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TMI BlogEXPLANATORY NOTES TO LLPX X X X Extracts X X X X X X X X Extracts X X X X ..... nto account the various points of view. 5. The Ministry invites suggestions for improvement of the paper. Once the concepts are frozen after public debate and completion of consultation process, necessary changes will be proposed and finalized. Thereafter, the Limited Liability Partnership Bill will be framed for introduction in the Parliament. 6. It will be appreciated if the suggestions are given, in a tabular form, against each section. All suggestions must, however, reach the Ministry (by post addressed to Shri B M Anand, Joint Director, Ministry of Company Affairs, Room No 539, A Wing, Shastri Bhawan, New Delhi or by e-mail at [email protected]) latest by 31-12-2005. 7. These explanatory notes have been made to assist the reader in understanding the paper and need to be read in conjunction with the paper. However, they are not meant to be a comprehensive description of the paper. Background 8. The idea that there should be the opportunity in India to organise as an LLP emerged out of the Report of the Naresh Chandra Committee on Regulation of Private Companies and Partnership and Report of the Expert Committee on Company Law (Dr. J. J. Irani Committee). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Chapter III - Incorporation 4. Chapter IV - Partnership 5. Chapter V - Extent and Limitation of Liability 6. Chapter VI - Duties and Standards of Conduct 7. Chapter VII - Contributions 8. Chapter VIII - Financial Disclosures 9. Chapter IX - Taxation 10. Chapter X - Assignment and Transfer of Partnership Rights 11. Chapter XI - Investigation 12. Chapter XII - Conversion to Limited Liability Partnership 13. Chapter XIII - Foreign Limited Liability Partnership 14. Chapter XIV - Amalgamation, Merger and Demerger of Limited Liability Partnerships 15. Chapter XV - Winding Up and Dissolution 16. Chapter XVI - Miscellaneous Schedules 1. First Schedule - Default provisions for limited liability partnerships. 2. Second Schedule - Conversion from firm to limited liability partnership. 3. Third Schedule - Conversion from private company to limited liability partnership. 4. Fourth Schedule - Conversion from unlisted public company to limited liability partnership. 5. Fifth Schedule - Penalties. 14. Commentary on Chapters Chapter I - Preliminary The preliminary chapter contains the provisions relating to short title, commencement and extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eto. The statement must be made by a subscriber to the incorporation document and by either an advocate, or a Company Secretary, or a Chartered Accountant in whole time practice in India, who is engaged in the formation of the LLP. The incorporation document must contain information such as the name of the LLP, its proposed business, address of its registered office, the name, address and photographs of the persons who are to be its partners and manager(s) on incorporation. If a person makes a statement under section 8(1)( c ) that he knows to be false or does not believe to be true he shall be punishable under the Act. When the registrar receives the incorporation document he will retain and register it. Once the documents have been registered, the registrar will issue a certificate that the LLP is incorporated by the name specified in the incorporation document. A statement that is delivered under section 8(1)( c ) may be accepted by the registrar as sufficient evidence that the requirement in section 8(1)( a ) has been complied with. The certificate issued by the registrar is an evidence that all the requirements have been complied with. Every LLP is required to have a reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a partner, the manager of the LLP shall within thirty days from the date on which the partner becomes or ceases to be a partner notify the registrar in the prescribed form and manner. In case of admission of a partner, a statement by the incoming partner that he consents to be a partner should also be filed in the prescribed form and manner. Similarly where there is any change in the name or address of a partner, the same shall be notified. If a person ceases to be a partner and believes that the LLP shall not lodge the statement with the Registrar, he shall himself lodge it. Chapter V - Extent and Limitation of Liability Each partner of the LLP is an agent of the LLP but not of other partners. Therefore, a partner shall be held personally liable for his own wrongful act or omission, but will not be liable for the wrongful act or omission of any other partner of the LLP. An LLP is however, not bound by the actions of a partner where that partner has no authority to act for the LLP, and the person dealing with the partner is aware of this or does not know or believe that the partner was in fact a partner of the LLP. Further, where a partner of an LLP is liable to a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides false information, shall be punishable under the Act. He shall also have the powers to enforce the lodging or filing of any return, account or other document. Further, the Registrar may destroy any document lodged, filed or registered with it, if it is no longer necessary or desirable to retain the same. Regulations to the Act shall prescribe the offences which may be compounded by the Central Government under this Act. A limited liability partnership shall take all reasonable precautions to maintain the records it is required to maintain under sub-section (1) of section 27 in a manner so as to prevent loss or destruction thereof prevent falsification of entries and facilitate detection and correction of inaccuracies. Chapter IX - Taxation This chapter ensures that the partners of an LLP which is carrying on a business with a view to profit are treated for the purposes of income tax and capital gains tax as if they were partners carrying on a business in partnership, despite the fact that an LLP is a body corporate. It also provides that the property of the LLP shall be treated for those purposes as property of its partners. This ensures that partners will be indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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