Friday, August 5, 2011

Need for the New Corporate Form - LLP


Need for the New Corporate Form - LLP

With the growth of the Indian economy, the role played by its entrepreneurs as well as its technical and professional manpower has been acknowledged internationally.  It is felt opportune that entrepreneurship, knowledge and risk capital combine to provide a further impetus to India’s economic growth.  In this background, a need has been felt for a new corporate form that would provide an alternative to the traditional partnership, with unlimited personal liability on the one hand, and, the statute-based governance structure of the limited liability company on the other, in order to enable professional expertise and entrepreneurial initiative to combine, organize and operate in flexible, innovative and efficient manner. 
2.       The Limited Liability Partnership (LLP) is viewed as an alternative corporate business vehicle that provides the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement. The LLP form would enable entrepreneurs, professionals and enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP would also be a suitable vehicle for small enterprises and for investment by venture capital.
3.            keeping in mind the need of the day, the Parliament enacted the Limited Liability Partnership Act, 2008 which received the assent of the President on 7th January,2009.
The salient features of the LLP Act 2008 inter alia are as follows: -
The LLP shall be a body corporate and a legal entity separate from its partners. Any two or more persons, associated for carrying on a lawful business with a view to profit, may by subscribing their names to an incorporation document and filing the same with the Registrar, form a Limited Liability Partnership.  The LLP will have perpetual succession;
(ii)      The mutual rights and duties of partners of an LLP inter se and those of the LLP and its partners shall be governed by an agreement between partners or between the LLP and the partners subject to the provisions of the LLP Act 2008 .  The act provides flexibility to devise the agreement as per their choice.  In the absence of any such agreement, the mutual rights and duties shall be governed by the provisions of proposed the LLP Act;
(iii)     The LLP will be a separate legal entity, liable to the full extent of its assets, with the liability of the partners being limited to their agreed contribution in the LLP which may be of tangible or intangible nature or both tangible and intangible in nature. No partner would be liable on account of the independent or un-authorized actions of other partners or their misconduct. The liabilities of the LLP and partners who are found to have acted with intent to defraud creditors or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the LLP;
(iv)     Every LLP shall have at least two partners and shall also have at least two individuals as Designated Partners, of whom at least one shall be resident in India. The duties and obligations of Designated Partners shall be as provided in the law;
(v)      The LLP shall be under an obligation to maintain annual accounts reflecting true and fair view of its state of affairs.  A statement of accounts and solvency shall be filed by every LLP with the Registrar every year.  The accounts of LLPs shall also be audited, subject to any class of LLPs being exempted from this requirement by the Central Government;
(vi)     The Central Government have powers to investigate the affairs of an LLP, if required, by appointment of competent Inspector for the purpose;
(vii)    The compromise or arrangement including merger and amalgamation of LLPs shall be in accordance with the provisions of the LLP Act 2008;
(viii)   A firm, private company or an unlisted public company is allowed to be converted into LLP in accordance with the provisions of the Act. Upon such conversion, on and from the date of certificate of registration issued by the Registrar in this regard, the effects of the conversion shall be such as are specified in the LLP Act. On and from the date of registration specified in the certificate of registration, all tangible (moveable or immoveable) and intangible property vested in the firm or the company, all assets, interests, rights, privileges, liabilities, obligations relating to the firm or the company, and the whole of the undertaking of the firm or the company,  shall be transferred to and shall vest in the LLP without further assurance, act or deed and the firm or the company,  shall be deemed to be dissolved and removed from the records of the Registrar of Firms or Registrar of Companies, as the case may be;
(ix)     The winding up of the LLP may be either voluntary or by the Tribunal to be established under the Companies Act, 1956. Till the Tribunal is established, the power in this regard has been given to the High Court;
(x)      The LLP Act 2008 confers powers on the Central Government to apply provisions of the Companies Act, 1956 as appropriate, by notification with such changes or modifications as deemed necessary.  However, such notifications shall be laid in draft before each House of Parliament for a total period of 30 days and shall be subject to any modification as may be approved by both Houses;
(xi)     The Indian Partnership Act, 1932 shall not be applicable to LLPs.

