Key highlights of the Limited Liability Partnership (Amendment) Bill 2021

The Limited Liability Partnership (Amendment) Bill 2021 was introduced in the Rajya Sabha on 29.07.2021. The Cabinet gave its approval to the Amendment Bill on 28.07.2021. The Amendment Bill seeks to facilitate greater ease of living to law-abiding corporates and to decriminalise certain provisions of the Act. Key changes as proposed in the bill includes as viz. introduction of the concept of ‘small companies’, de-criminalisation of certain offences, empowering Govt. to establish special courts, Authorisation to Regional directors w.r.t. compounding of offences- fine only, empowering Govt. to prescribe ‘AS’ and ‘Auditing Standards for a certain class of LLPs etc. A snippet of all changes made in the LLP Bill, 2021 are presented in this article.

I. Introduction of Small LLPs

The Bill seeks to amend the LLP Act to introduce the concept of “Small Limited Liability Partnership” in line with the concept of “Small Company” under the Companies Act, 2013. As per the Bill, a small limited liability partnership shall mean an LLP having contribution up to Rs. 25 lakh [ Govt. may raise the limit upto maximum 5crores] or the turnover of Rs. 40 lakhs in the preceding financial year [the limit can be hiked to Rs. 50 crores by Govt.]

II. De-criminalisation of monetary penalties:

There are now 24 criminal provisions, 21 of which are compoundable and three of which are non-compoundable. The overall number of criminal provisions under the LLP Act will be reduced to 22, with compoundable offences reduced to 7, non-compoundable offences reduced to 3, and the number of defaults dealt with via the In-House Adjudication Mechanism (IAM) reduced to only 12.

III. Accounting Standards for classes of LLPs

In order to align with the Companies (Accounting Standards) Rules, the bill proposes the Accounting Standards for a class or classes of limited liability partnership. The Central Government may, in consultation with the National Financial Reporting Authority prescribe the standards of accounting; and prescribe the standards of auditing, as recommended by the Institute of Chartered Accountants of India constituted under section 3 of the Chartered Accountants Act, 1949, for a class or classes of limited liability partnership.

IV. Compounding of offence

The Bill proposes to allow the Regional Director or any other officer not below the rank of Regional Director to compound any offence under the LLP Act which is punishable with a fine only. Every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Regional Director or any other officer not below the rank of Regional Director authorised by the Central Government.

V. Establishment of Special Court for speedy trial of offences

The Bill proposes to empower Central Government to establish or designate Special Courts with a view to providing speedy trial of offences under the LLP Act. The Special Court shall consist of a single Judge holding office as Sessions Judge or Additional Sessions Judge, in case of offences punishable under this Act with imprisonment of three 3 or more; and a Metropolitan Magistrate or a Judicial Magistrate of the first class, in the case of other offences. The bill seeks to empower Special Courts to try an offence other than an offence under this Act with which the accused may, under the Code of Criminal Procedure, 1973 be charged at the same trial.

VI. Establishment of the Appellate Tribunal

In order to provide relief to the aggrieved party, the bill seeks to bring more clarity on the filing of an application to the Appellate Tribunal if a person is not satisfied with the judgement of the Tribunal. Moreover, it has been proposed to appoint as many officers as adjudicating officers to adjudicate penalties under the LLP Act.