Limited Liability Partnership Act, 2008 - LLP's are now possible in India too. Click here to download the Act http://mca.gov.in/MinistryWebsite/dca/actsbills/pdf/LLP_Act_2008_15jan2009.pdf
Yes, LLP is formed & regulated by Limited Liability Partnership Act, 2008 which received President's assent on 7th January 2009.
Ministry of Corporate Affairs (MCA) is administrating ministry - Ministry of Corporate Affairs, Government of India is the administrating ministry. Registrar of Companies (RoC) of respective State is the administrative authority where all documents are to be filed.
Provisions of Companies Act can be made applicable - Central Government can make applicable any provision of Companies Act to LLP with suitable modifications by issuing a notification [Section 67 of LLP Act, 2008]
However, provisions of Indian Partnership Act will not apply to LLP [Section 4 of LLP Act, 2008].
Individual or body corporate can be partner, that too with a limited liability protection now - Any individual (who is of sound mind and is solvent) and any body corporate can be partner of LLP. There should be minimum two partners. Personal liability if number falls below two. No upper limit on number of partners [Section 5 and 6 LLP Act, 2008].
LLP must have two 'designated partners' who must be individuals. If a body corporate is partner of LLP, it can nominate a person as 'designated partner'. He has to give consent to act as designated partner. He has to obtain DPIN [Designated Partner Identification Number] from Central Government [Section 7 of LLP Act, 2008]. The designated partner is liable for all compliances as required under the Act and is liable to penalty for contravention of those provisions [Section 8 of LLP Act, 2008].
Comparison between traditional partnership and LLP
Traditional Partnership | Limited Liability Partnership |
Distinctions | |
Unlimited personal liability of each partner for dues of the partnership firm. Personal property of each partner also liable. | No personal liability of partner, except in case of fraud. |
Written agreement not essential. | Incorporation document essential. |
Partnership can be registered under Partnership Act. Registration is not mandatory. | LLP is incorporated under LLP Act. Incorporation is mandatory. |
Not a legal entity separate from its partners | It is a legal entity separate from its partners, having perpetual succession |
Property cannot be held in name of partnership firm. | Property can be held in name of LLP. |
Partnership deed/agreement is executed. Even verbal agreement is valid. | 'Incorporation Document' is required to be executed. In addition, LLP Agreement is required in almost all cases, though such LLP agreement is not mandatory. |
Documents are required to be filed with Registrar of Firms (of respective State) | Registrar of Companies (ROC) is the administrating authority. |
Death of partner dissolves a firm, in absence of agreement | Death of partner does not dissolve LLP. |
Minimum two and maximum twenty partners | Minimum two partners. No limit on maximum number of partners |
Each partner can take part in business of firm. | Each partner can take part in business of firm, but LLP Agreement can provide to the contrary. |
All partners are liable for statutory compliances under Partnership Act | Only designated partners are liable for statutory compliances as are required under LLP Act (not necessarily in respect of other Acts). |
Partner cannot enter into business with firm, though he can give loan to firm. | Partner of LLP can enter into business with LLP. He can also give loans to LLP. |
Every partner of firm is agent of firm and also of other partners. He can bind partnership firm as well as other partners by his acts. | Every partner of LLP is agent of LLP but not of other partners. Thus, he can bind LLP by his acts but not other partners. However, LLP agreement can restrict powers of individual partner. |
Filing of accounts, statement of solvency and annual return not required. | Filing of accounts, statement of solvency and annual return not required. |
Partnership can be 'at will' i.e. any partner can resign or dissolve firm | Individual partner can resign but cannot dissolve the LLP. |
Death of partner dissolves partnership unless there is contract to contrary | Death of partner does not dissolve LLP. |
Public notice is required for retirement of a partner. | Filing of return of retirement of partner with ROC is required, but no provision for public notice of retirement of partner. |
Partnership firm can be dissolved. | LLP can be would up. |
No specific provision to enter into compromise, arrangement, amalgamation, reconstruction etc. This can be done only under civil laws. | LLP can enter into compromise, arrangement, amalgamation, reconstruction etc. |
Minor can be admitted to benefit of partnership. | There is no specific provision to admit minor to benefit of partnership. It is doubtful if this can be done. |
Similarities | |
Partner is not employee of firm | Partner is not employee of LLP. |
Liability of a person for 'holding out', i.e. representing himself as partner, though he is not | Liability of a person for 'holding out' i.e. representing himself as partner, though he is not [clause 29 of LLP Bill, 2008] |
Partner of firm entitled to remuneration only if partnership agreement so provides | Partner of LLP entitled to remuneration only if LLP agreement so provides |
New partner can be introduced only with consent of all existing partners | New partner can be introduced only with consent of all existing partners, unless LLP Agreement provides otherwise. |
Insolvent person cannot continue as partner of firm. | Insolvent person cannot continue as partner of LLP. |
