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Introduction
The concept for LLPs in India was introduced in 2008, with “The Limited Liability Partnership Act 2008″. The first limited liability Partnership was incorporated back in 2009. LLP, as mentioned earlier stands for Limited Liability Partnership. This means that there exists only a limited liability towards the incorporated legal entity by each of its partners. We shall delve into it as we discuss it later. LLP protects against liabilities to its partners by limiting their liability to the contribution agreed to in the agreement during incorporation. Although, it is liable to the full extent of its assets as a legal entity. LLP by allowing limiting liability helps to avoid joint liability of a partner not engaged with another whose fault caused misconduct. The relationship of the partners is being governed by the agreement entered into by them and it helps in avoiding any minuscule conflicts. For the formation of an LLP, a minimum of two partners are required with no maximum cap. Governed by the Contract or the agreement between the partners, duties, and obligations of the said partners are governed by the law. Like LLC, an individual, Corporation, another LLP can form a partnership and have an agreement.
LLP Agreement is a written contract between the partners of the LLP or between the LLP and its designated partners. It establishes the rights and duty of the designated partners toward each other as well toward the LLP. It is compulsory to execute and file the LLP agreement with MCA within 30 days of the incorporation of LLP.
Further, capital investment from each partner is required. The invested amount is the amount agreed upon in the agreement. Furthermore, a name and a registered office are required to apply for registration. In India, Online registration is functional and except name, address & Agreement between the partners, nothing more is generally required to form an LLP. It creates the foundation for the smooth running of a Limited Liability Partnership. It defined the outlook and set well define concepts for decision making, adding a new partner, and leaving existing partners or change in roles.
There exist multiple benefits in LLP, having an agreement formed by mutual consent helps in day to day management. It also helps in limiting liability in case of misconduct or something else. LLP’s carry on like a separate legal entity from their partners meaning it is easy to leave or join or transfer an LLP.
LLP Settlement Scheme 2020
In March 2020, the Ministry of Corporate Affair introduced an easement scheme to promote the ease of doing business among LLPs and cleanse the system. It provided the LLPs a one-time relaxation in payment of additional fees and immunity from prosecution. Thereafter, the Ministry of corporate affairs in order to relax the circumstances for LLP’s and to assist them in their ease of doing business during the outbreak of Covid-19, the MCA has vide its General Circular No. 13/2020 dated March 30, 2020 brought a “Modified Scheme”. It brought certain changes to the existing settlement scheme and helped in relaxing certain rules for defaulters.
The Original Scheme
The original Scheme applies from March 16, 2020, to June 13, 2020. All defaulting LLPs which were due for filing they’re financial till 31st October 2019 shall avail benefits of the LLP Scheme by paying a statutory filing fee (as prescribed under the Limited Liability Partnership Act, 2008) along with an additional fee of Rs.10 (Rupees ten only) per day for delay up to an amount of Rs.5,000 (Rupees five thousand only) per belated document. The LLP SETTLEMENT SCHEME-2020 brought relief in the sense of allowing a company a‘one-time condonation of delay’concerning a defaulting Limited Liability Partnership. The changes allowed a defaulting Limited Liability Partnership to pay their default compliances, without a need for payment of any additional fees, this is during the period of moratorium. The highlights of the REVISED Limited Liability Settlement Scheme-2020 are as follows.
