Introduction
The Ministry of Corporate Affairs has officially announced The Limited Liability Partnership (Third Amendment) Rules, 2023 (“Amendment Rules”)[i], on October 27, 2023, with an aim to bring certain key developments in the existing regulations pertaining to the Limited Liability Partnerships (“LLP”) in India.
Key developments introduced by this Amendment Rules are as follows:
- Maintenance of Register of Partners By LLPs under Rule 22a of the Amendment Rules
Rule 22A of the Amendment Rules mandates a LLP (which is established after the effective date of the Amendment Rules) to maintain a register of partners in the manner specified in Form 4A from the date of its incorporation. On the other hand, with respect to the existing LLP (which are existing prior to the notification of these Amendment Rules), the creation and maintenance of such a register is required to be completed within a period of 30 days from the commencement of the Amendment Rules. Further, the Amendment Rules specified that this register should be kept within the premises of the registered office of such LLP.
The register of partners, inter alia, should include the following details\ detailed information of the assets or other resources and forms of contribution, details of beneficial ownership, and other pertinent information.
- Name of the Partner;
- Corporate Identification Number, / Registration No;
- Unique Identification No;
- Address/ Registered address (in case of body corporate);
- E-mail address;
- Father’s/ Mother’s/ Spouse’s name;
- Status;
- Occupation;
- PAN Number;
- Whether citizen of India (Yes/No);
- Nationality;
- Detailed information of the assets or other resources and forms of contribution;
- Details of beneficial ownership;
- Other information as required under Form 4A.
It is pertinent to note that Section 88 of the Companies Act, 2013 (“CA 2013”)[ii] also stipulates a similar obligation for companies incorporated under the CA 2013 to maintain a register of members in a manner prescribed thereto.
- Declaration relating to beneficial interest under Rule 22b of the Amendment Rules
The Amendment rules provides the following categorization:
- Individuals who are registered partner of the LLP but do not hold any beneficial interest either fully or partly are referred to as “Registered Partner”.
- Individuals who are not registered partner of the LLP but hold any beneficial interest either fully or partly are referred to as “Beneficial Partner”.
In addition to the foregoing, it may be noted that the Amendment Rules requires that individuals who are partners in an LLP to declare a nominee for themselves. Further, the other members of the LLP (other than the partners) are require to provide certain declaration as specified below.
The Registered Partner and the Beneficial Partner, under the Amendment Rules, are obligated to disclose the details relating to beneficial interest through a declaration in Form 4B and Form 4C respectively. The declaration must be submitted to the LLP within 30 days from the date on which their name is entered into the register of partners or the date on which the beneficial interest is acquired. Moreover, any change in the beneficial interest in the contribution must be declared within 30 days of acquiring the beneficial interest
It is pertinent to note that section 89 of the CA 2013 also stipulates a similar obligation for disclosure of information with respect to individuals who are holding or acquiring beneficial interest in the company’s shares; and similar disclosures are to be made for individuals without a beneficial interest in a company’s shares but are named as the holder in the register of members.
Upon receiving these declarations from the Registered Partner and Beneficial Partner, the LLP is obligated to record them in the register of partners and submit the records to the Registrar within 30 days from the date of receiving the declarations. Similarly, under section 89(6) of the CA 2013, stipulates similar provisions where the company required to file a return with the Registrar of Companies concerning the declarations company has received..
Furthermore, Rule 22B(4), states that the LLP is required to designate a specific partner (hereinafter referred to as “Designated Partner”) who would be responsible for filing Form 4B and Form 4C with the Registrar or any other officer authorized by the Central Government. Furtherly the details of such Designated Partner must be provided in Form 4 by the LLP’s. In the absence of such specified Designated Partner, all partners will be considered as deemed Designated Partners for the purpose.
Similar to the above provision the Ministry of Corporate Affairs introduced amendments to the Companies (Management and Administration) Rules, 2014[iii], on October 27, 2023. These amendments make it mandatory for every company to designate an individual who will collaborate with and supply information to the Registrar or any other authorized officer regarding beneficial interest in the company’s shares. The company is also required to disclose the particulars of this designated person in its annual return.
Analysis
The Companies Act, 2013, stipulates that any individual holding or acquiring a beneficial interest in a contribution related to the company’s shares must make a corresponding declaration. The recent requirement for beneficial partners to submit a similar declaration to an LLP aligns with the procedures for companies. This cohesive approach enables the Government of India to gain insights into beneficial owners, even when their names may not be directly linked to direct investments. It promotes transparency and facilitates a comprehensive understanding of beneficial ownership structures across various forms of entities.
When comparing the provisions applicable to LLPs and companies, it is clear that the Companies Act, 2013, imposes fines for certain contraventions including but not limited to failures in not maintaining the register of members, default in not making required declarations regarding beneficial interest, or with respect to not filing returns concerning received declarations.
However, in cases of non-compliance for LLP’s, Section 74 of the Limited Liability Partnership Act, 2008[iv], becomes applicable. This section specifies that if no penalty is explicitly provided for contraventions of the Act or rules, the penalty for the LLP, partner, designated partner, or any other person in default would be as follows: –
- a penalty of INR 5,000/-.
- in case of a continuing contravention, an additional penalty of INR 100/- (which was earlier stated as INR 50/-) for each day after the first day during which such contravention continues, subject to a maximum of INR 1,00,000/-.
Reference
[i]https://www.mca.gov.in/bin/dms/getdocument?mds=174Uq4fp39PgAUh7CLq%252FxA%253D%253D&type=open
[ii] https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf
[iii] https://www.mca.gov.in/Ministry/pdf/CompaniesMgmtAdminAmndtRules_05032021.pdf
[iv] https://www.mca.gov.in/Ministry/actsbills/pdf/LLP_27oct2008.pdf
Author: Madhav Krishna, Associate
Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at info@samistilegal.in
