LLP Settlement Scheme, 2020:AN Analysis From an Indian Law Perspective

Abstract

The concept of Limited Liability Partnership (LLP) in India was introduced with the introduction of the Limited Liability Partnership Act, 2008 (the Act) in the year 2009. Ever since, LLP’s have been a popular way to run operations in India, as they are viewed as an alternative corporate business vehicle which provides benefits of limited liability of a company and the flexibility of a partnership. Further, as the liability of the partners is limited to their agreed contribution in the LLP and it offers various advantages with regard to the flexibility of the operations, LLP seems to be a favorite with both promoters within India and from outside India. Additionally, unlike a traditional partnership setup, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability, created by another partner’s wrongful business decisions or misconduct. Keeping in view the growing popularity of LLP’s in India and as part of the Indian governments, efforts to promote the ease of doing business, the Ministry of Corporate Affairs, Government of India (the MCA) through a general circular number 6/2020, dated March 4, 20204, has introduced the LLP Settlement Scheme, 2020 (the Scheme)2 and subsequently through a modification through a general circular number 13/2020, dated March 30, 20205(Modification Circular). Upon a review of the wordings of the Scheme and the Modification Circular the intention of the MCA appears to be to enable the defaulting LLPs in India, a one-time relaxation by way of allowing a one-time condonation of delay in filing of certain statutorily required documents under the provisions of the Act and the allied rules made thereunder with the relevant governmental authority- i.e. the office of the relevant registrar, enabling it to serve as a compliant LLP in the future. This article analyses the applicability of the Scheme and the Modification Circular summarizes the procedural requirements provided therein and also provides a broad summary of the relaxations provided.