THE LIMITED LIABILITY PARTNERSHIP (SIGNIFICANT BENEFICIAL OWNERS) RULES, 2023

[Mr. M. GOVINDARAJAN]

Significant beneficial owner

A beneficial owner is a person who enjoys the benefits of ownership even though the title to some form of property is in another name.  It also means any individual or group of individuals who, either directly or indirectly, has the power to vote or influence the transaction decisions regarding a specific security, such as shares in a company.

Section 90(1) of the Companies Act, 2013 provides that Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than twenty-five per cent. or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control  shall make a declaration to the company, specifying the nature of his interest and other particulars, in such manner and within such period of acquisition of the beneficial interest or rights and any change thereof, as may be prescribed.

Rules

The obligation of significant beneficial owners under Companies Act, 2013 has now been extended to Limited Liabilities Act, 2008.  The Central Government, for this purpose, made a rule called as ‘The Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023 vide Notification dated 09.11.2023.  The provisions of these Rules came into effect from 09.11.2023.

Definition

Rule 3(1)(k) defines the expression ‘significant beneficial owner’ in relation to the reporting Limited Liability Partnership (‘LLP’ for short) as an individual who acting alone or together or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting LLP-

1. holding indirectly or together with any directing holdings, not less than 10% of the contribution;
2. holds indirectly or together with any direct holdings, not less than 10% of the voting rights in respect of the management or policy decisions in such LLP;
3. has right to receive or participate in not less than 10% of the total distributable profits or any other distribution, in a financial year through indirect holdings alone or together with any direct holdings;
4. has right to exercise or actually exercises, significant influence or control, in any manner other than through direct holdings alone.

Non applicability of Rules

These rules shall not be applicable to the extent of contribution of the reporting LLP is held by-

• the Central Government, State Government or any local authority;
• a body corporate; or
• an entity controlled by the Central Government or by one or more State Governments or partly by the Central Government and partly by one or more State Governments;
• an investment vehicle registered with and regulated by Securities and Exchange Board of India such as-

• mutual funds;
• alternative investment funds;
• real estate investment trusts;
• infrastructure investment trusts;

• any investment vehicle regulated by the-

• Reserve Bank of India;
• The Insurance Regulatory and Development Authority of India; and
• The Pension Fund Regulatory and Development Authority.

Reporting LLP

The expression ‘Reporting Limited Liability Partnership’ is defined under Rules 3(1)(i) as a LLP required to comply with the requirements of section 90 of the Companies Act, 2013 as modified in this rules.

Rule 4 provides the duty and obligations of the reporting LLP.  Every reporting LLP shall take steps to find out the significant beneficial owner in relation to the reporting LLP.  If identified the reporting LLP shall cause such individual to make declaration in LLP BEN - 1.  Every reporting LLP shall in all cases where its partner (other than individual) holds not less than 10% of its-

• contribution; or
• voting rights; or
• right to receive or participate in the distributable profits or any other distribution payable in a financial year

give notice to such partners in Form LLP BEN - 4 in seeking information.

Declaration

Rule 5(1) provides that every individual who is a significant beneficial owner in a reporting LLP, at the time of commencement of these Rules, shall file a declaration in Form LLP BEN - 1 to the reporting LLP within 90 days from the date of commencement of these rules.

Rule 5(2) provides that every individual who becomes a significant beneficial owner, subsequent to the commencement of these rules or where his beneficial undergoes any change shall file a declaration in Form LLP BEN - 1 within 30 days of such acquiring such beneficial ownership or any change therein.

Rule 5(3) provides that an individual becomes a significant beneficial owner or undergoes any change within 90 days from the commencement of these Rules, it shall be deemed that such individual became the significant beneficial owner or any change therein happened on the expiry of 90 days from such commencement and the period of 30 days for filing will be reckoned accordingly.

Return by reporting LLP

On receipt of declaration from the significant beneficial owner in Form LLP BEN - 1, the reporting LLP shall file a return in Form LLP BEN - 2 with the Registrar of Companies in respect of such declaration within 30 days from the date of receipt of such declaration along with the required fees.

Register

The LLP shall maintain the register of significant beneficial owner in Form LLP BEN - 3 which shall be open for inspection during business hours at a reasonable time of not less than 2 hours on every working day as may be decided by LLP or by the partners of LLP on payment of fees as prescribed by the LLP but not exceeding Rs.50/- for each inspection.

Seeking information

Rule 8 provides that the LLP shall give notice in Form LLP BEN - 4 for seeking information.

Application to Tribunal

The reporting LLP shall file an application before the Tribunal-

• where any person fails to give the information required  by the Notice in Form LLP BEN -4 within the time specified;
• where the information given is not satisfactory,

for directing that the contribution in question be subject to such restrictions as Tribunal deems fit, including-

• restrictions on transfer of interest attached to the contribution in question;
• suspension of the right to receive profits or any other distribution in relation to the contribution in question;
• suspension of voting rights in relation to the contribution in question;
• any other restriction on all or any of the rights attached with the contribution in question.