LLP Settlement Scheme, 2020

LLP Settlement Scheme, 2020 – A sigh of relief for Defaulters

A Limited Liability Partnership has become one of the most sought-after businesses these days. Just as the name implies, it exhibits the blend of both partnership and corporation by offering the advantage of Limited Liability of a company and flexibility of a partnership. All LLPs are administered under the Limited Liability Partnership Act of 2008.

Reasons to initiate the scheme
It had been observed lately that a vast number of LLPs have defaulted in the filing of documents or statutory returns due to numerous reasons. Furthermore, the applicability of additional fees of INR 100/- per day for every day created an excessive financial burden on them, due to which the defaulting LLPs remained non-compliant, mainly on account of their incapacity to pay the fee. Also, the unavailability of records didn’t allow for inspection and ultimately, LLPs were unable to shut down until all compliances were completed.

About the scheme
The LLP Settlement Scheme has been introduced keeping in mind the ease of doing business as well as the ease of living to the citizens. It is a one-time opportunity/relaxation scheme given to the defaulting LLPs to file all the belated forms (or statutory documents) to save them from the criminal prosecution by the registrar of companies and to become a compliant LLP in the future.

Ministry of corporate affairs (MCA) through General Circular No. 6/2020 dated 04th March 2020 launched the ‘LLP Settlement Scheme 2020’. In continuation of the same, MCA has modified the said scheme through General Circular No. 13/2020 dated 30th March, 2020.

Amended scheme in a nutshell

Particulars Provisions as per General Circular No. 6/2020 dated 04th March, 2020 Provisions as per General Circular No. 13/2020 dated 30th March, 2020 (Modified)
Duration of the scheme From 16th March, 2020 To 13th June, 2020 From 01st April, 2020 To 30th September, 2020
Eligible LLPs Any ‘defaulting LLP’ is qualified to file its pending forms or documents, which were due for filing till 31st October, 2019. Any ‘defaulting LLP’ is qualified to file its pending forms or documents, which were due for filing till 31st August, 2020.
Fee Defaulting LLPs can file the form by making payment of additional fees of INR 10/- per day for each day till the default continues (Instead of INR 100/-)  in addition to the normal application fees, subject to a maximum of INR 5000/- per form. No additional fee is to be charged on belated documents other than the normal application fees.
Forms / Documents on which scheme is applicable i.Form-3

ii.Form-4

iii.Form-8
iv.Form-11

Applicable on ‘All Forms’ required to be filed under the Limited Liability Partnership Act, 2008
Scheme NOT applicable to LLPs which have made an application in Form-24 to the registrar, for striking off their name from the register as per provisions of Rule 37(1) of LLP Rules, 2009.
Exemption
from Prosecution
Non-Compliant LLPs which have filed their pending forms till 13th June, 2020 shall not be subjected to prosecution Non-Compliant LLPs which have filed their pending forms till 30th September,2020 shall not be subjected to prosecution

The point to be kept in mind is that, on the conclusion of the scheme, the registrar shall take required actions under the LLP Act, 2008 against those LLPs who have not availed the scheme and remained a defaulter.

All things considered, the scheme comes as a good opportunity to those LLPs who are facing financial hardships and are unable to complete or missed their filing due to a lack of knowledge of the law and proper guidance. LLP Settlement Scheme will surely provide a big relief and is a golden chance for defaulters to reduce their burden and rectify the non-compliances.

Here, at AJSH we do assist our clients in registration / incorporation of a LLP, annual compliances of LLPs and related services. If you have any questions or want to know more about LLPs, please click here.