Rights of partnership can be assigned. | Rights of partnership can be assigned. |
Partner liable to firm for any personal profits made by him by use of property, name or business connection of firm. | Partner liable to LLP for any personal profits made by him by use of property, name or business connection of LLP |
Partner cannot undertake competing business without consent of other partners | Partner cannot undertake competing business without consent of LLP. Otherwise, liable to account for and pay profits to LLP |
Partner liable to firm if he commits fraud. | Partner liable to LLP if he commits fraud. |
Comparison between company and LLP
Company under Companies Act | Limited Liability Partnership |
Distinctions | |
Memorandum is to be filed with ROC | Incorporation Document is required to be filed. |
Memorandum should contain State in which incorporated. | Incorporation Document is not required to contain State in which incorporated. Thus, registered office can be changed to any place in India just by informing ROC subject to prescribed conditions. |
Name to contain 'Limited' or 'Private Limited' as suffix | Name to contain 'Limited Liability Partnership' or 'LLP' as suffix |
Articles are to be filed at the time of incorporation. Private company must have Articles. In case of public company, provisions of Table A apply if there are no Articles. | LLP Agreement is required to be filed later. In absence of LLP Agreement, mutual rights and duties will be as specified in first schedule to LLP Act. Thus, practically, each LLP must have LLP Agreement, though not mandatory. |
Managing Director and Wholetime Director to look after day to day administration.. | Designated Partner to look after statutory compliances. Otherwise, all partners can look into affairs of the LLP. However, LLP can delegate powers to some partners who may be designated as 'Managing Partner', or 'Executive Partner' or any other name. |
Individual director or member does not have authority in conduct of business of company. | Every partner has authority to conduct business of LLP, unless the LLP Agreement provides to contrary. |
Restrictions on remuneration to director as per Companies Act | No restriction on remuneration to partner. Remuneration should be provided in LLP agreement. |
Notice of change of director is to be given by company. | A partner who has resigned from LLP can himself file notice of his resignation to ROC. |
Share, share certificate, register of members, transfer and transmission of shares etc. required. | No requirement of share and share certificate. Hence, no question of its issue, allotment, transfer, rectification of register etc. |
Board meetings, general meetings are required. | No provision for regular meeting of Board and members. Partners can decide when and how to meet, delegation of powers etc. Provision is made that LLP should maintain minute book |
Charges are required to be registered | No provision for registration of charges. |
Elaborate records and registers are required to be maintained | No records and registers have been prescribed. |
Restrictions on Board regarding some specified contracts, contracts in which directors interested, investments, loans and guarantees to other companies | Partners are free to enter into any contract. |
Disclosures required of contracts where directors are interested | No requirement of disclosures required of contracts where partners are interested, unless specified in LLP Agreement. |
Elaborate provision relating to redressal in case of oppression and mismanagement | No provision relating to redressal in case of oppression and mismanagement |
Specific provisions relating to nidhis, NBFC | No specific provisions relating to nidhis, NBFC |
Similarities | |
Limited liability and perpetual succession | Limited liability and perpetual succession |
Must have common seal | Common seal is optional |
Provision of approval of name, change of name are similar. | Provision of approval of name, change of name are similar. |
ROC is the administrative authority | ROC is the administrative authority |
Provisions of name, its approval and change are similar. | Provisions of name, its approval and change are similar. |
No personal liability of individual director or member [except of director of private company in some cases like income tax and sales tax dues]. | No personal liability of partner, except in case of fraud. |
Complicated procedure for change of registered office, particularly when change is to other State | Simple procedure to change registered office of LLP anywhere in India just by informing ROC and following prescribed conditions. |
Registrar of Companies (ROC) is the administrating authority. | Registrar of Companies (ROC) is the administrating authority. |
Memorandum and Articles, details of directors, accounts, annual return, special resolutions etc. filed by LLP with ROC will be available for public inspection | Incorporation document, details of partners, accounts, statement of solvency and annual return filed by LLP with ROC will be available for public inspection [clause 36 of LLP Bill, 2008] |
Powers to Central Government to inspect records of company and to order investigation | Powers to Central Government to inspect records of company and to order investigation |
Provisions of compromise, arrangement or reconstruction of companies are similar | Provisions of compromise, arrangement or reconstruction of LLP [clauses 60 to 62 of LLP Bill, 2008] |
Company can be would up voluntarily or by order of Court | LLP can be would up voluntarily or by order of Court |
ROC can strike off name of defunct company. | ROC can strike off name of defunct LLP |
Source: http://www.dateyvs.com/
