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10th June, 2011 1
LIMITED LIABILITY PARTNERSHIPS
PRESENTED BY : Group-9
MUKESH GOYAL
NEHA BABLANI
RICHA SHARMA
ROSY JAISWAL
RIDDHI MADAN
10th June, 2011 2
WHAT IS LLP ?
Governed by the Limited Liability Partnership Act, 2008.
An LLP is a body corporate.
Minimum two partners and two Designated Partners (Individuals & one of them must be resident in India).
Every Designated Partner must obtain DPIN form the Central Government.
The name of the LLP must end with either the words Limited Liability Partnerships or LLP.
LLP can carry business with profit motive only.
10th June, 2011 3
CONCEPT OF LLP
LLP is an alternative corporate business form that gives the benefit of limited liability of a company and the flexibility of a partnership.
An LLP can continue its existence irrespective of change in partners.
No partner is liable on account of the independent actions of other partners.
Mutual rights and duties of the partners within an LLP are governed by an agreement.
10th June, 2011 4
LLP-GENESIS
Other Countries where this form is available:-
UK, USA, various other Gulf countries, Australia and Singapore.
LLP Act is broadly based on UK LLP 2000 and Singapore LLP Act 2005.
Both these Acts allow creation of LLPs in a body corporate form.
Apr. 2, 2009 –First LLP was registered. June 6,2011-Number of LLPs Registered 5052
10th June, 2011 5
COMPARISONPartnership Firm Limited Liability
PartnershipPrivate Company Public Company
Registration-Optional
Registration - Mandatory
Registration - Mandatory
Registration - Mandatory
Registering Authority-Registrar of Firms
Registering Authority- Registrar of Companies
Registering Authority- Registrar of Companies
Registering Authority- Registrar of Companies
Partnership Firm is not a Body Corporate
LLP is a Body Corporate
Private Company is a Body Corporate
Public Company is a Body Corporate
Not Independent legal entity
Is an Independent legal entity distinct from partners
Is an Independent legal entity distinct from shareholders
Is an Independent legal entity distinct from shareholders
10th June, 2011 6
COMPARISON CONTD…Partnership Firm Limited Liability
PartnershipPrivate Company Public Company
Partnership firm can commence Business immediately on implied or written agreement between partners
LLP can commence Business immediately after issue of Certificate of Incorporation by the Registrar
Private Company can commence Business immediately after issue of Certificate of Incorporation by the Registrar
Public Company should obtain Certificate of Commencement of Business before commencement of Business
There is no concept of issue of ownership Certificate for capital contribution
There is no concept of issue of ownership Certificate for Contribution
Share Certificate will have to issued within 3 months of issue/allotment of shares
Share Certificate will have to issued within 3 months of issue/allotment of shares
There is no concept of capital contribution at premium
There is no concept of contribution at premium
Shares can be issued at a premium
Shares can be issued at a premium
10th June, 2011 7
COMPARISON CONTD…Partnership Firm Limited Liability
PartnershipPrivate Company Public Company
An Unregistered Partnership Firm can be sued by third party but it cannot sue third parties
LLP can sue and be sued in its name
Private Company can sue and be sued in its name
Public Company can sue and be sued in its name
Existence of Partnership Firm is determined by Facts
Existence is determined by Registration Certificate
Existence is determined by Registration Certificate
Existence is determined by Registration Certificate
Partnership Firm has no perpetual succession
LLP has perpetual succession
Private Company has perpetual succession
Public Company has perpetual succession
Min. no. of partners - 2
Min. no. of partners - 2
Min. no. of Shareholders - 2
Min. no. of Shareholders - 7
10th June, 2011 8
COMPARISON CONTD…Partnership Firm Limited Liability
PartnershipPrivate Company Public Company
Max. no. of Partners:
Banking - 10
Non-Banking - 20
Max. no. of Partners - No Limit
Max. no. of Shareholders - 50
Max. no. of Shareholders - No Limit
Partnership in writing is evidenced by Partnership Deed
Limited Liability Partnership Agreement
Memorandum and Articles of Association
Memorandum and Articles of Association
Voting Rights not applicable
One vote per Partner
One vote per member on show of hands
One vote per member on show of hands
10th June, 2011 9
COMPARISON CONTD…Partnership Firm Limited Liability
PartnershipPrivate Company Public Company
Liability of Partners is unlimited - joint and several
Liability of Partners is limited to the extent of Contribution made except under certain circumstances
Liability of shareholders is limited to the extent of shares held
Liability of shareholders is limited to the extent of shares held
