LLP - LATEST ADVANTAGES.

[Mr. M. GOVINDARAJAN]

                        The concept of ‘Limited Liability Partnership’ (‘LLP’ for short) is gaining momentum nowadays.  The first LLP was registered on 02.04.2009.   As of 08.08.2011, 5868 LLPs were registered.  Having all the characteristics of a company registered under the Companies Act, 1956 LLP will have all the facilities provided to a company. The latest two advantages added to LLP are discussed in this article.

LLP – MEMBER OF STOCK EXCHANGE:

                        Securities Contract Regulation Act deals with the functioning of stock exchanges.  The Securities Contract Regulation Rules do not explicitly mention the ‘LLP’ since the concept of LLP was a consequent development.   Rule 8 provides the qualifications required for a membership of a recognized stock exchange.   Rule 8 (4A) allows a company as defined in the Companies Act to be elected as a member of stock exchange if-

• Such company is formed in compliance with the provisions of Section 12 of the Companies Act, 1956;
• Such company undertakes to comply with such financial requirements and norms as may be specified by the Securities and Exchange Board of India for the registration of such company under Section 12(1) of Securities and Exchange Board of India Act, 1992;
• The directors of the company are not disqualified from being members of a stock exchange and the Directors of the company had not held the offices of the Directors in any company which had been a member of the stock exchange and had been declared defaulter or expelled by the stock exchange; and
• Not less than two directors of the company are persons who possess a minimum two years experience-
  • In dealing in securities; or
  • As portfolio managers; or
  • As investment consultants.

Rule 8(5) also allows a partnership firm to be a member of the stock exchange.

                        SEBI received many requests from various stock exchanges to permit LLP to be admitted as members of stock exchange so as to enable to get registration as stock broker under SEBI (Stock Brokers and Sub-brokers) Regulations, 1992. 

                        SEBI considered granting membership to LLPs subject to LLP complying with the conditions laid down in Rule 8(4A) of the Securities Contract Regulations Rules, as far as it can apply to LLPs since Parliament has put in place a legal framework for LLPs.  In Circular No. CIR/MIRSD/12/2011, dated 11.07.2011 SEBI issued instructions to stock exchanges to-

•  bring the provisions of this clarifications relating to admissibility of LLP as a member of stock exchange to the notice of the stock brokers and also disseminate the same on their websites;
•  make necessary clarificatory amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision in co-ordination with one another to achieve uniformity in approach.

INTEGRATION OF DPIN AND DIN:

                        The designated partners play a vital role in the management of LLP like that of Directors in a company registered under the Companies Act, 1956.   The designated partners are responsible for doing all the acts, matters and things as are required to be done by the LLP in respect of compliance of the provisions of the LLP Act including filing of any document, return, statement and the like report pursuant to the provisions of the LLP Act and as may be specified in the LLP agreement.

                        Minimum two designated partners who are individuals are mandatory.   One of them shall be a resident in India.  One should necessarily be a partner to become a designated partner.  Every designated partner shall obtain a Designated Partner Identification Number (DPIN).   For obtaining DPIN the application should be made in Form no.7 along with identity proof, proof of residential address and a passport size photograph duly certified by the authorities mentioned in Rule 10(5) of LLP Rules and Forms, 2008.  Where the individual is already having DPIN, he is not required to get DPIN again.   He has to intimate his DPIN number for this purpose to the Central Government in Form 25. 

                        The Ministry of Corporate Affairs thus issued two separate identifications number as DIN to an individual for becoming a director of a company under the Companies Act and also DPIN for a designated partner in a LLP under LLP Act, 2008.   It is possible for one individual to get DIN and also DPIN.  To avoid this multiplicity and to give ease to the stakeholders, the Ministry of Corporate Affairs has decided to issue only one identification number to an individual for both the purpose.

                        The Ministry, therefore, integrated the DIN issued under the Companies Act and DPIN issued under LLP Act with effect from 09.07.2011 vide Notification dated 05.07.2011.   Further vide its Circular No. 44/2011, dated 08.07.2011 the Ministry issued the following instructions in regard to the integration of DIN and DPIN:

• With effect from 09.07.2011 no fresh DPIN will be issued.   Any person, who desires to become a Designated partner in a LLP has to obtain DIN by filing e-form DIN-1;
• If a person has been allotted DIN, the said DIN shall also be used as DPIN for all purposes under LLP act;
• If a person has been allotted DPIN the same can also be used as DIN for the purposes of Companies Act, 1956;
• If a person has been allotted both DIN and DPIN, his DPIN will stands cancelled and his DIN will be used as DIN as well as DPIN for the purposes of Companies Act and LLP Act.