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posted 3 years ago
The LLP Amendment Bill, passed by India’s upper house of parliament on August 4, introduces the concept of ‘small LLPs’, which will encourage start-ups and unincorporated MSMEs to opt for this entity model. It also decriminalizes offenses in the LLP Act, 2008 by converting them into civil defaults liable to monetary penalties instead of fines.
After receiving the Union Cabinet’s nod on July 28, 2021, the Ministry of Corporate Affairs (MCA) had tabled the ‘Limited Liability Partnership (Amendment) Bill, 2021’, in the upper house of the Indian parliament. On August 4, 2021, the bill was passed by the upper house (Rajya Sabha) after a brief 20-minute debate.
In its bid to further ease doing business in India, the amendment bill introduces a slew of changes to the existing Limited Liability Partnership Act, 2008, including the decriminalization of certain provisions by converting offenses into civil defaults and making them liable to monetary penalties instead of fines. Click here for the original check.
Hailed as a move to boost India’s start-up ecosystem, the amendment bill primarily intends to place limited liability partnerships (LLP) on an equal footing with larger corporates as the government had previously decriminalized certain provisions of the Companies Act, 2013. The bill also introduces the concept of small LLP, akin to the concept of ‘small company’ under the Companies Act.
The intention behind the move is to make LLP an attractive model for start-ups as well as unincorporated micro, small and medium enterprises (MSMEs), as the organized LLP structure offers incentives like lesser compliance requirements.
According to India’s finance minister Nirmala Sitharaman, the amendment bill will also benefit chartered accountants and cost accountants due to increased ease of doing business. The newly inserted section 34A in the bill will empower the Centre to prescribe the “Accounting Standards” or “Auditing Standards” for a class or classes of limited liability partnerships.
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