Limited Liability Partnership – An Overview – II
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What are the key features of a LLP?
The key features of a LLP incorporated in India are as follows:
1. LLP is a body corporate. It is must for every LLP to get registered with the Registrar of Companies (ROC) similar to that of setting up of a company. Its name should be unique i.e. there should not be another LLP having similar name.
2. LLP is distinct from its members. The liability of members is limited to the extent of their contribution.
3. The LLP must have at least 2 members. Any legal person may be a member of a LLP. Each partner is the agent of the firm and not of the other partners. The LLP shall not be liable for the acts of a partner if the partner in fact does not have an authority to act on behalf of the LLP even if the third person knows or does not know this fact and believes that he is a partner of the LLP.
4. Management includes at least 2 members as ‘designated members’ out of whom one member should be resident in India. The designated members will have the statutory responsibility for complying with various departments. According to U.K. LLP Act (2000), there are some extra responsibilities on designated members. In particular they are responsible for:
§ Appointment of an auditor (if it is needed),
§ Signing the accounts on behalf of the members,
§ Delivering the accounts to the Registrar,
§ Notifying any changes in case of memberships, registered office address, or the name of limited liability partnership,
§ Preparing, signing and delivering to the registrar an annual return, and acting on behalf of limited liability partnership if it is wound up and dissolved.
The Designated members will be held liable for the penal action in the event of failure of compliance with their responsibilities. Unless otherwise specified to the ROC, all the members of LLP will be designated members.
5. The LLP has a complete flexibility in setting up its internal structure and management. The duties and responsibilities of partners towards the LLP and towards each other depend on the agreements between the partners and the agreement between LLP respectively subject to the provisions under proposed legislation.
6. Similar to that of Companies, LLP will have an obligation of maintaining annual accounts reflecting a true and fair view. A Statement of Accounts and Solvency shall be filed by every LLP with the ROC every year. The LLP should get its Book of Accounts audited, subject to any class of LLP’s being exempt from this requirement by the Central Government. There is a provision that the government will have powers to investigate the affairs of a LLP and for that purpose the government may appoint one or more competent persons as inspectors.
What are the Disclosure Requirements?
1. The Disclosure requirements of a LLP are similar to that of a Company. They are required to disclose the following :
§ The LLP shall maintain such proper book of accounts as may be prescribed relating to its affairs for each year of its existence at its Registered Office on double entry basis. The accounting method employed may be on cash basis or accrual basis.
§ 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. The partners of the LLP shall put their signatures on such statement evidencing their acceptance.
§ Every LLP shall file a Statement of Account and Solvency with the Registrar in the prescribed manner along with the requisite filing fee.
§ Every LLP shall get its accounts audited as per rules as may be prescribed. However, the Central Government may by notification exempt a class or classes of LLP from this requirement.
§ If an LLP fails to comply any of the aforesaid provisions then the LLP shall be punishable with not less than Rs. One Lakh which may extend to Rs. Five Lakh and the designated partners shall be punishable with fine not less than Rs.10000/- but which may extend to Rs.100000/-.
2. Disclosures by way of filing documents to Registrar are as follows:
§ To file Annual Return of a LLP with the Registrar within 60 days of closure of financial year in the prescribed manner along with the requisite fee.
§ To file a notice of change in the name of LLP registered with the Registrar in such form and manner as may be prescribed and accompanied with the fee.
§ To file the particulars of the designated partners and their consent to act as designated partner and the changes in the designated partners, within 30 days from the date of appointment in the prescribed form and manner.
§ To file a notice within 30 days from the date when a person becomes or ceases to be a partner.
§ To file a notice of any change in address of the registered office in such form and manner as may be prescribed and such change shall be effective only on filing of the notice.
§ To file a notice of any change in the name and address of a partner within 30 days of such change.(…cont.)