The Limited Liability Partnership Act, 2008 was enacted by the Parliament of India to introduce and legally sanction the concept of LLP in India. This legal framework was
enacted to provide a new form of business organization known as a Limited
Liability Partnership. The LLP structure combines elements of a traditional
partnership and a company with limited liability. Unlike the general partnerships in India, LLP
is a body corporate and legal entity separate from its partners,
have perpetual succession and any change in the partners of an LLP shall not
affect the existence, rights or liabilities of the LLP.
LLP is a corporate business vehicle that enables
professional expertise and entrepreneurial initiative to combine and operate in
flexible, innovative and efficient manner, as a hybrid of companies & partnerships
providing benefits of limited liability while allowing its members the
flexibility for organizing their internal structure as a partnership. Some of key characteristics of LLP are:
Ø
Separate Legal Entity- Continue its existence irrespective of changes in
partners,
Ø
LLP itself can enter
into contracts and hold properties,
Ø
Partners' Liability
limited to the agreed contribution,
Ø Professional & Non-professional (Businessmen), both can set up LLP.
Some key provisions of LLP Act :
1. Formation
of LLP (Sections 7-11): The Act outlines the procedure for
the formation of an LLP, including the requirements for partners, name
reservation, and the filing of incorporation documents.
2. Nature
of LLP (Section 3): An LLP is a separate legal entity,
distinct from its partners. The liability of partners is limited to their
agreed contribution to the LLP, and the personal assets of partners are
generally protected.
3. Partnership
Agreement (Section 23): The LLP agreement is a crucial
document that governs the mutual rights and duties of partners and the conduct
of LLP's business. The agreement can be entered into between the partners or
between the LLP and its partners.
4. Designated
Partners (Sections 7, 8, 9): Every LLP is required
to have at least two designated partners who are individuals, and at least one
of them must be a resident in India. Designated partners are responsible for
regulatory compliance.
5. Contribution
and Financial Disclosures: Partners contribute to the LLP,
and the Act specifies the rules regarding contributions and financial
disclosures.
6. Obligations
of LLP (Sections 17-21): The Act sets out various
obligations of LLPs, including the maintenance of books of accounts, audit
requirements, and filing of annual returns.
7. Conversion
of Firm into LLP (Section 55): The Act allows for the
conversion of existing firms into LLPs, subject to certain conditions.
8. Conversion
of Private Company or Unlisted Public Company into LLP (Sections 56-57):
The Act provides provisions for the conversion of a private company or an
unlisted public company into an LLP.
9. Winding
up and Dissolution (Sections 63-64): The Act specifies the
procedures for winding up an LLP, either voluntarily or by the National Company
Law Tribunal (NCLT).
10. Penalties
(Sections 72-73): The Act includes provisions for
penalties in case of non-compliance with various provisions.
11. National
Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal
(NCLAT): Similar to the Companies Act, the LLP Act also
involves these quasi-judicial bodies for dispute resolution and appellate
proceedings.