Ease of Doing Business is central to all startups and with the exemptions available when registered as LLP and Private Limited companies, it has become crucial.
The MCA introduced an improved version (MCA v3 portal) of the online portal for regulatory filings of LLPs and Companies. Currently, it new portal is for LLPs, but will soon seem company filings integration.
More than 2.17 Lakh LLP Forms have been filed since the launch of MCA v3, including more than 40,400 Forms for LLP Name Reservation and LLP Incorporation, as of July 18, 2022.
The first amendment (“First Amendment Rules”) to Limited Liability Partnership Rules 2009 (“original LLP Rules”) was introduced via G.S.R. 109(E) effective April 1, 2022. It included provisions for establishing an adjudicating authority and for appealing against the order of such adjudicating authority before the Regional Director within 30 days with requisite fees.
The First Amendment Rules also introduced a new proviso to Rule 19(1) of original LLP Rules whereby an application could be filed before the Regional Director to seek the change of name of subsequently incorporated LLP if its name was similar to or resembled any registered trademark.
To achieve smooth functionality of LLPs, GoI has introduced a second amendment, i.e., Limited Liability Partnership (Second Amendment) Rules, 2022 (“Second Amendment Rules”) via G.S.R. 173(E), effective March 4, 2022.
The key highlights of Second Amendment Rules –
- Allotment of DPIN at incorporation – In the e-form FiLLiP, the LLP can make an application for the allotment of five DPINs instead of two.
Businesses can make applications for DPIN at the time of incorporation and not face delay for being appointed as Designated Partners for absence of a DPIN. - Inclusion of PAN and TAN in Certificate of Incorporation – As for companies, the Certificate of Incorporation issued by the Registrar in Form 16 to LLPs shall include the details for PAN and TAN allotted by the Income Tax Department.
Previously, this aspect was not clear and required making different applications dealying business commencement. A separate PAN and TAN application is not not required. - LLP Incorporation is web-based – To streamline the processes and align it to that of companies, all LLP forms are now web-based, including one for incorporation – similar to the SPICE e-Form for company incorporation.
- Removal of authority assessment in name change applications – As per Rule 19(4) of original LLP Rules, the applicant’s authority, for name change application, had to be verified through documentary evidence. This required a Resolution.
The Second Amendment Rules, has removed this requirement, and copy of the incorporation certificate is sufficient. - Interim Resolution Professional (“IRP”) to sign Statement of Account & Solvency – Where the Corporate Insolvency Resolution Process is initiated against the LLP, the IRP is authorised to sign the statement of account and solvency as required for winding up proceedings. Under the original LLP Rules, only a designated partner was authorised to sign these. This helps in continuing the proceedings without any delay due to procedural requirements.
- Reporting of changes in e-Form 3 – the revised e-form, is comprehensive and provides a list of items to select from – to record the reason for the change, requires every change to be reported instead of attaching the revised LLP Deed. It also requires the input of details from the original deed and the revised clauses.
- Reporting of penalties and compounding of offences – As previously implemented in MGT-7 (Annual Return for companies), LLPs are required to include information concerning all penalties levied and any compounding of offences in e-form 11 (Annual Return for LLPs).
- Consolidation of form 29 with form 28 – the requirement of filing of form 29 by Foreign LLP has been removed, and the following alterations are included in e-form 28 –
a. in the certificate of incorporation or registration;
b. in names and addresses of any of the persons authorized to accept service;
c. in the principal place of business in India; and
d. notification of cessation to have a place of business in India
Revamping the regulatory filing process – the portal and e-forms, are significant changes received positively by businesses as it has lowered cost and time of compliances. It is also leasing to a better governance structure.
Would this impact incorporation of companies, or both would continue to see a surge is yet to be seen.
This is only for informational purposes. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein. Endeavoured to accurately reflect the subject matter of this alert, without any representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this. This isn’t an attempt to solicit business in any manner.
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