| S.No | Features/highlights | Explanation |
| Applicability | All those limited liability partnerships who are defaulting in their filling of documents on the stipulated due date as is specified under the Limited Liability Partnership Act, 2008(LLP ACT of 2008). Further, those companies as mentioned under the rules of the LLP Act are allowed a condonation of delay and file belated documents. According to the Limited liability Partnership Settlement Scheme-2020, the due date stipulated is 31 August 2020. | |
| Moratorium Period | The period termed as moratorium period starts on April 01, 2020, and consequently ends on the 30th of September, 2020. | |
| Immunity | As stipulated by the Limited Liability Settlement Scheme-2020, those Defaulting Limited Liability Partnerships who file the documents post due date in this moratorium period and improve on their default will be exempted or provided immunity from any subsequent prosecution from the ROG for the default and they would not be liable to pay additional fees. | |
| Multiple forms | The Limited Liability Settlement Scheme-2020 has a number forms: Form 3- This form provides information about the Limited Liability Partnership agreements and the changes that are made in it if any. Form 4- This form provides information such as changes in names/registered address/ designation of a partner, consent to become a partner, notice of appointment, termination. Form 5- This form provides for a notice for the change of the name of the LLP Form 8- This form provides the information relating to the statement of accounts and the solvency of the LLP either on an interim basis or annual basis Form 11- This form provides the information regarding the annual returns of the LLP Form 12- This form allows to intimate other address for service of documents. Form 15- This form allows the LLPs to notice a change in place of their registration Form 22- This form provides for a notice in matters of orders from the Tribunal/government to the registrar, court order, etc. Form 23- It is a form that serves as an application directed towards the LLPs to change its name. Form 29- this form provides for (a) notice in case of any alterations made in the certificate of incorporation; (b) notice in case of a change in names and addresses of any of the persons authorized to accept services on behalf of foreign limited liability partnerships; (c) notice in case of a change in the core place of business all over India of the foreign limited liability Partnership. Form 31- this form provides an application in case of compoundable offenses. | |
| Forms not covered in LLPSS-2020 | It has been clarified by the Ministry of Corporate Affairs that the Limited Liability Settlement Scheme-2020 will not apply to those Limited Liability Partnerships who via form 24 to register for removal of their names from the register following the LLP Act, 2008. | |
| Defaulters | The Ministry of Corporate Affairs has stated and clarified that once the Limited Liability Settlement Scheme-2020 closes, the registrar of companies is free to take any action provided under the LLP Act,2008 against such Limited Liability Partnerships who failed to avail the benefits of the scheme and still default in filing of documents on time. |
The Action was taken by the Ministry of Corporate Affairs to launch the Limited liability Settlement Scheme-2020 was a principle initiative during the tough times due to the COVID-19 outbreak globally. The scheme has allowed a certain “ease of doing business” to such LLPs. The scheme reduces the burden that is placed on a huge number of limited liability partnerships that have or are defaulting in the submission of documents on the stipulated date. It is a way for making good on their defaults and become a compliant entity. India is a huge country with a large population. In such an environment, a large number of LLPs can exist and make it difficult for them to register and make filling compliances in a short period. The scheme serves as a way to ease the burden on the registrar of companies as well as to (1) reduce the extra fee charged; (2) Granting immunity to partners from criminal prosecution; and (3) prevent any further delay in filing of finances.
Revised LLP Settlement Scheme 2020
MCA vide its circular[1] dated 4th March 2020 introduced the Limited Liability Settlement Scheme 2020. Subsequently, with an order[2] dated 30thMarch 2020 the MCA revised the said scheme to allow limited liability partnerships to deal with the outbreak of COVID-19 better and become compliant entities. In case the companies decide not to take advantage of the scheme then such defaulting LLPs will have to pay the stipulated additional fees as per section 69 of the LLP Act, 2008. Furthermore, the protection granted by the scheme against future prosecution would not be guaranteed and the ROC can move ahead with the prosecution of the partners of such companies.
Revised LLP Settlement Scheme-2020 in nutshell:
| S.no | FEATURES | Before REVISION | AFTER REVISION |
| Legal provision: | Under section 460 of the companies Act, 2013(which has been extended to affect LLPs u/s 67(2) of the LLP, Act 2008) the Government is empowered to decide on the introduction of a scheme that is the Limited Liability Settlement Scheme 2020 by allowing a company a ‘one-time condonation of delay’ in respect to a defaulting Limited Liability Partnership. The changes allowed a defaulting Limited Liability Partnership to pay their default compliances, without a need for payment of any additional fees. | No Modification in the said Provision. | |
| Scheme Applicable From: | March 16th, 2020 till 13th June 2020 | 01st April 2020 up to30th September 2020 | |
| Scheme Applicable To: | All those limited liability partnerships who are defaulting in their filling of documents on the stipulated due date (31st October 2019) as is specified under the Limited Liability Partnership Act, 2008(LLP ACT of 2008). Further, those companies as mentioned under the rules of the LLP Act are allowed a condonation of delay and file belated documents. | All those limited liability partnerships who are defaulting in their filling of documents on the stipulated due date (31st August 2020) as is specified under the Limited Liability Partnership Act, 2008(LLP ACT of 2008). Further, those companies as mentioned under the rules of the LLP Act are allowed a condonation of delay and file belated documents. | |
