The Ministry of Corporate Affairs (MCA) has notified the effective date for provisions of the Limited Liability Partnership (Amendment) Act, 2021 shall be April 1, 2022.
“In exercise of the powers conferred by sub-section (2) of section 1 of the Limited Liability Partnership (Amendment) Act, 2021 (31 of 2021), the Central Government hereby appoints the 01st day of April 2022 as the date on which the provisions of sections 1 to 29 of the said Act shall come into force,” the notification read.
The Amendment Act has introduced the concept of Small LLP which is aimed to be in line with the concept of small companies under the Companies Act, 2013. The Amendment Act has defined Small LLP as a limited liability partnership. The contribution of which is up to INR 2,500,000 or such other amount as may be prescribed, not exceeding INR 5,00,00,000; and turnover of which is up to INR 40,00,000 or such other amount as may be prescribed, not exceeding INR 500,000,000, for the preceding financial year.
Pursuant to the Amendment Act, Small LLPs and start-up LLPs will have an advantage over other LLPs when facing penalties in event of default.
The Amendment Act provides that the penalty payable for non-compliance of the LLP Act by a Small LLP or a Start-Up LLP or by its partner or designated partner shall be one-half of the penalty specified, subject to a maximum of INR 1,00,000 for limited liability partnership and INR 50,000for every partner or designated partner or any other person, as the case may be.
In terms of the LLP Act, every LLP is required to have at least 2 designated partners, out of which at least 1 has to be a resident of India. The LLP Act previously defined the term resident of India as a person who has stayed in India for 182 (one hundred and eighty-two) days during the immediately preceding 1 year. Pursuant to the Amendment Act, a person who has lived in India for not less than 120 (one hundred and twenty) days during the financial year is also entitled to become a designated partner of an LLP.
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