Main Website- www.pmandassociates.in



Legal Compliances and other Corporate Secretarial Services
Business set up Services/ Registration Services:
  • Setting up of Branch in India
  • Setting up of Joint Venture Company in India
  • Setting up Liaison office and Project Office in India
  • Setting up Wholly Owned Subsidiary in India or Outside India
  • Setting up Private or Public Limited Company anywhere in India
  • Setting up of unit under Special Economic Zone(SEZ) and Software Technology Park(STPI)
Handling Public Issues, FCCB,GDR/ADR, Co-coordinating with Stock Exchanges, S.E.B.I, C.L.B, R.O.C., and other Professional Agencies including Merchant Banker, Banker to the Issue, Arranging tie-ups and getting shares subscribed, liaison with bankers, Registrar to the Issue, Advisors, Printers, Advertising Agencies, Share Brokers and other intermediaries of the Public Issue.
Regularization of suspension of trading in DSE, BSE, Listing of various issues like preferential issue, conversion, Bonus issue.
Matters relating to R.O.C, R.D., and C.L.B & M.C.A related to shifting of registered office from one state to another, petitions for delayed filing of charges , compounding of various defaults under section 169, 297, 383A.
Conducting of ‘Labour & Industrial Laws Audit’ & preparation of Compliance Report pertaining to labour & industrial laws viz. Provident Fund, Bonus, Gratuity, ESI, Contract Labour, Factories Act, Standards of Weights & Measures, Environmental Laws, etc.
Drafting & Vetting of Contracts / Agreements of all kinds including Joint Venture Agreements; syndication Loan Agreements, Lease Deeds; Technical & Foreign Collaboration Agreements, Shareholders’ Agreements, Service Agreements of all kinds, Model Agreements, Memorandum of Understanding, Marketing & Sales promotion Agreements, Drafting of Conveyance / Sale Deeds, Agreement to Sell, General / Special Power of Attorney , Drafting of replies to legal notices from State Level / Central Level Statutory Bodies / Departments; Follow-up & interaction with concerned departments for the same; Handling Consumer Complaints / Notices etc.

Wednesday, July 6, 2011

procedure for LLP for Registration


PROCEDURE FOR REGISTRATION OF LLP INDIA

Stage I - Partners
Stage II - DPIN & DSC
Stage III - Name filing
Stage IV - Agreement
Stage V - Filing of Incorporation documents
Stage I – Partners
To form a LLP, there Minimum two partners and at least two shall be designated partners having DIPN. In case of body corporate as partners, their nominee can be act as designated partners. Out of two designated partners, one must be resident in India. (Who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding financial year)
Stage II - Obtaining DPIN & Digital Signature
DPIN can be obtained by making an application online with MCA . After submitting the online application, signed physical copy of Form 7 has to be submitted to Ministry of Corporate Affairs along with certified copies of address proof and Identity proof of the applicant.
Digital Signature can be obtained from any of the Certifying Authorities in India.
Stage III - Name filing
After finalization of name, an application of name availability has to be filed in form 1 with MCA for approval. Please note that selection of name is subject to Guidelines issued by MCA.
Stage IV - Agreement
LLP agreement has to be drafted line with LLP Act. It is not mandatory to file LLP agreement at the time of registration and same can be file with in 30 days. If no agreement is framed, provisions of Schedule I of the LLP Act shall be applicable.
Stage V  - Filing of Incorporation Documents
The following documents along with required attachments has to be filed with MCA
Form 2            :          Details of partners, registered office etc
Subscription Sheet: All partners are required to subscribe their names along with signatures to the subscription sheet, which shall be witnessed by any chartered Accountant/Company Secretary/Advocate in practice.
Form 4:           Consent of Partners - Consent of each partner to become a partner of Liability Partnership
Form 3:           LLP agreement – this can be filed with in 30 days from the date of registration
Above said documents are required to be filed after signing digitally. After verification, registrar will register all documents and issue Certificate of Incorporation.

LLP formation


LLP FORMATION

Pre-requisites for registering a LLP

  1. Minimum 2 Partners  (Individual or body corporate)
  2. Minimum 2 Designated Partners who are individuals and at least one of them should be resident in India.
  3. Digital Signature Certificate
  4. LLP Name
  5. LLP Agreement
  6. Registered Office

Partners of LLP
An LLP should have minimum 2 partners. In case any Body Corporate is a partner, then it will be required to nominate any person (natural) as its nominee for the purpose of the LLP.
Partner of LLP can be consisted of
  • Companies incorporated in and outside India
  • LLP incorporated in and outside India
  • Individuals Resident in and outside India
Designated Partner

Every LLP should have minimum 2 designated partners who are individuals and at least one of them should be resident in India.
A person or nominee of a body corporate, intending to be appointed as who is appointed as designated partner of LLP should hold a Designated Partner Identification Number (DPIN) allotted by the Ministry of Corporate Affairs.

DPIN can be obtained by submitting application along with address proof and identity proof of the individuals.

Digital Signature Certificate
All forms for registration of LLP shall be filed online after signing digitally and for this purpose, one of the designated partners shall take digital signature certificate.