| Payment of Fees and Additional Fee | The defaulting LLPs may make additional payments and fill out the required forms. The additional fee amounts to 10/-rs for every day the default is not cleared. This may extend up to a maximum of five thousand rupees. | The defaulting LLPs may file form still 30th September 2020, till then-No Additional fees will be charged to file forms. | |
| Scheme Applicable for the following forms only: | Form 3-This form provides information about the Limited Liability Partnership agreements and the changes that are made in it if any. Form 4- This form provides information such as changes in names/registered address/ designation of a partner, consent to become a partner, notice of appointment, termination. Form 8- This form provides the information relating to the statement of accounts and the solvency of the LLP either on an interim basis or annual basis Form 11- This form provides the information regarding the annual returns of the LLP | Form 3- This form provides information about the Limited Liability Partnership agreements and the changes that are made in it if any. Form 4- This form provides information such as changes in names/registered address/ designation of a partner, consent to become a partner, notice of appointment, termination. Form 5- This form provides for a notice for the change of the name of the LLP Form 8- This form provides the information relating to the statement of accounts and the solvency of the LLP either on an interim basis or annual basis Form 11- This form provides the information regarding the annual returns of the LLP Form 12- This form allows to intimate other address for service of documents. Form 15- This form allows the LLPs to notice a change in place of their registration Form 22- This form provides for a notice in matters of orders from the Tribunal/government to the registrar, court order, etc. Form 23- it is a form that serves as an application directed towards the LLPs to change its name. Form 29- this form provides for (a) notice in case of any alterations made in the certificate of incorporation; (b) notice in case of a change in names and addresses of any of the persons authorized to accept services on the behalf of a foreign limited liability partnerships; (c) notice in case of a change in the core place of business all over India of the foreign limited liability Partnership. Form 31- this form provides an application in case of compoundable offenses. | |
| The scheme not Applicable to: | It has been clarified by the Ministry of Corporate Affairs that the Limited Liability Settlement Scheme-2020 will not apply to those Limited Liability Partnerships who via form 24 to register for removal of their names from the register following the LLP Act, 2008. | No Modification | |
| Immunity from prosecution | As stipulated by the Limited Liability Settlement Scheme-2020, those Defaulting Limited Liability Partnerships who file the documents post due date in this moratorium period and improve on their default will be exempted or provided immunity from any subsequent prosecution from the ROG for the default and they would not be liable to pay additional fees. (validity till 13th of June 2020) | As stipulated by the Limited Liability Settlement Scheme-2020, those Defaulting Limited Liability Partnerships who file the documents post due date in this moratorium period and improve on their default will be exempted or provided immunity from any subsequent prosecution from the ROG for the default and they would not be liable to pay additional fees. (Validity till 30th of September 2020). | |
| 7. | Upon Conclusion of Scheme: | The Ministry of Corporate Affairs has stated and clarified that once the Limited Liability Settlement Scheme-2020 closes, the registrar of companies is free to take any action provided under the LLP Act,2008 against such Limited Liability Partnerships who failed to avail the benefits of the scheme and still default in filing of documents on time… | No Modification |
The scheme came at the right time which has worked as a breather for non-filers and late filers of Companies and LLP. The relaxations have been given in additional fees but also given immunity from prosecutions and proceedings including against imposition of penalties for late submissions. The scheme allows for defaulters to file their documents after the stipulated due date without the payment of additional fees of filing the documents late. Previously, defaulting in the filling of financials meant that the designated partners of an LLP would be liable for criminal prosecution. Furthermore, the registrar of companies is instructed to suspend the pending proceedings u/s 454 of the Companies Act, 2013. In this way, the companies coming under the ambit of the scheme would not have to pay the extra penalty fee.
This has allowed the ever-increasing number of non-compliant Limited liability partnerships to finally clear their dues and become compliant. This is an opportunity that is available only for the time being and is a one-time opportunity for the LLPs who are defaulting to make good on their dues and become fully compliant. The corporate industry has and should’ve utilized the additional time and relief given to them to make good on their defaults. But the revised scheme overlapped with the original scheme creating a discrepancy on which scheme is to be applied under what circumstance. But the scheme is a one-time solution. There need to be amendments made to the scheme to make it a routine affair to stop overburdening of penalty cases and prosecution cases.
References:
[1]General Circular No. 6/2020 dated 04th March 2020 notified ‘LLP settlement Scheme, 2020
[2]General Circular No. 13/2020, dated 30th March 2020,
