On October 27, 2023, the Ministry of Corporate Affairs, in exercise of its powers under sub-sections (1) and (2) of Section 79 of the Limited Liability Partnership Act, 2008 (“LLP Act”), issued a notification to amend the Limited Liability Partnership Rules, 2009 (“LLP Rules”). The amended rules make several significant changes to the extant LLP Rules, primarily related to the register of partners and beneficial interests in the contributions of the Limited Liability Partnership (“LLP”). The significant updates made to the LLP Rules have been summarised below:
- Register of Partners (Rule 22A):
Rule 22A of the LLP Rules now requires that every LLP must maintain a register of its partners in Form 4A (annexed to the amended LLP Rules)—which ought to be kept at the registered office of the LLP. While the LLP Rules now require that any new LLP maintains such a register from the date of its incorporation, existing LLPs are required to comply with this requirement within 30 (thirty) days from the commencement of the amended LLP Rules.
The register of partners is required to contain the following particulars, in respect of each partner: (i) name, address and email address; (ii) PAN or CIN, (iii) Unique Identification Number (if any); (iv) name of father/ mother/ spouse; (v) occupation, status, nationality, and the name and address of their nominee; (vi) the date of becoming partner; (vii) date of cessation; (viii) amount and nature of contribution with monetary value thereof; (ix) any other interest (if any). Any change in the contribution amount, the name and details of the partners of the LLP, or cessation of partnership interest, is required to be reflected within 7 (seven) days in the register.
- Declaration of Beneficial Interest (Rule 22B)
Every registered partner of the LLP which does not have any beneficial interest (fully or partly) in contribution, is required to file a declaration in Form 4B (annexed to the amended LLP Rules) with the LLP, within 30 (thirty) days from the date on which such partner’s name was entered in the aforesaid register of partners, specifying the name and particulars of the person who actually holds any beneficial interest in such contributions. Further, any changes in the beneficial interest is required to be reported in Form 4B within 30 (thirty) days from the date of such change.
In parallel, every person which has a beneficial interest in the contribution of the LLP but is not registered in the register of partners of the LLP is required to file a declaration in Form 4C (annexed to the amended LLP Rules) with the LLP, within 30 (thirty) days from the date on which they acquired such beneficial interest in the contribution of the LLP, specifying the nature of his interest and his particulars. Further, any change in the beneficial interest is required to be reported in Form 4C within 30 (thirty) days from the date of such change.
After receiving the aforementioned declarations (as applicable), the LLP is required to record the same in the register of partners and file a return in Form 4D within a period of 30 (thirty) days with the Registrar of Companies (“ROC”) along with the applicable fees.
- Designated Partner for Providing Information
Rule 22B(4) of the amended LLP Rules specify that each LLP is required to specify a designated partner responsible for furnishing information and cooperating with the ROC (or any other officer authorised by the Central Government) in providing information in relation to beneficial interests in the contribution of the LLP. It also states that the aforementioned information is required to be filed with the ROC in Form 4 (annexed to the amended LLP Rules). The LLP Rules also stipulate that until such a designated partner is specified, every designated partner is responsible for furnishing such information.
The Ministry of Corporate Affairs has been quick to bring LLPs within a regulatory framework that is commensurate with its increased use as a vehicle for carrying out businesses in India. LLPs are much more favoured than regular partnerships; and are almost as common as private limited companies. This requires the adept formulation of rules and regulations to ensure that the flexibilities provided by the LLP structure are not exploited to the detriment of key stakeholders like financial institutions, creditors, partners, and employees.