Govt to decriminalise 12 offences under LLP Act for ease of doing business

The corporate affairs ministry on Wednesday said it plans to decriminalise 12 offences as well as omit a provision entailing criminal liability under the Limited Liability Partnership (LLP) Act, 2008, for greater ease of doing business for law-abiding LLPs.

"The government treats Honest and Ethical Corporate entrepreneurs as wealth creators and nation builders.

"The objective of the de-criminalisation exercise is to remove criminality of offences from business laws where no malafide intentions are involved... an exercise was undertaken to identify those provisions of the LLP Act, violations of which do not result in injury to the public interest but are presently criminal in nature with fine as well as punishment after conviction being provided for in the Act," an official release said.

Offences that relate to minor/ less serious compliance issues, involving predominantly objective determinations, are proposed to be shifted to the In-House Adjudication Mechanism (IAM) framework instead of being treated as criminal offences.

Further, offences that are more appropriate to be dealt with under other laws are proposed to be omitted from the LLP Act.

For non-compoundable offences that are very serious violations entailing an element of fraud, intent to deceive and caused injury to the public interest or non-compliance of the order of statutory authorities impinging on effective regulation, status quo would be maintained, as per the release.

"In all, 12 offences are proposed to be decriminalised and 1 provision (Section 73) entailing criminal liability is proposed to be omitted. The 12 de-criminalised offences would then get shifted to IAM thereby de-clogging the criminal courts from routine cases," it noted.

Further, the ministry plans to introduce certain new concepts in the LLP Act for greater ease of doing business.

One proposal is to create small LLPs in line with the concept of small companies.

"Such small LLPs would be subject to lesser compliances, lesser fee or additional fee and lesser penalties in the event of default. Thus, lower cost of compliance would incentivise unincorporated micro and small partnerships to convert into the organised structure of an LLP and derive its benefits," the release said.

Further, LLPs will be allowed to raise capital through the issuance of fully secured Non-Convertible Debentures (NCDs) from investors regulated by Sebi or the RBI.

According to the ministry, such a move will help deepen the debt market as well as enhance the capitalisation of LLPs.

Also, Section 29 of the LLP Act is proposed to be amended to reduce the additional fee of Rs 100 per day, presently applicable for the delayed filing of forms, documents.

"A reduced additional fee is expected to incentivise smooth filing of records and returns of LLPs and consequently result in an updated registry for proper regulation and policymaking," the release said.