Ministry of Corporate Affairs introduces the Companies “Fresh Start” Scheme and Revision of LLP Settlement Scheme, 2020” to provide relief for the law-abiding companies and Limited Liability Partnerships. It has come against the backdrop of the coronavirus pandemic that has also resulted in the disruption of business activities.
Details of the Schemes are as Under:
(i) In a release, the Corporate Affairs Ministry said that the schemes are a part of efforts to provide relief to law-abiding companies and LLPs in the wake of COVID-19.
(ii) The MCA said that the fresh start scheme and revision of LLP Settlement scheme incentivise the compliance and reduce the burden of compliance during the unprecedented public health situation caused by COVID-19.
(iii) The Schemes provides a benefit of “one-time waiver of additional filing fees for delayed filings” by the companies and LLPs with the Registrar of Companies during the period of April 1st to 30th September 2020.
(iv) They also significantly reduce the related financial burden on them, especially for those with long-standing defaults, thereby giving them an opportunity to make a “fresh start”.
(v) The defaulting LLPs, which have filed their pending documents till 13th June 2020 and made good the default, shall not be subjected to prosecution by Registrar for such defaults.
(vi) According to the release, “both the schemes also contain a provision for giving immunity from penal proceedings, including against imposition of penalties for late submissions and also provide additional time for filing appeals before the concerned Regional Directors against the imposition of penalties, if already imposed,”
What is the Limited Liability Partnership (LLPs)?
Let me explain this in simple words. LLP is a Limited Liability Partnership. It’s an amalgamation of partnership and limited companies. In normal, the partnership of a company ends when the partnership ends. But in LLP company becomes a separate entity and it remains perpetual even if the original owners leave the company or someone else joins.
In an LLP one partner is not responsible or liable for another partner’s misconduct or negligence. In an LLP, all partners have limited liability for each individual’s protection within the partnership, similar to that of the shareholders of a limited company. However, unlike the company shareholders, the partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP’s employees or other agents.
LLP- A separate Legal Entity
LLP is a separate legal entity, liable to the full extent of its assets; the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
Salient Features of LLPs (Limited Liability Partnerships)
(a) Separate legal entity
(b) Easy to establish
© Flexibility without imposing detailed legal and procedural requirements
(d) Perpetual existence irrespective of changes in partners
(e) Internationally renowned form of business in comparison to Company
(f) No requirement of minimum capital contribution
(g) No restrictions as to the maximum number of partners
(h) LLP & its partners are distinct from each other
(i) Partners are not liable for Act of other partners.
(j) Personal assets of the partners are not exposed except in case of fraud.
(k) Easy to dissolve or wind-up
(l) Professionals like CS / CA / CWA / Lawyers can form Multi-disciplinary Professional LLP
(m) No requirement to maintain statutory records except Books of Accounts
(n) Less Cost of formation (Compared to a company)