Decriminalisation of the Limited Liability Partnership Act

The ministry of corporate affairs (MCA) has initiated the process of decriminalisation of the Limited Liability Partnership (LLP) Act, based on the recommendations of a high-level government panel.

“The objective of the decriminalisation exercise is to remove criminality of offences from business laws where no malafide intentions are involved,” the ministry said in a statement on Wednesday.

ADVERTISEMENT

The government will decriminalise 12 compoundable offences under the Act and will omit section 73, which relates to penal provisions in case of non-compliance with orders of a tribunal.

The MCA will adopt three principles while going through the decriminalisation process, it said. First, offences that relate to minors compliance issues, involving predominantly objective determinations, will be shifted to the in-house adjudication mechanism framework instead of being treated as criminal offences.

ADVERTISEMENT

Second, offences that are more appropriate to be dealt with under other laws, will be omitted and third, status quo will be maintained for non-compoundable offences that are serious in nature and involve injury to public interest.

In this process, the government has incorporated all the suggestions of the Company Law Committee, which proposed the decriminalisation of provisions in the LLP Act, relating to the maintenance of books of account, other records and audit (section 34), annual returns (section 35), schemes for compromise or arrangements (section 60) and reconstruction or amalgamation (section 62), among others.

Further, the MCA would also create a class of ‘small LLPs, along the lines of small companies under the Companies Act, would be subject to lesser compliances, lesser fee or additional fee and lesser penalties in the event of default.

“Lower cost of compliance would incentivise unincorporated micro and small partnerships to convert into the organized structure of an LLP and derive its benefits,” the statement said.

The ministry would also amend section 69 of the LLP Act to reduce the additional fee of Rs 100 per day, presently applicable for the delayed filing.

To augment their fundraising capacity, the ministry will permit LLPs to raise capital through issue of fully secured non-convertible debentures from Securities and Exchange Board of India or Reserve Bank of India-regulated investors.

1027