Limited Liability Partnerships (“LLP”) has become a preferred choice over a period of time; Due to benefit of limited liability given along with the flexibility of organizing internal structure as a partnership firm based on mutually arrived agreement.
However, alike companies, LLPs are also required by Limited Liability partnership Act, 2008 (“LLP Act”) to file various information and documents with the Registrar of Companies on a timely basis and non-compliance of same may attract heavy penalty and prosecution against defaulting persons.
1. Existing Non-compliances by LLPs
The government found a large default in compliance by LLPs such as default in filing of:
- Form-3- Filing of LLP Agreement and changes therein.
- Form-8-Statement of Account & Solvency (Annual or Interime)
- Form-11- Annual return of LLP
As per Section 69 of LLP Act 2008, defaulting LLP may file belated forms on payment of an additional fee of INR 100 per day during which default continues in addition to the fee applicable for filing of such form or return.
Considering the quantum of penalty and financial burden, the government of India received large number of representations requesting waiver of additional fee or condonation of delay and relaxation in additional fee.
2. LLP Settlement Scheme, 2020
2.1 What is LLP settlement scheme, 2020
The LLP Settlement Scheme incentivize compliance and reduce compliance burden during the unprecedented public health situation caused by COVID-19. The USP of the schemes is a one-time waiver of additional filing fees for delayed filings by the LLPs with the Registrar of Companies during the currency of the Schemes, i.e. during the period starting from 1st April 2020 and ending on 30th September 2020.
2.2 Reasons of introducing LLP Settlement Scheme, 2020
Non-filing of information and documents by LLP lead to the following consequences:
- Due to default in filing of various forms by LLPs, records available with Registrar were not updated and therefore, also not available for inspection to stakeholders.
- Designated partners of defaulting LLPs were liable for criminal prosecution and LLP could not be closed till all compliances were completed.
- Financial burden was accumulating on LLPs due to additional fee accumulating for each defaulting day.
Considering all such issues and with an objective of promoting ease of doing business, the Ministry of Corporate Affairs (“MCA”), in the exercise of the power given u/s 460 of the Companies Act, 2013, introduced LLP Settlement Scheme 2020. Wherein, one-time condonation has been allowed to defaulting LLPs and now they are allowed to file pending forms with a reduced additional fee.
2.3 Effective date of applicability and time limit of filing of belated documents
Such scheme shall be available for defaulting LLPs for forms due for filing till 31st October 2019 and defaulting LLPs shall be able to file permitted forms till 13th June 2020 on reduced additional fee.
2.4 Documents covered under LLP Settlement Scheme
This scheme shall apply on filing of following belated forms:
- Form 3: Form for filing of LLP agreement and intimation of changes made in such agreement.
- Form 4: Notice of appointment, cessation, changes in name/ address/ designation of designated partner or partners and consent to become partner/designation partner.
- Form 8: Statement Of Account & Solvency (Interim or Annual)
- Form 11: Annual Return Of Limited Liability Partnership (LLP)
All other belated forms shall be filed by LLPs on payment of application fee along with additional fees.
Further, filing under this scheme shall not be available to LLP which has filed application in form 24 for striking of name from register.
2.5 Manner of payment of fee and additional fee on filing of belated documents
Under such scheme, defaulting LLPs are allowed to file belated forms on payment of additional fee of INR 10/- per day during which default continues alongwith any fee applicable on filing of forms or returns. However, such additional fee can’t exceed INR 5,000/- per document.
2.6 Immunity from prosecution
All defaulting LLPs, which have filed belated form by 13th June, 2020 and made good the default, shall not be liable for any prosecution by registrar for such defaults.
2.7 Action against defaulting LLPs
Registrar shall take action against LLPs which have failed to file documents under this scheme and are in default in filing of documents under LLP Act, 2008.