Why Go for LLP

LLP compliance set to get stricter as MCA applies sections of Companies Act to LLP Act

The Limited Liability Partnership and to better regulate designated partners, the ministry of corporate affairs has decided to extend certain sections of the Companies Act to the LLP Act.

A total of eight sections relating to the register of significant beneficial owners, disqualification of directors, conduct of inquiries, inspections and non-cognizable offences will soon be applicable to LLPs, the MCA said in an intimidation on April 1, Thursday.

The changes are to fill the gaps in the LLP Act by applying the sections of the Companies Act to LLPs. It has been done in the past, A senior authorities official stated. These sections will likely be modified to match into the  Limited Liability partnership Act, relating to which a notification is predicted to be out quickly, limited liability partnerships, partners and designated partners thereof are advised to take note of the same for appropriate action, the ministry stated.

One significant change in the application of the clause triggering disqualification of directors of a company that has not complied with filing for three years to LLPs.

Clauses of Section 164 of the Companies Act, which state that a director of a company which has defaulted on filing financial statements or annual returns for three consecutive years will be disqualified as director, shall apply to LLPs.

Similarly, those who chose to form LLPs to avoid disclosure of beneficial ownership will now have to disclose this information as clauses of Section 90 of the Companies Act will also apply to LLPs.

Section 67 of the LLP Act allows the government to apply sections of the Companies Act to the LLP Act by way of notification.

However, since the move is in the nature of amendments to the LLP Act, Parliament’s approval will be required as the notification must be placed in both Houses, the official said.