New Reform of the LLP Amendment Bill 2021

Last Updated On: Sept. 8, 2021, 10:37 p.m.

New Reform of the LLP Amendment Bill, 2021


On Wednesday, 28th July, 2021 Cabinet has passed LLP Amendment Bill, 2021. This will be the first time that changes are being made to the Act since it came into effect in 2009. They have made 29 amendments to LLP Act 2008 by LLP Amendment Bill 2021.


The main objects behind the LLP amendment bill, 2021 are as follow:

  • To encourage the conversion of partnership firm into LLPs;
  • To make LLP popular for startups;
  • To provide greater ease of doing business in India;
  • The objective of the De-criminalization exercise is to remove criminality of offences from business laws where no malafide intentions are involved;
  • To promote the formation of LLPs.


Highlights of the Amendment:

Small limited liability partnership– The Bill defines the term “small limited liability partnership”. The definition is an exhaustive definition.

Residency of designated partners– There is a pre-requisite for each LLP to have at least 2 designated partners who are individuals and at least one of them shall be a resident in India. While determining the condition of residency the amendment bill has reduced the term of stay to 20 days during the financial year.

Accounting Standards– the Central Government, in consultation with the National Financial Reporting Authority constituted, prescribe the Accounting Standards and prescribe the Auditing Standards, as recommended by the Institute of Chartered Accountants of India for a particular class of LLP.

Authority to Regional Director– the Bill provides that a Regional Director, authorized by the Central Government, may compound such offences.  The compounding provisions have been brought in line with the compounding provisions mentioned under the Companies Act, 2013

Establishment of Special Courts– For the purpose of speedy trial of offences, the Central Government may establish Special Courts. The amendment bill further mentions the composition of such courts which is as follows:

(i) a Sessions Judge or an Additional Sessions Judge, for offences punishable with imprisonment of 3 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.

The Amendment Bill also elaborates on the procedure of trial of such Special Courts. The appeal and revision petitions shall lie to the High Court within whose jurisdiction the Special Court is located.

Registration of documents– Any document required to be registered with Registrar, if, is not registered within the time frame, may be registered after that time, on payment of such additional fee in addition to any fee as is payable.

Role of Appellate Tribunal– Appeal shall lie to the Appellate Tribunal. No appeal shall lie to the Appellate Tribunal from an order made by the Tribunal with the consent of parties. The time frame within which appeal shall be filed is period of 60 days. For sufficient cause the time frame can be extended if the Appellate Tribunal is satisfied with the cause. Opportunity of being heard is an important element while dealing with appeals filed.

Penalty for offences– If an LLP or any partner or any person contravenes this Act or the rules, the defaulter, shall be liable to a penalty of Rs. 5,000 and in case of a continuing contravention with a further penalty of Rs. 100 for each day after the first during which such contravention continues, subject to a maximum of Rs. 1, 00,000.

Punishment for defraud– If an LLP or its partners carry out an activity to defraud their creditors, or for any other fraudulent purpose, every person party to it knowingly is punishable with imprisonment now of up to 5 years and a fine between Rs 50,000 and Rs. 5,00,000.

Adjudication of penalties– The amendment bill provides for adjudication of penalties by officers appointed by the Central Government not below the rank of Registrar. The officer may by border impose penalty. The penalty where payable by a small LLP or start-up LLP or by its partner the such penalty shall be to the tune of one-half of the penalty specified subject to a maximum of Rs. 1,00,000 for LLP and Rs. 50,000 for every partner or any other person. Opportunity of being heard play the key role under this proceeding.

Appeal shall lie to the Regional Director in case the party is aggrieved by the order of the Registrar which shall be filed within 60 days.

Where an LLP fails to comply with the order within 90 days from the date of receipt of order, shall be punishable with fine not be less than Rs. 25,000, but may extend to Rs. 5,00,000.

Where a partner or designated partner fails to comply with an order within 90 days from the date of receipt of order, shall be punishable with imprisonment which may extend to 6 months or with fine which shall not be less than Rs. 25,000 but may extend to Rs. 1,00,000, or both.

Decriminalizing certain offences: The Bill seeks to decriminalize numerous sections bearing in mind the harsh consequences of criminal proceeding on the overall functioning of the LLP.



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