This aims to facilitate ease of doing business, encourage startups, bringing an equal playing field for LLPs as compared to large companies under the Companies Act. Nirmala Sitharaman said, a lot of changes have been done in the Companies Act, 2013 in terms of ease of doing business and similar treatment has to be given to LLPs since LLPs are among more popular amongst startups.
1. Penal Provisions: Prior to the amendment, there were 24 penal provisions (21 compoundable & 3 non-compoundable). The proposed amendment has reduced the penal provisions to 22 (7 compoundable, 3 non-compoundable, 12 to be decriminalized and to be dealt with under the In-House Adjudication Mechanism – IAM). 3 sections with criminal liability to be omitted.
2. Small LLPs: New definition of small LLP based on turnover and contribution of partners has been inserted. This is in line with the concept of small companies under the Companies Act. The threshold relaxation up to the turnover size of Rs 40 lakh and partner’s contribution of Rs 25 lakh has been enhanced with this proposed amendment thereby expanding the scope of small LLP. The new threshold now is turnover-Rs. 50 crores and contribution-Rs. 5 crores. These LLPs will be subject to fewer compliances, reduced fee or additional fees, and smaller penalties in the event of default.
3. Non-Convertible Debentures: LLPs can now issue fully secured NCD from Investors regulated by SEBI or RBI.
4. Special Court: proposed to empower Central Government to establish/designate Special Courts with a view to providing speedy trial of offences under the LLP Act. The special court will consist of: (i) a Sessions Judge or an Additional Sessions Judge, for offences punishable with imprisonment of three years or more; and (ii) a Metropolitan Magistrate or a Judicial Magistrate, for other offences. They will be appointed with the concurrence of the Chief Justice of the High Court.
5. Appellate Tribunal: Appeal against orders of NCLT shall be made to NCLAT, to be filed within 60 days (extendable by another 60 days) of the order. No appeal against the orders was made with the consent of the parties.
6. Change in name: The amendment bill allows the government to direct and allot a new name to LLP under certain circumstances instead of imposing a fine. Earlier, the Govt. could direct an LLP to change its name on certain grounds or pay a fine ranging from Rs 10,000 to Rs 5 lakh if it fails to comply.
7. Accounting Standards: The Govt. in consultation with NFRA may prescribe AS to align it with Companies (Accounting Standards) Rules. It may also prescribe Auditing standards as recommended by ICAI.
Other proposed amendments include the appointment of adjudicating officers, punishments for fraud and non-compliance of tribunal orders.