Topic : Limited Liability Partnership (Amendment) Act, 2021 – A balancing act

Date : 24-09-2021

Name :CS Pratik Jain (M No - A61747)

Change is the only constant, the Laws of the Land are no exception to this rule. As the society changes there comes a need to change Laws, which in the end regulates and standardize the behaviors of the society

Last Parliament session went under unstoppable uproar on Pegasus issue and protest against Farm Laws. The Rajya Sabha Chair Mr. M Venkiah Naidu broke into tears following an incident inside the House in which some member of the Upper House sat on the tables and even climbed on the tables, he expressed that the sacredness of the house was destroyed. Nevertheless the house functioned amid ruckus.

As many as 17 Bills were passed by the Parliament despite the ruckus by the opposition, amongst them was Limited Liability Partnership (Amendment) Bill, 2021.

In a constant endeavor towards the Ease of Doing Business (EODB) and to decriminalize the LLP Act, 2008 the Central Government proposed the Bill. The objects of the Bill inter-alia include:

1. to introduce the concept of ‘small LLP’ in line with the concept of ‘small company’ under Companies Act, the new concept will encourage the entrepreneurs to incorporate LLP’s as ‘small LLP’ will be exempted from various provisions of the LLP Act.
2. to convert certain offences into civil defaults.
3. to insert a new section 34A so as to empower the Central Government to prescribe the 'Accounting Standards' or 'Auditing Standards' for a class or classes of limited liability partnerships
4. to insert a new section 67A empowering the Central Government to establish or designate as many 'Special Courts' as may be necessary for the purpose of providing speedy trial of offences under the Act;
5. to insert a new section 76A so as to provide that the Central Government may appoint as many officers as Adjudicating Officers as it thinks necessary for the purpose of adjudicating penalties under the Act.

From the above mentioned objects certainly we can derive that the motive of the Central Government in proposing the amendments were EODB and to promote the corporate forms of businesses. But if one go through the amendments carefully it is also very clear that on one side the Government is promoting the business but at the same time also insertion of Section 67A and 76A in the Act is clear signal that although the penal provisions have drastically reduced but at the same time establishments of Special Courts and appointment of Adjudicating Officers the Government is in no mood to spare those who are non-compliant of the LLP Act. The Government is playing a beautiful balancing act to ensure that there exists Ease of Doing Business but at the same time the investment community or the stakeholders are very well protected. The newly inserted Section 34A which empowers the Central Government to prescribe Accounting and Auditing Standards is also a step in this direction.

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