Table of contents | |
The Big Picture: Limited Liability Partnership (Amendment) Bill, 2021 | |
Why in News | |
Key Points | |
Limited Liability Partnership (LLP) | |
Way Forward | |
Conclusion |
The Union Cabinet has recently approved the amendments to the Limited Liability Partnership (LLP) Act, 2008 vide the Limited Liability Partnership (Amendment) Bill, 2021.
About LLP:
Liability: In a partnership firm, all the partners are liable for any action taken by any partner and the liability is unlimited.
Legal Backing: An LLP and a partnership firm are governed by different Acts.
Entity: An LLP has a separate legal entity and is liable to the full extent of its assets (liability of partners is limited) while the partnership firm does not have any kind of separate legal entity.
Perpetual Succession: An LLP observes perpetual succession while a traditional partnership firm does not.
Number of Partners: Required number of minimum members is two in both the LLP and the Partnership firm.
Partnership of Foreign Nationals: Foreign Nationals can become partners in LLP. whereas in case of partnership firms, foreign nationals can’t become the partner.
Minors as Partners: Minor can’t be admitted to the benefits of LLP.
Risk Taking Capacity: In a partnership firm, there is professional expertise but the risk taking capacity often gets undermined due to high liabilities on the partners.
Decriminalisation of Offences: Currently, there are 24 penal provisions, 21 compoundable offences and 3 non-compoundable ones.
In-House Mechanisms: Offences that relate to minor/ less serious compliance issues, involving predominantly objective determinations, are proposed to be shifted to the In-House Adjudication Mechanism (IAM) framework instead of being treated as criminal offences.
Introduction of Small LLPs: The bill proposes the creation of a class of small LLPs to encourage entrepreneurs.
Threshold Contribution and Turnover Size: The threshold contribution for the partners for the LLPs have been enhanced from Rs. 25 lac to around Rs. 5 crore and the turnover size from 40 lac to 50 crore.
Non-Convertible Debentures: The amendment allows the LLPs to issue fully secured Non-Convertible Debentures from investors regulated by SEBI or the RBI.
Accounting and Auditing Standards: The accounting standards and auditing standards for LLPs have been introduced by inserting the section 34A in the bill.
Increasing the Access of Angel Investors to LLPs: An angel investor is a wealthy individual that agrees to invest in a small startup company that has little access to capital.
Promoting Registrations of LLPs in India: Currently, no two NRIs can form an LLP in India; one of the partners has to be an Indian resident.
Employee Stock Ownership Plan (ESOP): It is an employee benefit plan that gives workers ownership interest in the company.
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