A guarantee given by a Partnership Firm to a third party in the absence of agreement to the contrary stands revoked in respect of future transactions
A guarantee given by a LLP to third party shall continue and be binding on the LLP for future transactions even after the death of a partner
A guarantee given by a private company to third party shall continue and be binding on the company for future transactions even after the death of a shareholder
A guarantee given by a public company to third party shall continue and be binding on the company for future transactions even after the death of a shareholder
10th June, 2011 10
COMPARISON CONTD…Partnership Firm Limited Liability
PartnershipPrivate Company Public Company
A Minor cannot become a Partner but can be admitted to the benefits of Partnership with the consent of all the partners as per Section 30 of the Partnership Act 1932
A Minor cannot become a Partner nor admitted to the benefits of LLP since there is no provision in the LLP Act 2008 to this effect
A Minor can become a fully paid up shareholder. Share Certificate shall be issued in the Guardian’s name
A Minor can become a fully paid up shareholder. Share Certificate shall be issued in the Guardian’s name
10th June, 2011 11
INCORPORATION AND REGISTERATION
10th June, 2011 12
FORMATION OF LLP
Deciding the Partners & Designated Partners Obtaining DPIN (Form-7) & Digital Signatures Reservation of name of LLP (Form-1) Filing of Incorporation documents (Form-2) Filing of LLP Agreement (Form-3) Filing of consent of Partners/ Designated
Partners (Form-4) Certificate of Incorporation
10th June, 2011 13
Step I: Deciding the Partners and Designated Partners
• Minimum of Two Partners (Individuals or Body Corporate through their nominees)
• At least two shall be Designated Partners, of which at least one must be an Indian Resident.
PROCESS
10th June, 2011 14
Step II: Obtaining DPIN No. & Digital Signature
• Designated Partner Identification Number (DPIN): Section 7 (6) of LLP Act 2008, provides that every Designated Partner to obtain a DPIN from the Central Government.
• Digital Signature Certificate: As all the documents and forms required for incorporating an LLP in India to be filed electronically and under the signatures of Designated Partners, thus at least one Designated Partner to obtain the digital signature certificates from government recognized DSA’s.
PROCESS
10th June, 2011 15
• The name of the proposed LLP shall be evaluated under the prescribed parameters and make an application in Form 1 of Rule 18(5) of the Limited Liability Partnership Act 2008, for reservation of the desired name.
•The name of the limited liability partnership shall not be similar or identical with Company or LLP already registered in India and it should not contains words prohibited under the ‘Emblems and Names (Prevention of improper use) Act, 1950’or which are also not ‘Undesirable’ in the opinion of Central Government or which satisfies the conditions prescribed under rule 18(2).
Step III: Checking the Name Availability
PROCESS
10th June, 2011 16
Step IV: Drafting of LLP Agreement
• LLP Agreement governs the mutual rights and duties among the partners and among the LLP and its partners.
• The basic contents of Agreement are: 1. Name of LLP 2.Name of Partners & Designated Partners 3.Form of contribution 4.Profit Sharing ratio 5.Rights & Duties of Partners 6.Proposed Business 7.Rules for governing the LLP
• If, no agreement. Then Schedule I will be applicable.
PROCESS
10th June, 2011 17
PROCESS
Step V: Filing of Incorporation Documents • eForm2: Incorporation Document
• eForm 3: Details of LLP Agreement
• eForm 4: Consent of Partners Consent of each partner to become a partner of Limited Liability Partnership along with their address and identity proof to be filed with the Registrar of Companies.
10th June, 2011 18
Step VI: Certificate of Incorporation
• After the Registrar is satisfied that all the formalities with respect to the incorporation has been complied , he will issue a Certificate of Incorporation as to formation of the LLP within maximum of 14 days from date of filing of documents . The Certificate of Incorporation issued shall be the conclusive evidence of formation of the LLP.
PROCESS
10th June, 2011 19
Form-3, Form-4,
Form-5, Form-15
Form-8 and Form-11
EVENT BASED REGULAR
COMPLIANCES
10th June, 2011 20
ANNUAL COMPLIANCES
Limited Liability Partnership shall with in a period of six months from the end of every financial year prepare and file a Statement of Account and Solvency with the Registrar in such form and manner and accompanied by such fee as may be prescribed.
Limited Liability Partnership to file an Annual Return to the Registrar of Companies with in sixty days of closure of the financial year in such form and manner and accompanied by such fee as may be prescribed.
