The Revisions Made To ‘limited Liability Partnership Settlement Scheme, 2020’

Scheme-LLP stands for Limited Liability Partnership. This means that there exists only a limited liability towards the incorporated legal entity by each of its partners. LLP protects against liabilities to its partners by limiting their liability to the contribution agreed to in the agreement during incorporation. Although, it is liable to the full extent of its assets as a legal entity.

The Ministry of Corporate Affairs (MCA) has taken several measures in 2020 to promote the ease of doing business and to cleanse the system. It provided the LLPs a one-time relaxation in payment of additional fees and immunity from prosecution. In the first instance, the MCA issued General Circular No. 06/2020 dated 04.03.2020 giving several reliefs to the LLPs. Later, the MCA revised the LLP Settlement Scheme 2020 General Circular No. 13/2020 dated 30.03.2020.

What was the Original Scheme?

• The old Scheme was in force from March 16, 2020, to June 13, 2020.
• The scheme was applicable to file belated documents that were due for filing till October 31, 2019.
• The additional fee was reduced from Rs.100 to Rs.10 per day during the period of default subject to a maximum additional fee of Rs.5000 per document/form.
• The old Scheme was not applicable on Form 3, Form 4, Form 8, Form 11
• The scheme did not apply to LLPs who have filed Form 24 for striking off the name of the LLP.

What is the Revised LLP Settlement Scheme?

The highlights of the revised LLP Settlement Scheme are as follows:

• Applicability: Any defaulting LLP which has made a default in filing of documents on the due date specified under the LLP Act, 2008 and rules made thereunder, is permitted to file belated documents, which were due for filing till August 31, 2020, under the LLPSS, 2020.
• Moratorium Period: The moratorium period under the LLPSS, 2020 started on April 01, 2020, and ended on September 30, 2020.
• Immunity: The LLPSS, 2020 provides that those Defaulting Limited Liability Partnerships who file the documents post due date in this moratorium period and improve on their default will be exempt or provided immunity from any subsequent prosecution from the Registrar for the default and they would not be liable to pay additional fees.
• Multiple Forms: The LLPSS, 2020 has a few forms:

Form 3: This form provides information about the LLP agreement and the change that are make in them.

4: This form provides information such as changes in names/ registered address/ designation of a partner consent to become a partner, notice of appointment, termination.

Form 5: This form provides notice for the change of the name of the LLP.

8: This form provides the information relating to the statement of accounts and the solvency of the LLP either on an interim basis or annual basis.

11: This form provides information regarding the annual returns of the LLP.

Form 12: This form allows to intimate other address for service of documents.

15: This form allows the LLPs to notice a change in place of their registration.

22: This form provides for a notice in matters of orders from the Tribunal/government to the registrar, court order, etc.

23: It is a form that serves as an application direct towards the LLPs to change their name.

Form 27: It provides registration of particulars by Foreign LLP.

29: This form provides for notice in case of (a) any alterations made in the certificate of incorporation; (b) a change in names and addresses of any of the persons authorized to accept services on behalf of foreign LLP; (c) a change in the core place of business all over India of the foreign LLP.

Form 31: This form provides an application in case of compoundable offenses.

• Forms not covered under LLPSS, 2020: It has been clarified by the MCA that the LLBSS, 2020 will not apply to those Limited Liability Partnerships who via form 24 to register for removal of their names from the register following the LLP Act, 2008.
• Defaulters: The MCA has further clarified that upon closure of LLPSS-2020, the Registrar will take necessary action under the LLP Act, 2008 against the LLPs who have not availed the LLPSS-2020 and are in default in filing of documents on time.

What is the Purpose of the Scheme?

• To enable ease of doing business.
• Various LLPs have default leading to the automatic registry not being update. The stakeholders are at a disadvantage as the record are not show for inspection.
• To provide an opportunity to the LLP to make a fresh start as a fully compliant entity.
• reduce the financial burden imposed on the LLPs, which have a long-standing default.
• To enable the inactive LLPs to close since the filing of certain forms is a prerequisite before the closure of said LLP.
• To take measures to combat the threat imposed by COVID-19 and to reduce the burden of compliance.

What is the Effect of Revised LLP Settlement Scheme, 2020?

• No additional fees would be levie on any return file by the LLP under the revised scheme.
• The companies will be grant the Immunity Certificate.
• ROC shall withdraw any pending prosecution regarding such forms and proceedings of adjudication of penalties.

Conclusion

Both the schemes came at the right time which will work as a breather for non-filers and late filers of Companies and LLPs. Not only the relaxations have been given in additional fees but also given immunity from prosecutions and proceedings including against imposition of penalty for late submissions. Earlier, defaulting in the filing of financials would make the LLP partners liable for criminal prosecution.  Moreover, the registrar of companies is instruct to suspend the pending actions under Section 454 of the Companies Act, 2013. Thus, the companies falling under the range of this scheme would not have to pay the extra penalty fee.

This has allowed the expanding number of non-compliant LLP to ultimately clear out their dues and become conforming and an opportunity for those who are defaulting to make it good on their dues and become perfectly compatible. The corporate industry has also utilized the additional time and relief given to them to make good on their defaults. But this scheme is a one-time solution. Amendments must be made for the scheme to stop the usual overloading of penalty cases and prosecution cases.