LLP settlement Scheme, 2020: Allow a One-time condonation of delay in filing statutorily required documents with the Registrar

The government is set to launch an amnesty scheme for Condonation of delay in filings by limited liability partnership (LLP) firms, in a move that could benefit around 20-25% of these.

LLP is a corporate structure that combines the flexibility of a partnership and advantages of limited liability of a company at a low compliance cost. Currently, there are around 1.5 lakh LLPs in India, with about 1.3 lakh active firms.

The scheme will allow those who have not filed forms 3 and 4 as well as forms 8 and 11 to file the returns with an additional fee of Rs 10 a day with an overall cap of Rs 5,000. Currently, for each day of delay in filing any of these forms, the penalty is Rs 100 a day.

While forms 8 and 11 deal with the financial statement, form 3 relates to initial agreement. “There are many companies which have not been able to file form 3 for 10 years, for them the penalty can be Rs 3.5 lakh or more. Now, they can clear the default by simply paying a fee of Rs 5,000,” adding that MCA will notify the scheme in a day or two.

The move is meant to make life easier for businesses and help them cure problems that they may be facing due to non-filing of returns.

But getting to this point has been a complicated affair as the LLP Act, 2008 does not provide for such a mechanism. As a result, MCA first used provisions of the Companies Act to extend the scheme to LLPs, using a special provision of the LLP Act.

General Circular No. 6/2020

F.No.17/61/2016(CL-V)-Pt-I

GOVERNMENT OF INDIA

MINISTRY OF CORPORATE AFFAIRS

5″ Floor, ‘A’ Wing Shastri Bhawan, Dr. R.P. Road, New Delhi Dated: 4″ March, 2020

To,

Sir,

All Regional Directors/All Registrars of Companies, All Stakeholders.

Subject:-LLP settlement Scheme, 2020-reg.

It has been almost over a decade since LLP Act came into being. 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. Owing to flexibility in its structure and operation, the LLP often become the preferred option for small enterprises.

2. It has come to the notice of Government that a large number of LLPs have defaulted in filing Form (3) viz. LLP Agreement and changes therein and statutory return viz. Form-8- Statement of Account & Solvency (Annual or Interim) and Form-11- Annual Return of LLP. In the event of requisite forms not being filed within prescribed time presently LLPs may file such documents on payment of additional fee for one hundred rupees for every day of such delay under Section 69 of the LLP Act in addition to any fee as is payable for filing of such document or return.

3. A large number of representations were received from various quarters for waiver of fee or condonation of delay and relaxations in additional fee on the ground of excessive financial burden.

4. It is also noted that a large number of LLPs are not filing their due statutory documents (i.e. Information with regard to LLP agreement and changes etc., Notice of Appointment of Partner/ Designate Partner etc. and other Annual filing documents i.e. Statement of Account & Solvency and Annual Returns) in a timely rainier with the Registrar. Form 3 is filed for filing Information with regard to LLP agreement and changes, if any made therein and Form-4 is for filing Notice of Appointment of Partner/ Designated Partner, his consent etc. which are required to be filed with the prescribed fee.

5. Due to this, the records available in the electronic registry are not updated and they are not available to the stakeholders for inspection. Further, due to not filing the required documents on time the LLPs and their designated partners are liable for criminal prosecution and the said LLPs cannot be closed till all compliances are completed.

6. As part of Government’s constant efforts to promote ease of doing business it has been decided to give a Onetime relaxation in additional fees to the defaulting LLPs to make good their default by filing pending documents and to serve as a compliant LLP in future.

7. The Central Government in exercise of its power u/s 460 of the Companies Act, 2013 (extended to LLPs vide Gazette Notification No. G.S.R. 59(E) Dated 30th January, 2020 u/s 67 (2) of the Limited Liability Partnership Act, 2008) has decided to introduce a scheme namely “LLP Settlement Scheme, 2020”, by allowing a One-time condonation of delay in filing statutorily required documents with the Registrar.

8. The details of the scheme are as under:

(i.) This scheme shall come into force on the 16th March, 2020 and shall remain in force up to 13th June, 2020.

