The Author, Jyotsana Yamini, is 5th year student of BA.LLB (H) at Law College, Dehradun, Uttaranchal University, Uttarakhand. She is currently interning with LatestLaws.com.
Seeing the market need of the country, the government of India has enacted the limited liability partnership act,2008. This was done in order to make provisions for the formation and regulation of limited liability partnerships and for matters connected therewith or incidental thereto.Unlike the other Acts,this Act is applicable to the whole of India Including the State of Jammu and Kashmir. Section 1 of the Act clearly states the jurisdiction of the Act.
Government had also in the year 2006 introduced the limited liability partnership bill but it was lapsed there. Then again the bill was freshly introduced in the year 2008.
The said bill came after the recommendation of the Naresh Chandra Committee on ‘Regulation of Private Companies and Partnership”. And also from the report of Dr. J. J. Irani Committee formed to give opinion on the current ‘Company law’.
Q1. When did the Limited Liability partnership Act, 2008 came into force?
Ans. the limited liability partnership bill was introduced in the parliament on October 21,2008.after clearance by the parliament. It received the accent of the president on 7 january 2009.The Act came into force on 31st March 2009 as the limited liability partnership act,2008.
Q2. What is limited liability partnership?
Ans. According to Section 2(n) of Limited Liability Partnership Act, 2008, Limited liability partnership means partnership formed and registered under the Act. Basically, limited liability partnership is the partnership in which the partners have limited liability equal to the share in the capital.
Q3. Salient features of Limited Liability Partnership Act,2008.
- Limited liability partnership is a body corporate and unlike the principles of partnership, it is a separate legal entity. Here the partners are only liable up to their agreed contribution.
- The limited liability partnership provides the benefits of both the company and the Partnership.
- the Limited Liability Partnership is under an obligation to maintain its annual accounts .A statement of accounts and solvency shall be filed by every such partnership with the Registrar every year.
- It allows the professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner.
- The central government is given power to investigate the affairs of the limited liability partnership, whenever required under the Act.
- A firm, private company or an unlisted public company can be converted into a Limited Liability Partnership in accordance with the provisions of the Act.
- Now the provisions of the partnership Act,1932 is not applicable to the limited liability partnerships.
Q4. What is minimum number of the partners required in a Limited Liability Partnership firm and who can become partners of the limited liability partnership firm?
Ans. the minimum number of partners required under the act is two(2) and Any person who is of sound mind, insolvent and has not applied for adjudication for insolvency can become the partners under the limited liability partnership Act,2008.
Q5. What is Limited Liability Partnership agreement under the Act?
Ans. “limited liability partnership agreement” means any written agreement between the partners of the limited liability partnership or between the limited liability partnership and its partners which determines the mutual rights and duties of the partners and their rights and duties in relation to that limited liability partnership.
Q6. How is LLP different from Partnership?
In LLP, liability of each partner is in proportion of their shares invested whereas in partnership, there is unlimited liability of the partners. Also, with the minimum of 2 partners required in both LLP and Partnership, the maximum limit differs as in Partnership there can be maximum of 20 members while in LLP there is no limit as to maximum number of partners.
The introduction of the Limited Liability Partnership as an separate statutory law and with the provisions different from the partnership Act,1932 will provide a platform to small and medium enterprises and professional firms of company secretaries, chartered accountants, advocates etc. to conduct their business/profession efficiently.
Thereby increasing the global competitiveness. In the present era it is considered as an alternative corporate business vehicle that provides the benefits of limited liability but at the same time allows the person the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.
Limited Liability partnership is basically a body corporate with perpetual succession but it is a separate legal entity from its partners. By the current Act any change in the partners of such partnership does not affect it liabilities of the limited liability partnership. It is expected that the Limited Liability Partnership will act as an engine of growth for economic development of the country and would lead to the growth of professional services in the country.