Centre plans to decriminalise provisions of LLP Act, invites comments

The government plans to decriminalise various provisions of the Limited Liability Partnership (LLP) Act as part of efforts to provide greater ease of doing business as well as to de-clog the criminal justice system.

More than 1.45 lakh LLPs are registered under the LLP Act and a bulk of them are small and medium enterprises.

"The exercise to identify and decriminalise the provisions of the Act is aimed at incentivising compliance, de-clogging of criminal justice system and promoting congenial business climate," the corporate affairs ministry said in a communication on Friday.

The ministry, which is implementing the LLP Act, has sought comments from stakeholders on the proposed changes by July 4.

It has been decided to review the penal provisions of the Act to decriminalise compoundable offences involving minor, procedural or technical violations. Offences that may not involve any harm to public interest would also be reviewed, according to the ministry.

Generally, compoundable offences are those that can be settled by paying certain amount of money.
 

Non-compliance with norms regarding eligibility and appointment of designated partners, registration of changes in partners, maintenance of books of account and filing of annual return, among others, are proposed to be decriminalised.

"Criminalisation of minor violations acts as an avoidable deterrent and impinges upon the business sentiments," the ministry said.

Sandeep Jhunjhunwala, partner at Nangia Andersen LLP, said the ministry seems to be planning for an overhaul of penal provisions applicable for filing or reporting non-compliances by the partners of limited liability partnership firms, which do not involve substantial violations or are not contrary to the larger public interest.

LLP Act has 81 sections and 4 schedules.

The ministry has already decriminalised various offences under the Companies Act, 2013.

LLP is an alternative corporate business vehicle that provides the benefits of limited liability but allows its members the flexibility of organising their internal structure as a partnership based on a mutually arrived agreement.

LLP Act, 2008, is intended to bridge the gap between a company governed by the Companies Act and a general partnership firm governed by the Partnership Act, 1932, as per the communication.