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LLP Settlement Scheme 2020 & Modified LLP Settlement Scheme 2020

March 30, 2020
Modified-LLP-Settlement-Scheme-2020

Modified-LLP-Settlement-Scheme-2020

What is a Limited Liability Partnership?

Limited Liability partnerships (“LLP”) is viewed as an alternative corporate business vehicle that provides the benefits of Limited Liability while allowing its partners the flexibility of organizing their internal structure as a partnership based on mutually arrived agreement.Owing to its flexibility in its structure and operation, the LLP often has become the most preferable option for small enterprises.

LLP Settlement Scheme, 2020:

Why was LLP Settlement Scheme 2020 introduced?

The Government of India has acknowledged the fact that a large number of LLPs have defaulted in filing the below mentioned forms within the prescribed timelines as a result of which they have to file such forms by making an additional payment of Rs.100 (One hundred) for every day of such delay under Section 69 of the LLP Act in addition to any fee that  is payable for filing of such document or return.

  1. Form 3 - Filing information with regards to LLP Agreement and changes, if any made therein
  2. Form 4 - Filing the notice of appointment, cessation, change in name/address/designation of partner/Designated partner, their consent to become a partner/Designated partner, etc.
  3. Form 8 - Statement of account and solvency (Annual or interim) and
  4. Form 11 - Annual return of Limited Liability Partnership

The Government also received a large number of representations from LLPs for waiver of fee or condonation of delay and relaxation in additional fee on the ground of excessive financial burden. Based on the representations, it has decided to give a “Onetime relaxation in additional fees” to defaulting LLPs to make good their default by filing pending documents and to serve as a compliant LLP in future.

The Central Government in the exercise of its powers under Section 460 of the Companies Act, 2013(extended to LLP vide Gazette Notification No. G.S.R. 59(E )  dated 30th January, 2020 under Section 67(2) of Limited Liability Partnership Act, 2008) has decided to introduce new scheme namely “LLP Settlement Scheme, 2020”  by allowing a one-time condonation of delay in filing statutorily required documents with the Registrar.

Click on the below link for the information about the scheme:         

https://www.mca.gov.in/Ministry/pdf/GeneralCircular06_04032020.pdf

Key features of LLP Settlement Scheme, 2020:

  • Name of Scheme introduced by Government: LLP Settlement Scheme 2020
  • The effective date of enforcement of the scheme: This scheme shall come into force on 16th March 2020 and shall remain in force up to 13th June 2020.
  • Applicability of the Scheme: Any defaulting LLP (i.e. an LLP registered under the limited liability partnership act, 2008 which has made a default in filing of documents on the due date(s) specified under the LLP Act, 2008 and rules made thereunder) is permitted to file belated documents, which were due for filing till 31st October 2019 in accordance of the provisions of this scheme as mentioned below.
  • Manner of payment of fees and additional fees: The defaulting LLPs may avail the scheme for filing the documents which have not been filed or registered in time on payment of additional fee Rs.10/- per day for delay in addition to any fees as is applicable for filing of such document or return, provided that such payment of additional fee shall not exceed Rs.5000/- per document.
  • Immunity from prosecution: The defaulting LLPs which have filed their pending documents till 13th June 2020 and made good the default shall not be subjected to prosecution by Registrar for such defaults.
  • Non-applicability of the said Scheme: This scheme shall not apply to the filing of documents except Form 3, Form 4, Form 8 and Form 11 and it shall not apply to LLPs which has made an application in Form 24 to the Registrar, for striking off its name from the register as per the provisions of Rule 37(1) of the LLP Rules, 2009.

Benefits of LLP Settlement Scheme, 2020:

  • Defaulting LLP’s have been given a chance to become compliant in the future after adhering to the scheme.
  • Defaulting LLPs, which have filed their pending documents till 13 June 2020 and made good the default, shall not be subjected to prosecution by Registrar for such defaults and they get immunity from prosecution.
  • Defaulting LLPs have to bare a maximum additional fee of Rs.5000/- (Rupees Five Thousand Only).
  • Defaulting LLPs shall file all the returns /documents/information, the records which shall be available in the electronic registry updated and readily available to the stakeholders for inspection.

Modified LLP Settlement Scheme, 2020:

In continuation to the MCA Circular dated 4th March, 2020 and in order to support LLP’s registered in India to focus on taking necessary measures to address the COVID-19 threat and to reduce their compliance burden, the MCA has come up with a modification to the LLP Settlement Scheme on 30th March, 2020. The original LLP Settlement Scheme shall be effective from 16th March, 2020 upto 31st March, 2020. After 31st March, 2020, the modified scheme shall come into force.

Click on the below link for the information about the scheme:         

http://www.mca.gov.in/Ministry/pdf/Circular13_30032020.pdf

Key features of the Modified LLP Settlement Scheme, 2020:

  • The effective date of enforcement of the scheme: This scheme shall come into force from 1st April, 2020 and shall remain in force up to 30th September, 2020.
  • Applicability of the Scheme: Any defaulting LLP (i.e. an LLP registered under the limited liability partnership act, 2008 which has made a default in filing of documents on the due date(s) specified under the LLP Act, 2008 and rules made thereunder) is permitted to file belated documents, which were due for filing till 31st August, 2020 in accordance of the provisions of this scheme as mentioned below.
  • Manner of payment of fees and additional fees: The defaulting LLPs may avail the scheme for filing the documents which have not been filed or registered in time on payment of fee as is payable for filing of such document or return. Provided that no additional fees shall be payable for filing any belated under this scheme.
  • Immunity from prosecution: The defaulting LLPs which have filed their pending documents till 30th September 2020 and made good the default shall not be subjected to prosecution by Registrar for such defaults.
  • Non-applicability of the said Scheme: This scheme shall not apply to LLPs which have made an application in Form 24 to the Registrar, for striking off their name from the register as per the provisions of Rule 37(1) of the LLP Rules, 2009.

Benefits of the Modified LLP Settlement Scheme, 2020:

  • Defaulting LLP’s have been given a chance to become compliant in the future after adhering to the scheme.
  • Defaulting LLPs, which have filed their pending documents till 30th September 2020 and made good the default, shall not be subjected to prosecution by Registrar for such defaults and they get immunity from prosecution.
  • Defaulting LLPs have be exempted from paying any additional fee.
  • Defaulting LLPs shall file all the returns /documents/information, the records which shall be available in the electronic registry updated and readily available to the stakeholders for inspection.

Conclusion:

The Registrar shall take necessary action under the LLP Act, 2008 readwith relevant rules made thereunder against the LLP's which have  not availed this scheme and are in default in filing of documents required under the provisions of the LLP Act, 2008 on time.

 Disclaimer:

The entire contents of this document have been developed based on relevant information and are purely for private circulation. Though the authors have made utmost efforts to provide authentic information, however, the authors expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and consequences of anything done or omitted to be done by any such person in reliance upon the contents of this document.

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