There are different company types which are
introduced by the Ministry of Corporate Affairs and one of the company types is
Limited Liability Partnership which is generally called LLP. There were some
issues in the compliances of the Limited Liability Partnership Company and
hence The MCA (Ministry of Corporate Affairs) has decided to improve the
compliances of the Limited Liability Partnership company to make a better
regulation of designation of the partners. The MCA announced this message on
the 18th of February, 2021. Total eight number of would-be soon applicable to
the LLP.
The primary objective of this extension of
sections is to improve the mechanism of the compliance of the Limited Liability
Partnership and to improve and regulate the destination of the partnerships.
The applicability of the provisions is not
notified yet as at present it is only proposed by the MCA. But the notification
would be announced soon in the recent days.
These provisions would be applied to improve
the loopholes and gaps in the LLP act by applying the Companies act to LLP.
Section 164 would place a significant reform which states that the company
director of a company that is defaulted on the filing financial statements or
annual returns for three years consecutively would be disqualified as a
director. And this Section 164 of the Companies Act, 2013 would be made
applicable to the LLP's which would deal with the Disqualifications for
Appointment of Director. There are some of the LLP which is run by several
practicing professionals that are apart from the business entities. And Hence
the primary intention of the MCA would be to monitor the activities of such
Limited Liability Partnership companies.
According to Section 67 of the LLP Act, 2008,
the Central Government has an express power to directly notify the changes in
the Official Gazette directly that the provisions of the Companies Act shall be
applicable to any LLP company. According to Section 67, the Government shall
apply the provision directly or with some of the modifications in the
provisions.
Under Section 67(1) of the LLP Act, 2008, the
following provisions would be extended to the LLP's (Limited Liability
Partnership) and the section to the respected provisions are mentioned below:-
- Section 90 (1) to (11): This section states
the register of significant beneficial owners in a company.
- Section 64 (1) & (2) :- Disqualification
for Appointment of the Directors.
- Section 165 (1), (3) to (6):- Number of
Directorships.
- Section 206 (5):- Power to call for information,
Inspect Books and conduct Inquiries.
Impact
of the sections: -
- Section 90 (Sub-Sections 1 to 11, except
Sub-Section 12)
The intention of this Section would be to identify a natural
person that is controlling and exercising the beneficial interests of the
company. The purpose of the SBO would be the same for the LLP.
- Section 164 (Sub-Sections 1 & 2) –
Disqualification of Directors
This
section would be made an impact on the directors of the companies of Limited
Liability Partnership. As Section 164 states the Disqualification of the
directors, the directors that had defaulted the Annual return for consecutive
three years would be disqualified. Hence the laws that were applicable to the
other companies would be made applicable to the Limited Liability Partnership.
- Section 165 (Except Sub-Section 2)
According to section 165, the number of
directorships can hold the 20 directors in any private company and if the
company is public then the number of directorships can hold the 10 directors.
Those companies that are growing very slowly or the company growth is sustained
at one place is not counted for the purpose of maximum directorships.
Impact: The application of this section on
LLPs that have a maximum number of partnerships in various LLPs will be only in
the capacity of a desirable partner and not a partner. According to this, an
upper cap is a maximum number of partnerships.
- Section 167 - Vacation of office by
Director
If any director of the company suffers any of
the disqualification specified in section 164 and which provides the
disqualification for the appointment of directors. You have to vacate the
office of the director if any of the provisions of section 164 applies to you.
It also applies if he absents himself from the board meetings that happen in
the last year. The director will be disqualified by an order of the court.
- Section 206 - Power to Call for Information,
Inspect Books and Conduct Inquiries
The central government will have the right to
direct inspect the books and other personal documents of the company for any
special purpose
Impact: Our suggestion on that is: The LLPs
will allow the central Government the power of inspecting all the things.
- Section 207 Conduct of Inspection and
Inquiry
In this procedure, the Registrar or the
Inspector will do the inspection or inquiry he has powers to inspect all
documentation that is related to the company. He can do the inspection of any
book registers and the other things in the place of the company.
Conclusion:-
The provisions would be
introduced and would be announced in the future and the compliance of the
Limited Liability Partnership would be made more strict as compared to the
present. The loopholes and the gaps would be improved and a proper mechanism
compliance would be established for the Limited Liability Partnership
companies.
