In recent times, the Central Government has introduced some changes to the Limited Liability Partnership (LLP) Act, 2008, through the Limited Liability Partnership (Third Amendment) Rules, 2023. Let’s break down these changes and understand what they mean for LLPs in simpler terms.
1. What is LLP?
Limited Liability Partnership or LLP is a type of business structure where the partners have limited liability, protecting their personal assets from the company’s debts. It’s a hybrid of a partnership and a corporation, providing flexibility and liability protection.
2. The Latest Amendments
The government has introduced some new rules, and they are known as the Limited Liability Partnership (Third Amendment) Rules, 2023. These rules, effective from their publication date in the Official Gazette, aim to enhance transparency and accountability within LLPs.
3. Register of Partners (Rule 22A)
LLPs are now required to maintain a register of partners, starting from the date of incorporation. For existing LLPs, this register must be created within 30 days from the commencement of these new rules. The register (Form 4A) should be kept at the LLP’s registered office and contain specific details about each partner, such as their name, address, email, PAN or CIN, and more.
Any changes to partner details or contributions must be updated within seven days. If there are corrections due to orders by competent authorities, these must be recorded with reasons.
4. Declaration of Beneficial Interest (Rules 22B)
If a partner doesn’t hold any beneficial interest in the LLP’s contributions, they must file a declaration (Form 4B) within 30 days of being listed as a partner. This declaration should specify the person holding the beneficial interest.
On the other hand, any person holding beneficial interest but not registered as a partner (beneficial partner) should file a declaration (Form 4C) within 30 days of acquiring the interest. This form should include details about the nature of the interest and the partner in whose name the contribution is registered.
These declarations must be recorded in the register of partners by the LLP and submitted to the Registrar within 30 days, along with a return (Form 4D) and the required fees.
5. Designated Partner Responsibility (Rule 4)
Every LLP must specify a designated partner responsible for providing information about beneficial interests to the Registrar. This information should be filed in Form 4. Until a designated partner is specified, all partners are deemed responsible for this task.
6. Why Does This Matter?
These amendments aim to bring more transparency and accountability to LLPs. By maintaining accurate records of partners and their contributions, as well as declaring beneficial interests, the government aims to ensure fair practices and prevent misuse of the LLP structure.
7. Conclusion
Understanding these amendments is crucial for LLPs to comply with the new rules and maintain good standing with the authorities. By keeping accurate records and filing the necessary declarations, LLPs can continue to enjoy the benefits of this business structure while adhering to regulatory requirements.
