top of page
  • Writer's picturebrillopedia


Updated: Nov 17, 2021

Author: Akansha Bansal, 5th Year of B.B.A.,LL.B From Amity Law School, Noida.


The concept of Limited Liability Partnership (LLP) complies with the provisions of the Limited Liability Partnership Act, 2008, which came into effect on March 31st, 2009. LLP requires at least two partners for incorporation and there is no limit on the maximum number of partners. A single person cannot incorporate an LLP.

LLP is a hybrid form of a business organisation that combines the characteristics of both a partnership firm and a joint-stock company. It is a corporate body with a common seal and has the right to own, buy, and sell assets. It is also a separate legal entity in the eyes of law, which implies that both the LLP and its partners are independent of one another. In other words, the assets and liabilities of the LLP do not belong to its partners as the business is carried on in the name of the LLP. No partner shall be held jointly liable for the independent actions of the other partners, as in the case of a partnership firm. In LLP, the partners don’t expose to unlimited risk as their liability is limited to their agreed contributions to the LLP. LLP structure has become highly popular among professional service organisations and small & medium enterprises in India as it reduces the tax and compliance liabilities of the company.


The Company Law Committee (CLC) was constituted on September 18, 2019, which submitted the Report on Decriminalization of the LLP Act, 2008 to make business and life more convenient for the Indian people. The CLC recommended the government to decriminalise certain "compoundable offences," as well as related amendments and other changes to the LLP Act, 2008.

On January 4, 2021, they submitted their report, which suggested that 12 compoundable offences be decriminalised and one penal provision removed from the Act altogether. In case of major non-compoundable offences, no changes have been recommended in the LLP Act.

The Report is divided into three sections: -

  • Chapter I deals with the decriminalization of offences,

  • Chapter II deals with the ease of life-related changes and

  • Chapter-III deals with miscellaneous provisions. 

The CLC has adopted the same principle as it has recommended for the decriminalization of certain provisions of the Companies Act, 2013. Further, the CLC emphasized the need for the formation of ‘small LLPs’ that are subject to less compliance, fees and penalties to reduce compliance costs.


On Wednesday, July 28th, 2021, the Union Cabinet passed the LLP (Amendment) Act, 2021, which amends the LLP Act, 2009. According to Nirmala Sitharaman, Finance and corporate affairs ministries, the Companies Act, 2012 is going a number of modifications in order to make business and living more convenient for Indian people. The LLP Act has been amended for the first time since it came into effect.

  1. Small LLP defined: - Under Section 2(1) (ta) of the Bill, the definition of ‘small limited liability partnership’ in line with the concept of “small company” under the Companies Act, 2013 is introduced. As per the Bill, the term “small LLP” is based on partner’s contribution and turnover size.

  2. Decriminalisation of penalties: - The bill will convert offences into civil defaults and change the nature of punishment from fines to monetary penalties.

The bill will reduce the number of penal provisions to 22 (compoundable offences will be reduced to 7 and non-compoundable offences to 3 and defaults to be dealt under the In-House Adjudication Mechanism (IAM) to 12).

  1. Accounting Standards: - The bill also includes a new section 34A which allows the central government to prescribe "Accounting Standards" or "Auditing Standards" for a certain class or classes of LLPs, in consultation with the National Financial Reporting Authority (NFRA) constituted under Section 132 of the Companies Act, 2013.

  2. Compounding of Offences: - The Bill amends Section 39, which deals with ‘Compounding of Offences’ to empower Regional Director (or any officer above the rank of Regional Director) to compound any offences punishable under the Act with only fine. Every application for an offence must be filed with the Registrar, who will forward it to the Regional Director along with his comments.

  3. Establishment of Special Courts: - The Bill also seeks to insert an entirely new sections 67A, 67B,67C to empower the Central Government to establish or designate a ‘Special Courts’ to expedite the prosecution and conviction of offences under the Act. It shall consist of a: -

  4. Sessions Judge or an Additional Sessions Judge, for offences punishable with imprisonment of three or more; and

  5. Metropolitan Magistrate or a Judicial Magistrate for other offences.

They will be appointed with the approval of the Chief Justice of the High Court. Appeals will be made to the High Courts against the orders of these special courts.

  1. Establishment of Appellate Tribunal: - The bill proposes to amend section 72 of the Act to clarify when a person aggrieved by the decision of the NCLT can file an application with the National Company Law Appellate Tribunal (NCLAT) for redressal of grievances. According to the Bill, an order made with the consent of the parties cannot be appealed. The appeal must be filed within 60 days of the order (extendable by another 60 days).

  2. Non-compliance with the Orders of the Tribunal: - Failure to comply with an order of the NCLT can result in imprisonment of up to six months and a fine of up to Rs 50,000 under the Act. This offense has been removed as a result of the new amendment.

  3. Adjudicating Officers: - The proposed Bill also includes a new section 76A that provides for the appointment of adjudicating officers for adjudicating penalties under the Act. These will be officers of rank of Registrar or above in the central government. The Regional Director shall hear any appeals against the orders of the Adjudicating Officers.

bottom of page