Statement
of Accounts & Solvency
Annual Return
10th June, 2011 21
EVENT BASED COMPLIANCES OF LLPCompliance Section e-form Time Limit
Filing of Consent of Designated Partners
7(3) Form 4 Within 30 days of incorporation or subsequent appointments
Filing of Change in Partners
25(2) Form 3 and
Form 4
Within 30 days of Change
LLP Agreement & Changes therein
23(2) Form 3 With in 30 days of incorporation or Changes in LLP Agreement
Shifting of Registered Office
13(3) Form 15 Within 30 days of Compliance
Change of Name
19 Form 5 Within 30 days of Compliance.
10th June, 2011 22
• Additional Fees for delay filing of Form - Rs.100 per day up to 300 days.
• Delay Filing of the Form beyond 300 days will attract additional fees and action against LLP and Designated Partners under the Act.
EVENT BASED COMPLIANCES OF LLP Cont…
10th June, 2011 23
Books of Accounts
• Particulars of all sums of money received & expended
• A record of assets & liabilities
• Statements of cost of goods purchased
• Any other particulars as may be decided
EVENT BASED COMPLIANCES OF LLP Cont…
10th June, 2011 24
Audit
• Retiring auditor deemed to be reappointed if appointment not made unless otherwise provided in LLPA
• Auditor may resign by giving notice to LLP not less than 14 days from before end of time to appoint auditor
• Auditor can be removed when all partners consent or as otherwise provided in LLPA
EVENT BASED COMPLIANCES OF LLP Cont…
10th June, 2011 25
Who Can Convert?
Partnership Firm,
Private Company,
Unlisted Public Company.
CONVERSION
10th June, 2011 26
FROM PARTNERSHIP TO LLP
STEPS:-
Deciding the partners and designated partners,Obtaining the DPIN and Digital Signatures,Checking Name Availability of LLP,Drafting of Incorporation documents,Filing Conversion Application,Certificate of Registration,Information for conversion to Registrar of Firms.
10th June, 2011 27
FROM PVT. LTD. TO LLP
STEPS:
Partners and Designated partners,Obtaining the DPIN and Digital Signatures,Checking Name Availability of LLP,Drafting of Incorporation documents,Filing Conversion Application,Certificate of Registration,Certificate of Registration.
10th June, 2011 28
FROM UNLISTED PUBLIC LTD. TO LLP
STEPS:
Partners and Designated partners,Obtaining the DPIN and Digital Signatures,Checking Name Availability of LLP,Drafting of Incorporation documents,Filing Conversion Application,Certificate of Registration,Information for conversion to Registrar of Firms.
10th June, 2011 29
WINDING UP
Two Ways of Winding Up:a) Voluntaryb) By the tribunal :- 1. decided by the LLP 2. No. of designated partners below two, >6 months, 3. Unable to pay debts, 4. Acted against the interest sovereignty and integrity of India 5. Failed to file for 5 years consecutively, statement of account and solvency and annual return 6. Tribunal thinks, it is just and equitable to do so.
NOTE: here tribunal is established still powers are given to High Court.
10th June, 2011 30
ROLE OF COMPANY SECRETARYROLE OF COMPANY SECRETARY Certification of Annual Return by
Company Secretaries -Rule 25(2) of the LLP Rules
LLP with a turnover of over Rs.5 Crore;
or
LLP with a contribution of over Rs.50 Lacs
Annual Return to be accompanied by a certificate from a Company Secretary in practice to the effect that he has verified the particulars from the books and records of the LLP and found them to be true and correct.
10th June, 2011 31
ROLE OF COMPANY SECRETARYROLE OF COMPANY SECRETARY
SEIZE THE OPPORTUNITIES
Formation of LLPs/ Drafting of LLP Agreements Advisory Services –Foreign Clients–Entry options Advisory Services –Indian Clients–Corporate
Restructuring tool Conversion of existing private companies into LLP Conversion of existing partnership firms into LLP Good tool for large size NBFCs Advising the SME Sector –to forge alliances with their
foreign/ Indian counterparts Advising the upcoming entrepreneur class –to
graduate them to a body corporate status
10th June, 2011 32
Two Fold Opportunities
EXPLORE FOR YOUR OWN BUSINESS/ PROFESSION
ADVISE YOUR CLIENTS/ ORGANISATIONS
ROLE OF COMPANY SECRETARYROLE OF COMPANY SECRETARY
10th June, 2011 33
Separate legal entity & body corporate. Low compliance burden & cost. Limited Liability of partners. LLP is liable to the extent of its assets. More flexibility than company. Right of partners can be assigned to third party. Availability of solvency position in public domain
increases the credit worthiness. Allows Multi-disciplinary professionals
combination which provides level playing field against their international professional firm.
Easy to exit/ winding up. Venture capital funds can combined with
knowledge and expertise. Taxation benefits as compare to company.
Merits of LLP (as business model for SMEs and service providers)
10th June, 2011 34