LIMITED LIABILITY PARTNERSHIP (LLP)

Jan. 25, 2021

The Company Law Committee (CLC), headed by the Corporate Affairs Secretary Rajesh Verma, has recommended that 12 offences under the LLP Act be decriminalised and that LLPs be allowed to issue NCDs to raise funds with the aim of improving ease of doing business for limited liability partnership (LLP) firms.

Recommendations:

Several offences related to timely filings, including annual reports and filings on changes in partnership status of the LLP, not related to fraud have been recommended for decriminalisation.
the panel has recommended that companies be required to pay penalties for non-compliance, instead of fines which are imposed after a partner or the LLP is found guilty of misconduct by a court.
The Registrar of Companies would have the authority to levy penalties for any contravention of provisions of the LLP Act.
The CLC has also recommended that LLPs which are currently not allowed to issue debt securities be permitted to issue non-convertible debentures (NCDs) to facilitate raising of capital and financing operations.
- The move is likely to benefit startups and small firms in sectors which require heavy capital investment.