(ii.) Definitions: In this scheme, unless the context otherwise requires, –

(a) “Act” means the Limited Liability Partnership Act, 2008;

(b) “LLP” means a LLP as defined in Section 2 of the Limited Liability Partnership Act, 2008;

(c) “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 rules made there under;

(iii.l Applicability: – Any “defaulting LLP” is permitted to file belated documents, which were due for filing till 31• October, 2019 in accordance with the provisions of this Scheme:

(iv) Manner of payment of fees and additional fee on filing belated document for seeking immunity under the Scheme – The defaulting LLPs may themselves avail of the scheme for filing documents which have not been filed or registered in time on payment of additional fee Rs 10/- per day for delay in addition to any fee as is payable for filing of such document or return, provided that such payment of additional fee shall not exceed Rs. 5,000/- per document.

(vi) Immunity from prosecution in respect of document(s) filed under the scheme – The defaulting LLPs, which have filed their pending documents till 13a June 2020 and made good the default, shall not be subjected to prosecution by Registrar for such defaults.

(vii.) Scheme not to apply to certain documents –

(a.) This Scheme shall not apply to the filing of documents except the following documents:-

(i.) Form-3- Information with regard to limited liability partnership agreement and changes, if any, made therein;

(ii.) Form-4- 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- Statement of Account & Solvency (Annual or Interim); (iv.) Form-11- Annual Return of Limited Liability Partnership (LLP).

(b.) This Scheme shall not apply to LLPs which has made an application in Form 24 to the Registrar, for striking off its name from the register as per provisions of Rule 37(1) of the LLP Rules, 2009.

9. On the conclusion of the Scheme, the Registrar shall take necessary action under the LLP Act, 2008 against the LLPs which have not availed this Scheme and are in default in filing of documents as required under the provisions of LLP Act, 2008 in a timely manner.

10. This issues with the approval of the competent authority.

Your faithfully,

(Chandan Kumar) Deputy Director (Policy)

Copy to:

(i) E-Governance Section and web contents Officer to place this circular on the Ministry website, and;

(ii) Guard File.

“Clarification on Officer in default in case of Independent Directors, non-promoters and non-KMP non-executive directors”

Clarification on prosecutions filed or internal adjudication proceedings initiated against Independent Directors, non-promoters and non-KMP non-executive directors.

http://www.mca.gov.in/Ministry/pdf/Circular_03032020.pdf

http://www.mca.gov.in/Ministry/pdf/Notification_02032020.pdf

Section 462 of the companies Act, 2013 (18 of 2013), the Central Government, in the public interest, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Corporate Affairs

In the said notification:-

(i) for serial number 1 and the entries relating thereto, the following serial numbers and entries shall be substituted namely:-

Chapter l, Clause (45) of Section 2. ln clause (45), the following Explanation shall be inserted, namely:-

Explanation.- For the purposes of this clause, the “paid-up share capital” shall be construed as “total voting power”, where shares with differential voting rights have been issued.

Chapter ll, Section 4.

In section 4, in sub-section (1), in clause (a), the words ‘in the case of a public limited company, or the last words “Private Limited” in the case of a private limited Company’ shall be omitted.

(ii) for serial number 26 and the entries relating thereto, the following serial number and entries shall be substituted, namely:-

Chapter XII, first and second proviso to sub-section (1) of section 188

Shall not apply to –

(a) a Government company in respect of contracts or arrangements entered into by it with any other Government company, or with Central Government or any State Government or any combination thereof;

(b) a Government company, other than a listed company, in respect of contracts or arrangements other than those referred to in clause (a), in case such company obtains approval of the Ministry or Department of the Central Government which is administratively in charge of the company, or, as the case may be, the State Government before entering into such contract or arrangement.

http://www.mca.gov.in/Ministry/pdf/rule_28022020.pdf

Central Government hereby makes the following rules further to amend the companies (Appointment and Qualification of Directors) Rules, 2014,

(1) These rules may be called the Companies (Appointment and Qualification of Directors) Amendment Rules, 2020.

(2) They shall come into force on the date of their publication in the Official Gazette.

In the Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 6, –

(a) in sub-rule (1), in clause (a), for the words ,three months, the words “five months” shall be substituted;

(b) in sub-rule (4),-

(i) for the first proviso, namely:- the following proviso shall be substituted, namely-

“Provided that an individual shall not be required to pass the online proficiency self-assessment test, when he has served as a director or key managerial personnel, for a total period of not less than ten years, as on the date of inclusion of his name in the databank, in more of the following, namely:-

(a) listed public company; or

(b) unlisted public company having a paid-up share capital of rupees ten crore or more; or

(c) body corporate listed on a recognized stock exchange

(ii) in the second proviso, for the word ,companies, the words “companies or bodies corporate” shall be substituted.