LLP Name
Selection of business name is crucial for the image of your venture. You select a name which reflects the business you plan. Ensure selected name satisfy LLP Name Guidelines of Ministry of Corporate Affairs.
LLP Agreement
Like partnership, partners of LLP can frame agreement for defining their terms, profit sharing ratio etc. The basic contents of Agreement are, Name of LLP, Name of Partners  and Designated Partners, and Form of contribution, Profit Sharing ratio and Rights and Duties of Partners.
In case no agreement is entered into, the rights & duties as prescribed under Schedule I to the LLP Act shall be applicable. It is possible to amend the LLP Agreement but every change made in the said agreement must be intimated to the Registrar of Companies.
Registered Office
The Registered office of the LLP is the place where all correspondence related with the LLP would take place, though the LLP can also prescribe any other for the same. . A registered office is required for following purposes. At the time of incorporation, it is necessary to submit proof of ownership or right to use the office as its registered office with the Registrar of Companies.

miscellaneous issues in LLP


Management of LLP
Day to day operations of Limited Liability Partnership will be managed by Designated Partners, who are responsible for ensuring the compliances of all applicable laws.
Limited Liability Partnership is managed as per the LLP Agreement, however in the absence of such agreement the LLP would be governed by the framework provided in Schedule 1 of Limited Liability Partnership Act, 2008 which describe the matters relating to mutual rights and duties of partners of the LLP and of the limited liability partnership and its partners.
 Capital Contribution to LLP
Unlike in the case of a company, there is no requirement for minimum capital contribution for a LLP. However, the registration cost for LLP is determined on the basis of amount of contribution.
 FDI in LLP
The Government of India has not notified the policy for Foreign Direct Investment in LLP.
 Reservation of Name by a LLP registered out side India
A foreign LLP or a foreign company can reserve its existing name by which it is registered in the country of its incorporation by making an application to Ministry of Corporate Affairs. The reservation will be valid initially for three years and is renewable thereafter.
 Branch office of Foreign LLP
A LLP registered outside India can establish an office in India and has to comply wit the provisions of LLP Act 2008.

Designated Partner identification number


Designated Partner Identification Number  (DPIN)
A person or nominee of a body corporate, intending to be appointed as who is appointed as designated partner of LLP should hold a Designated Partner Identification Number (DPIN) allotted by the Ministry of Corporate Affairs.

IMPORTANT NOTE: Director Identification Number (DIN) allotted under the Companies Act and DPIN are not same. DIN holder has to make a separate application for DPIN with his/her DIN. On submission of documents for verification, the DPIN status will be confirmed.

Partners/ Designated Partners Of LLP


Partners  / Designated Partners of LLP
An LLP should have minimum 2 partners. Every LLP should have minimum 2 designated partners who are individuals and at least one of them should be resident in India.
Partner of LLP can be consisted of
a)      Companies incorporated in and outside India
b)      LLP incorporated in and outside India
c)      Individuals Resident in and outside India
Designated Partner of LLP shall be responsible for the doing of all acts and things that are required to be carried out by the LLP and is responsible for the compliance of the provisions and filing of document / returns/ statements of LLP Act  and as may be specified in the LLP agreement

Designated Partner shall be liable to all penalties imposed on the LLP for any contravention of provisions of LLP Act.

Advantages And Disadvantages of LLP


Advantages and Disadvantages of LLP
Advantages
  • Separate legal entity
  • Easy to establish
  • Flexibility without imposing detailed legal and procedural requirements
  • Perpetual existence irrespective of changes in partners
  • Internationally renowned form of business in comparison to Company
  • No requirement of minimum capital contribution
  • No restrictions as to maximum number of partners
  • LLP & its partners are distinct from each other
  • Partners are not liable for Act of other partners.
  • Personal assets of the partners are not exposed except in case of fraud.
  • Easy to dissolve or wind-up
  • Professionals like CS / CA / CWA / Lawyers can form Multi-disciplinary Professional LLP
  • No requirement to maintain statutory records except Books of Accounts
  • Less Cost of formation (Compared to a company)
Disadvantages
  • LLP cannot raise funds from Public
  • Any act of the partner without the other may bind the LLP.
  • Under some cases, liability may extend to personal assets of partners.
  • No separation of Management from owners


concept of LLP


Concept of LLP
Limited Liability Partnerships (LLPs) are commercial vehicles which combine the features of partnership and company form of business .The concept of Limited Liability Partnership (LLP)  has been introduced in India by way of Limited Liability Partnership Act, 2008 (notified on 31st March 2008).
A Limited Liability Partnership combines the advantages of both the Company and Partnership into a single form of organization. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence. In an LLP, all partners have limited liability for each individual's protection within the partnership, similar to that of the shareholders of a limited company. However, unlike the company shareholders, the partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP's employees or other agents.
 LLP – A Separate Legal entity
LLP is a separate legal entity, liable to the full extent of its assets; the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.