
Government may, by notification in the Official Gazette, specify in this behalf. Therefore, HUF is
not covered in the definition of body corporate and cannot be partner in LLP.

QUES 6 There is an LLP by the name Ram Infra Development LLP which has 4 partners namely Mr.
Rahul, Mr. Raheem, Mr. Kartar and Mr. Albert. Mr. Rahul and Mr. Albert are non – resident
while other two are resident. LLP wants to take Mr. Rahul and Mr. Raheem as Designated
Partner. Explain in the light of Limited Liability Partnership Act, 2008 whether LLP can do so?

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ANS According to Section 7 of LLP Act, 2008 every LLP shall have at least two designated partners who
are individuals and at least one of them shall be a resident in India. Further, explanation to the
section provides, the term “resident in India” means a person who has stayed in India for a
period of not less than one hundred twenty days during the financial year. Hence, in the given
problem, there is no violation

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