LLP SETTLEMENT SCHEME, 2020: AN ANALYSIS FROM AN INDIAN LAW PERSPECTIVE
Published by: Aseem Sahni
The concept of Limited Liability Partnership ("LLP") in India was introduced with the introduction of the Limited Liability Partnership Act, 2008 (the "Act") in the year 2009. Ever since, LLP’s have been a popular way to run operations in India, as they are viewed as an alternative corporate business vehicle which provides benefits of limited liability of a company and the flexibility of a partnership.
Further, as the liability of the partners is limited to their agreed contribution in the LLP and it offers various advantages with regard to the flexibility of the operations, LLP seems to be a favourite with both promoters within India and from outside India. Additionally, unlike a traditional partnership setup, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability, created by another partner’s wrongful business decisions or misconduct.
Keeping in view the growing popularity of LLP’s in India and as part of the Indian governments, efforts to promote the ease of doing business, the Ministry of Corporate Affairs, Government of India (the "MCA") through a general circular number 6/2020, dated March 4, 2020, has introduced the LLP Settlement Scheme, 2020 (the "Scheme")2 and subsequently through a modification through a general circular number 13/2020, dated March 30, 2020.
Upon a review of the wordings of the Scheme and the Modification Circular the intention of the MCA appears to be to enable the defaulting LLPs in India, a one-time relaxation by way of allowing a one-time condonation of delay in filing of certain statutorily required documents under the provisions of the Act and the allied rules made thereunder with the relevant governmental authority-i.e. the office of the relevant registrar, enabling it to serve as a compliant LLP in the future.
This article analyses the applicability of the Scheme and the Modification Circular summarizes the procedural requirements provided therein and also provides a broad summary of the relaxations provided.
WORKING OF THE SCHEME AND THE MODIFICATION CIRCULAR
A summary of the key-pointers of the Scheme read along with the Modification have been provided below:
The said Scheme is stated to be valid on a 'Defaulting LLP', to file 'Belated Documents' which were due for filing till August 31, 2020.
As discussed above, upon a review of the wordings of the Scheme and the Modification Circular, the intention of the MCA appears to be to enable the defaulting LLPs in India, a one-time relaxation by way of allowing a one-time condonation of delay in filing of certain statutorily required documents under the provisions of the Act and the allied rules made thereunder with the relevant governmental authority- i.e. the office of the relevant registrar, enabling it to serve as a compliant LLP in the future.
As per the Modification Circular, the Scheme was has been stated to commence from April 01, 2020, and is stated to remain in force until September 30, 2020.
Scheme not to apply to certain documents:
As per the wordings of the Scheme, the same will not apply to the filing of all documents as mandated under the Act, but instead, will only be limited to filing making good, the following list of documents:
i. Form-3: which pertains to information concerning the limited liability partnership agreement and changes, if any, made therein;
ii. Form-4: which pertains to 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: which pertains to statement of account & solvency (annual or interim);
iv. Form-11: which pertains to 'Annual Returns' of the LLP.
Scheme not applicable in certain select instances:
The Scheme will not be applicable on LLPs which have made an application to the office of the relevant registrar, for striking off its name from the register as per provisions of Rule 37(1) of the LLP Rules, 2009, by way of filing Form 24 to the office of the relevant registrar.
Manner of payment of fee on filing Belated Documents for seeking immunity under the Scheme:
Any defaulting LLP may avail of the benefits offered by the Scheme for filing documents which have not been filed or registered in time on the payment of an additional fee of INR 10 (Indian Rupees Ten) per day for delay in addition to the statutory dues shall not exceed INR 5000 (Indian Rupees Five Thousand), per document.
Immunity from Prosecution:
The Scheme provides immunity from prosecution to the LLPs by the office of the relevant registrar’s which have availed the benefits of the Scheme, have made good their defaults and have filed their 'Belated Documents' uptil September 30, 2020.
With the ever-growing popularity of incorporating LLP’s in India to do business, it is obvious that the intention of the Ministry of Corporate Affairs by way of introducing the Scheme appears to be to benefit all the defaulting LLP’s which have previously failed to make the required filings under the Act. The Scheme grants them immunity from proceedings or additional penalties being imposed in connection with such delayed filings. However, it is important to note that the immunity under the Scheme is only in connection with certain delayed filings and does not insulate LLP’s against other substantive non-compliances under the Act.
Footnotes:  Available at: http://www.mca.gov.in/MinistryV2/natureoflimitedliabilityparterneshipllp.html  See Supra Note 1.  Available at: https://www.mca.gov.in/Ministry/pdf/GeneralCircular06_04032020.pdf  Available at: http://www.mca.gov.in/Ministry/pdf/Circular13_30032020.pdf  'Defaulting LLP' means a LLP registered under the Limited Liability Partnership Act, 2008 which has made a default in filing of documents on the due date(s) specified under the LLP Act, 2008 and the allied rules made there under.  'Belated Documents' as per the said Scheme are said to constitute all documents or forms which are required to be filed in the MCA-21 registry under the provisions of the LLP Act, 2008 and the allied rules made thereunder.  Refer to Para 8 of the Scheme read with Para 3 of the Modification Circular, wherein Para 8A has been introduced.  See Supra Note 6