Decriminalising the Limited Liability Partnership Act, 2008

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Limited Liability Partnership (LLP) is a body corporate formed and incorporated under the Limited Liability Partnership Act, 2008, and separate from its partners. This kind of partnership will have perpetual succession. Any change in partners will not affect the existence, rights, or liabilities of the limited liability partnership. In LLP, each partner is not responsible or liable for another partner's misconduct or negligence.

Recently, the Ministry of Corporate Affairs recommended decriminalizing 12 offenses under Limited Liability Partnership Act, 2008 and issuing Non-Convertible Debentures (NCDs) to raise funds so that LLPs can perform their business smoothly. Decriminalization means that anyone who commits any offence under the 12 offences would not be imprisoned but would have to pay a fine to the grieving party. If the offence contains a huge amount as a fine then the fine would be lessened under decriminalization.

The following are the provisions that are recommended to be decriminalized are as follows:(See here)

1. Section 7- Designated Partner

2. Section 10- Change in Penalty

3. Section 13- Failure to comply with the provision related to notice for change in Registered Office

4. Section 21- Publication of Name

5. Section 25- Registration of Changes in Partners

6. Section 34- Maintenance of books of accounts, other records, and audit, etc.

7. Late filing of Annual Return

8. Compromise or Arrangement or Limited Liability Partnerships

9. Provisions for facilitating reconstruction or amalgamation of limited liability partnerships

10. Order of Tribunal

11. General Penalties

This move was made mainly to reduce the backlog of cases in courts and to remove the misconduct of offences when no criminal intent is involved. The offences which neither have any criminal nature nor do they injure the public interest have been decriminalized and instead be adjudicated by In-House Adjudication Mechanism. 

Section 77A has been inserted in this Act for this type of adjudication. It states that the Central Government may appoint officers, not below the rank of Registrar for adjudicating such offences. As for the very serious offences which cause injury to the public interest or are committed with the intent of causing fraud or deceit, the status quo is the same as before. 

The concept of small LLPs has been introduced under this act which contains lesser penalties as compared to other LLPs. This concept has been introduced so that they can enjoy the same privileges as small companies under the Companies Act, 2013.

Thus, it can be concluded that this decriminalization will be helpful in unclogging the pending litigation against LLPs who have committed these offences and that a simple adjudication would be more than enough. 

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