LLP Act 2008 (Part 1)
The LLP means partnership where liability of partners shall be limited to only amount they have invested into the firm. Before this India business and enterprises are of four types: proprietorships, partnerships, public ltd and private ltd companies. Recently lots of countries have enacted related bills such as UK, USA, Singapore, Australia etc. The LLP Act of India is based on UK and Singapore model of LLP.
- Tribunal – means National Company Law Tribunal (NCLT) constituted under companies act.
- Appellate Tribunal – as constituted under section 10FR of companies act.
Nature of LLP (Section 3-10)
- A LLP is a body corporate formed under this act shall be a legal entity and any change in number of partners will not change its powers, rights, liabilities etc.
- No provisions of Partnership Act, 1932 shall applicable to a LLP.
- Section 5 – Any individual or a corporate body can be a partner in a LLP.
- A LLP shall have at least 2 partners and in case only 1 partner for more than 6 months, the person shall be responsible for all obligations under LLP agreement or provision of this act.
- Every LLP shall have at least 2 ‘designated partners’ and at least one shall be resident of India in all cases either LLP composed of body corporate or individuals or both provided corporate shall nominate individuals to act as designated partner.
- The Designated Personal Identification Number (DPIN) shall be allotted to each designated partner from central govt and every partner shall satisfy such conditions as prescribed to obtain DPIN.
- A designated partner shall be liable for all matter, norms, acts etc. under provisions of this act including all norms/conditions specified in a LLP agreement and liable for all penalties imposed on LLP for contraventions of provisions.
- A LLP may appoint a new partner in case of any vacancy and shall report to Registrar with particulars of every new individual (partner) within 30 days.
- A LLP shall be liable for fine if contravenes any of above provisions of amount not < Rs 10000 and can be extended up to max of Five Lakh rupees.
Incorporation of LLP & Matters (Section 11-21)
- To incorporation of LLP 2 or more persons associated shall file an incorporation document with fees & a statement made by an advocate/CA/CS in such manner as prescribed by Registrar of state.
- The name, business profile, partners/designated partners name & address, address of office etc. of LLP shall be included in a incorporation document. If any person provides any false information then he shall be liable for punishment of imprisonment up to 2 yrs or fine up to 5lakh rupees.
- The Registrar shall register document and give certificate of incorporation within 14 days if document satisfy above all conditions in a manner as prescribed by registrar.
- The name of registered LLP can be changed by filling an application to registrar in manner with fees as may be prescribed.
- Every LLP shall have end words as limited liability partnership or LLP such as Tata LLP etc. If any person contravenes with this provision shall liable for fine from 50,000 – 5lakh rupees.
Partners and Their Relations (Section22-25)
- Every Partner shall have rights & duties as per the LLP agreement signed by them and person cease to be a partner if dies or declared insolvent or unsound mind by giving notice of 30 days.
- If no agreement is there than partners shall have liabilities as given in First Schedule of this act such as :-
- All partners are entitled for equal sharing in profits, losses & responsibilities of LLP.
- No person introduced as a partner without consent of all existing partners.
- Every matter related to LLP shall be decided by majority of partners and each has one vote.
- No majority of partners can expel any partner unless power given to them in an agreement.
Extent to Liability (Section 26-31)
- Every partner of LLP is, for the purposes of business of LLP, the agent of LLP.
- The obligations of LLP are either specified in contract or otherwise are solely obligations of LLP. The liabilities of LLP shall be met out from assets/properties of LLP.
- The liability of LLP or partners shall be unlimited for any act carried out by LLP or any of partners with intent to defraud creditors or for any fraudulent purpose. But no person or LLP is liable for any such act carried out by a partner without knowledge of any person or LLP.
- Any act done for any of above purposes by a person than he shall be liable for punishment of imprisonment up to 2 yrs with fine of Rs 50000 may extended up to 5lakh rupees.
- The Court/Tribunal can reduce or provide waiver in above punishment if aggrieved person has provided any useful information (i.e. whistle blower) during investigation of such LLP or partner.