Cabinet approves amendments to LLP Act; 12 offenses to be decriminalized
The cabinet on Wednesday approved amendments to the Limited Liability Partnership (LLP) Act to reduce offenses under the law as the government looks to improve ease of doing business and encourage start-ups.
In all, 12 offenses are proposed to be made non-criminal and a provision carrying criminal liability (Section 73) is to be dropped. The 12 non-criminal offenses will be moved to an internal adjudication mechanism to help free the criminal courts from routine cases.
The government has also approved the creation of a section of small LLPs to encourage entrepreneurs. These LLPs will be subject to less compliance, lower fees or additional charges, and smaller penalties in the event of default.
“LLPs are becoming popular among start-ups. For the first time an amendment is being proposed to the LLP Act,” said Finance Minister Nirmala Sitharaman.
According to experts, low compliance will encourage unincorporated micro and small partnerships to convert into an organized structure of LLP and reap its benefits.
Once the amendment for non-criminalisation is approved, the total number of penal provisions in the Act will be 22, the number of compoundable offenses will be only seven, the number of non-compoundable offenses will be only three, and the number of omissions will be only 12. , Sitharaman said.
He said this would help in leveling the playing field for LLPs who otherwise compete against corporations covered under the Companies Act. “…we are bridging this gap. And making LLPs more attractive and easy to handle… so that many of today’s start-ups, who prefer the LLP model, also see business opportunities equally. can feel from.
Union Minister Anurag Thakur said: “It promotes Atmanirbhar Bharat.”
The government will also introduce a new definition of small LLPs based on the size of their turnover and the contribution of the partners or proprietors. At present, there is an exemption up to the turnover size and Rs.40 lakhs and Rs.25 lakhs respectively for partner’s contribution.
“Now, Rs 25 lakh will become Rs 5 crore and a turnover of Rs 40 lakh will now be considered as Rs 50 crore. So, even a contribution of Rs 5 crore and a turnover of Rs 40 crore or Rs 50 crore will be considered as a small LLP, which means we are expanding the scope of a small LLP.
The Ministry of Corporate Affairs is also working towards setting up an e-decision platform as part of the new version of the MCA21 portal.
