The Limited Liability Partnership Act 2008 came into force from 31st March 2009. The Act is a hybrid of the Companies Act 1956 and the Indian Partnership Act 1932, however provision of Partnership Act shall not apply here. The act aims at providing extended rights to the members of a partnership firm almost similar to those granted to a company under the Companies Act. The act applies to all the partnership firms registered under this act and partnership firms and companies incorporated outside India. However corporation sole and co-operative societies have not been brought within its ambit as given under section 2 sub-clause (d).
Section 3 of the act states the nature of the limited liability partnership and defines it as a body corporate having perpetual succession independent of the identity of its partners. Any person under the act can become a partner in such firm provided he is not insolvent or of unsound mind and the minimum number of partners required are two under the Act out of which one shall be an Indian resident and such firm shall also have minimum two designated partners as given under section 7(1). The designated partner of such firm are required to obtain Designated Partnership Identification Number (DPIN) as mandated under the companies Act. Such designated partners shall be unequivocally responsible for the acts along with the other partners of the firm under section 8. Incase a partnership firm does not appoint such designated partner the firm is liable for fine of ten thousand rupees which may extend to five lakh rupees.
Section 11 of the Act deals with the incorporation of the Partnership firm under which the partners of the firm will have to fulfil certain essential requisites which includes the filling of form, names of partners and designated partners, the purpose and the address of such partnership. Once these necessary formalities are complete the registrar shall issue a certificate of registration under section 12. Once a firm is registered it shall become a limited liability partnership and can sue and be sued on its name, can acquire, dispose of properties. Such a firm shall also have a common seal. The partnership firm shall have a name ending with Limited Liability Partnership or acronym LLP. The name shall not be undesirable or identical to the name of another partnership firm.
Once a firm gets a status of Partnership Firm under the act all the members shall become partners to such firm and shall be jointly and severally liable for the acts of one another under an agreement signed by partners on incorporation of the firm. In absence of any such agreement the mutual rights and duties shall be similar to those set under first schedule of the Act as given under section 23.
A person shall cease to be a partner in the firm only after he notifies it to the firm under an agreement and the same is conveyed to the registrar. Incase a person does not notify his cessation as a partner the person continues to be a member. Apart from this incase of insolvency and unsoundness of mind or death a person ceases to be a partner in the firm. Such partner shall be entitled to his share to the extent of his contribution in the firm even after he ceases to be a partner. Any change made in such firm shall be declared to registrar contravention shall invite penalty under the act.
Every partner of the firm is an agent to the partnership firm. The partnership firm shall not be liable for the acts of the partners. Such partnership firm is only liable incase an act is done in course of business or under a contract. Section 30 provides for unlimited liability of partners in case of any fraud. Section 31 is an important section under which the government is empowered to reduce or waive of penalty of a partner who helps in finding out a fraud. Under section 34 the firm shall maintain proper accounts and records and shall also prepare Statement of account and solvency. Incase of default the firm shall be liable for penalty. The government under the act can appoint inspectors to look into affairs of the company. Where an inspector has reasonable ground to believe that the books and records relating to firm have been changed or destroyed, he shall file an application before Judicial Magistrate first class who shall further direct investigation under Chapter IX of the Act.
Section 63 deals with voluntary and compulsory winding up of such firms. The firm shall be wound up by the tribunal incase the number of members reduce below two or firm becomes insolvent along with others reasons as given under section 64. Under section 67 the Central government is empowered to apply provisions of the Companies Act 1956. The proceedings under the act other than winding up shall be done by National Company Law Appellate Tribunal and till the formation of this body the matters shall be looked into by high court or company law board under section 81.
Thus we can say that the act is an effort to recognise small scale business ventures. The act not only benefits the partnership firms but also imposes reasonable restrictions to keep a check on the activities of such firms.
by Vibhuti Nakta