MCA.GOV.IN

www.mca.gov.in

An important legislative change, if undertaken by the central government, could potentially reduce the pendency of cases in the Supreme Court by half, believes former Supreme Court Justice AK Sikri. The radical reform that Justice Sikri outlines require the Centre to amend Article 136 of the Constitution so that cases which are at the state level and arise out of state laws are dealt with by the respective high courts instead of burdening the Supreme Court.

“There should be an amendment to Article 136. All those issues that are at the state level and arise out of state laws — why should those SLPs be allowed right up to Supreme Court? After all, the High Court of the state is the highest court of the land. Land reform, rent control, etc… They (HCs) know better what is happening there. The judgment of the High Court should be final,” he said, addressing a book launch event in Delhi.

Justice Sikri added that certain state laws carry punishments of up to 2-3 years. “Why should cases come to SC when they have already been tested at three or four stages up to the High Court. If such amendments (Article 136) are made, they could knock-off 40-50% of the cases and time available to the Supreme Court would be much more for dealing with the important cases,” he added.

A Bill has been introduced in Rajya Sabha seeking to provide minimum 9 months’ time with assured income in case of termination of employees due to economic slowdown, employer becoming insolvent and change in technology among others.

The Terminated Employees (Welfare) Bill, 2020, was introduced recently. It proposes that, if an employee gets terminated due to economic slowdown, change in technology, court order, the employer becomes insolvent and the owner is unable to carry business and change of government, then he is entitled for unemployement benefits.

This Act shall not apply to terminated employee who has been terminated for any of the following reasons:-

(a)proven misconduct;

(b) cheating;

(c) indulging with fraudulent means and appropriate money; or

(d) having been found guilty by a criminal court of justice.

An employee whose employment is terminated for the reasons of the winding up of the organization or the establishment due to:—

(i) economic slowdown; or

(ii) change in technology in the respective field; or

(iii) the owner or director managing the affairs of the establishment becoming insolvent; or

(iv) the orders of any court; or

(v) incurring losses and unable to carry on the business; or

(vi) the change in Government policy;

shall be entitled to such unemployment compensation health insurance benefits or any other benefits as may be prescribed by the Central Government, if such benefits are not part of the employee employer agreement, for nine months or till the time he gets employed elsewhere, whichever is earlier.

NOTE 1:- The period of nine months shall include the notice period to be served by the employer before termination.

NOTE 2:- The unemployment compensation shall be admissible if the employer does not provide any severance package to the terminated employee or the severance package is less than the compensation provided under this Act.

The unemployment compensation shall not be less than sixty per cent. of the gross salary of the terminated employee or as per the terms of the employee-employer agreement, whichever is higher and it shall be borne by the employer. Health insurance benefit shall continue till the period as specified for nine months or till the time he gets employed elsewhere, whichever is earlier with the same terms and conditions which prevailed during his employment.

A terminated employee shall be entitled to the terminal benefits on the cessation of employment like provident fund, gratuity, leave encashment etc. Benefits notified shall be paid to the terminated employee from the month following the month on which termination is communicated to the employee or completion of the notice period, if any, whichever is earlier. If due to any reason, the employer is not able to pay the benefits within one month from the date of the termination of the employment, the employer shall pay to the terminated employee an interest at the rate of twelve per cent. per month for such delay.

Nothing in this Act shall apply to any terminated employee if benefits admissible under the employee-employer agreement, are higher than the benefits prescribed under this Act.

Every employer shall create a corpus fund to which at least five per cent of the net profit of the organization shall be credited, which shall be used for the welfare of terminated employees.

Every employer shall be entitled to solicit contribution from any organization, individual or trust for the purpose of maintaining the fund, in such manner as may be, prescribed. Fund shall also be utilized for the following purposes, namely:-

(a) payment of expenditure in connection with the education of the children of the terminated employees; and

(b) medical facilities, free of cost, in such a manner as may be prescribed.

Central Government shall, after due appropriation made by Parliament by law in this behalf, provide adequate funds for carrying out the purposes of this Act.