LLP Amendment Rules Bring Disclosure Requirements Akin To Companies Act

The Ministry of Corporate Affairs has recently issued the Limited Liability Partnership (Third Amendment) Rules, 2023, to introduce amendments to the Limited Liability Partnership Rules, 2009.

The new rules mandate every limited liability partnership to maintain a register of partners in Form 4A from its incorporation.

Existing LLPs have to maintain the register within 30 days from the commencement of these rules.

It should include specific details about each partner, such as their name, address, Permanent Account Number, Corporate Identification Number, Unique Identification Number, occupation, status, nationality, nominee details, date of becoming a partner, date of cessation, and contribution amount with monetary value.

Any changes in partner details or contribution amount must be recorded within seven days.

The rules also require any person whose name is listed in the register, but who does not hold any beneficial interest in the contribution, to file a declaration in Form 4B, within 30 days of their entry in the register.

Through the amendment, the government is fundamentally building a strong regulatory framework for LLPs to tackle money-laundering issues, said Noorul, partner at Lakshmikumaran and Sridharan.

These amendments put the LLPs on the same pedestal as the companies, since these disclosure requirements are similar to those under Section 89 of the Companies Act, 2013, he said.

Section 89 of the Companies Act, 2013, addresses the matter of beneficial interest in a share. This section imposes an obligation on any individual who acquires or holds a beneficial interest in a share, as well as the legal owner of the share, to make a formal declaration to the company concerning their beneficial interest.

In the amendment, any changes in the beneficial interest must be declared using Form 4C, within 30 days of the change. However, if a registered partner's beneficial interest is limited to the stated contribution, no such declaration is necessary.

Earlier, there was no requirement for reporting such beneficial interest in the contribution, leading to the opaqueness of the actual ownership and interest of the partners in the LLP, Faraz Khan, partner at IndusLaw, pointed out.

Moin Ladha, partner at Khaitan & Co., concurred saying that it indicates that the regulators intend to have greater supervision/transparency over the entities/individuals that hold beneficial interest over LLPs in India.

The remaining changes in the amendment include revisions to various forms—such as Form 4, Form 4A, Form 4B, Form 4C, and Form 4D. These forms pertain to the notice of appointment and other details of a designated partner or partner, consent to become a partner or designated partner, and declarations of beneficial interest received by the LLP.