Limited Liability Partnership or the LLP has become the most preferred form of business over the last decade owing to the flexibility with offers to the partners apart from the benefit of limited liability. However in the recent times, it was brought to the notice of the government that a large number of LLPs have not filed form 3, which discloses the LLP Agreement and statutory return and Form 8 which discloses the Statement of Accounts and Solvency, and there was the default in filing Form-11, that is filing an annual report of the LLP. In the event of default in filing any of these forms within the prescribed time, presently LLPs may file such documents on payment of a penalty for one hundred rupees for every day of such delay under Section 69 of the LLP Act in addition to the actual fee as is payable for filing of such document or return.
###Reasons for the introduction of LLP Settlement Scheme, 2020
The failure to comply with the procedure has lead to the following consequences:
Due to default in compliance by many LLPs, records available with Registrar were found to be outdated and therefore, also not available for inspection to the stakeholders.
The partners of defaulting LLPs were liable for criminal offense and LLP could not be closed till the essential compliances were concluded.
The financial burden was accumulating on LLPs due to the escalation of penalties for each defaulting day.
Considering the situation prevailing The Central Government in the exercise of its powers granted under Section 460 of the Companies Act, 2013 has introduced the “LLP Settlement Scheme, 2020”, by permitting a One-time condonation of delay in filing the compliance documents with the Registrar.
##The LLP Settlement scheme 2020 provides for the following:-
(i.) This scheme comes into force on the 16th day of March 2020 and shall remain in force till the 13th day of June 2020.
(ii.) The Scheme provides for the following definitions
(a) “Act” refers to the Limited Liability Partnership Act, 2008;
(c) "defaulting LLP" means an LLP registered under the Limited Liability Partnership Act, 2008 which has made a default in filing of documents on the due dates specified under the LLP Act, 2008 and rules made thereunder;
##The applicability of the LLP Settlement scheme 2020
Any “defaulting LLP” is permitted to file documents which ought to have been filed and which were due for filing till 31st October 2019 in accordance with the provisions of this Scheme:
##Computation of fees under the LLP Settlement scheme 2020
The defaulting LLPs may themselves avail of the scheme for filing documents which have not been filed or registered in time on payment of additional fee Rs 10 per day for delay in addition to any fee that is payable for filing of such document or return in the ordinary course of business, provided that such payment of additional fee shall not exceed Rs. 5,000 per document.
###Immunity from prosecution in respect of document filed under the scheme
The defaulting LLPs, which have filed the defaulted documents before 13th June 2020 and made good the default, shall not be subjected to any prosecution in this respect by Registrar for such defaults.
###The scheme not to apply to certain documents
(a.) The Scheme is applicable only for the filing of the following documents: –
(i.) Form-3- Information concerning the Limited Liability Partnership Agreement and the subsequent changes made to it;
(ii.) Form-4- Notice of appointment, cessation, change in name/ address/ designation of a designated partner or partner and consent to become a partner/ designated partner;
(iii.) Form-8; The Statement of Accounts & Solvency (Annual or Interim statement);
(iv.) Form-11- Annual Return of the LLP
(b.) This Scheme shall not apply to any LLP which has made an application in Form 24 to the Registrar, for striking off its name from the register as per in accordance with Rule 37(1) of the LLP Rules, 2009.
(c.) At the end of the time provided under this scheme, the Registrar shall take necessary action under the LLP Act, 2008 against the LLPs which have not availed this Scheme and are in default in filing of documents as mandated under the provisions of LLP Act, 2008 promptly.
The Limited Liability Partnership Settlement Scheme 2020, would be of massive utility to the firms which had defaulted in the previous years be reducing the financial burden to a very large extent.