The Central Government had introduced the recently amended Limited Liability Partnership Amendment Bill 2021 in Rajya Sabha on 29 July 2021. The approval to LLP Amendment was given on 28th July 2021. This Amendment decriminalized certain provisions of the LLP Act. The primary change that was proposed in the bill was the decriminalization of certain offences. Some of the changes prescribed in the LLP Bill are:

Key Points on LLP Amendment Act 2021

Some of the key points on LLP Amendment Act 2021 are as follows:

1. Under the LLPs, a total of 12 offences has been decriminalized.
2. Many startups will get benefitted from the ease of doing business.
3. To provide ease to law-abiding corporates in LLP firms criminality has been removed.
4. The decriminalized offences (12 offences) gets shifted to an internal adjudication mechanism to help unclog criminal courts from the routine cases.
5. In order to encourage entrepreneurs, the Government has also approved to create a class of small LLPs. These LLPs are subjected to fewer compliances, reduced or additional fees and smaller penalties in the case of default.
6. These changes include removing the criminal action for failure to comply with the provisions of the LLP Act. These will help around 2.30 lakh firms in the entire nation.
7. To boost the theory of Atmanirbhar Bharat, a penalty in the form of a fine has been decided for violating the general trend.

LLP Amendment 2021-Explained in Detail

The varied amendments made in LLP Act has been explained below:

1. Small LLPs Introduced

• The LLP Amendment Act introduced the concept of "Small Limited Liability Partnership".
• It is similar to the concept of "small company" explained under the Companies Act, 2013.
• According to the bill, a small limited partnership is an LLP contributing up to Rs. 25 lakh (Govt has the power to raise the limit to  Rs. 50 crores).

1. De-Criminalization of all Monetary Penalties

Currently, there are 24 criminal provisions of which 21 are compoundable and three are non-compoundable. The overall number of the criminal provisions specified under the LLP Act has been reduced to 22. Compoundable offences have been reduced to 7, non-compoundable offences to 3. The number of defaults that can be dealt with the In-House Adjudication Mechanism has been reduced to only 12. 

1. Accounting Standards for All Classes of LLPs

To support with Companies (Accounting Standards) Rules, the LLP Amendment Act has proposed Accounting standards for a class or classes of the LLP. The standards of accounting have been prescribed by the Central Government in consultation with National Financial Reporting Authority. LLP Amendment also prescribes the standards of auditing as recommended by the Institute of Chartered Accountants of India as per Section 3 of the Chartered Accountants Act, for class or classes of the limited liability partnership.

1. Compounding of any Offence

The LLP Amendment Act proposes to permit the Regional Director or any other officer who are not below the rank of Regional Director to compound any offence prescribed under the LLP Act that is punishable with a fine. Every application with regard to the compounding of offence is to be made to the Registrar. The Registrar shall then forward the same along with his/her comments to the Regional Director or any other officer not below the rank of Regional Director that is authorized by the Central Government.

1. Establishing Special Court for Speedy Trial of Offences

As per LLP Amendment, the Central Government establishes or designates special courts intending to provide speedy trials of the offences specified under the LLP Act. The Special Court prescribed here shall consist of:

• A Single Judge holding the office as sessions judge or an Additional Sessions Judge -for offences with imprisonment of 3 or more years as specified under the LLP Act.
• A Metropolitan Magistrate or a Judicial Magistrate of the first class for other offences.
• This bill seeks to empower the special courts to tray any offence other than the offence under this Act where the accused may be charged as per Code of Criminal Procedure, 1973.

1. Establishing Appellate Tribunal

This LLP Amendment to bring more clarity concerning the filing of the application and also to provide relief to the aggrieved party has proposed to appoint officers to adjudicate penalties under the LLP Act.

Conclusion

The Government to ease business ways as well as to encourage the startup system introduced LLP Amendment 2021. It decriminalized 12 offences specified under the law. Besides the Government is also planning to introduce a new definition under the amended Act.

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