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Cabinet clears amendments to LLP Act "EMPOWER IAS"

Cabinet clears amendments to LLP Act "EMPOWER IAS"

Context: 

  • The Cabinet recently cleared amendments to the Limited Liability Partnership (LLP) Act of 2008.

 

About the amendment:

  • The amendments also include a new definition for small LLPs and would benefit the 2.3 lakh LLP firms currently operational in the country.
  • Law-abiding corporates where to get Ease of Doing Business benefits and part of the criminality related sections would be replaced with penalties.
  • Of the 24 penal provisions in the Act, one would be omitted and a total of 12 cognisable offences were being decriminalised.

 

Limited Liability Partnership

  • About:
  • It is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities.
  • In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence.
  • The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.
  • The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.

What is a LLP?

  • Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations.
  • In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence.

 

Salient features of an LLP:

  • An LLP is a body corporate and legal entity separate from its partners. It has perpetual succession.
  • Being the separate legislation (i.e. LLP Act, 2008), the provisions of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by the contractual agreement between the partners.
  • Every Limited Liability Partnership shall use the words “Limited Liability Partnership” or its acronym “LLP” as the last words of its name.

 

Composition:

  • Every LLP shall have at least two designated partners being individuals, at least one of them being resident in India and all the partners shall be the agent of the Limited Liability Partnership but not of other partners.

 

About the Limited Liability Partnership (LLP) Act of 2008:

  • The Limited Liability Partnership Act, 2008 was enacted by the Parliament of India to introduce and legally sanction the concept of LLP in India.
  • LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.
  • Limited liability is where a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership.
  • The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.
  • The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.
  • Further, no partner is liable on account of the independent or unauthorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.