Enhancing Disclosure and Transparency for LLPs

The Ministry of Corporate Affairs, on October 27, 2023, has introduced certain amendments for LLPs introducing additional corporate governance practices and disclosures regarding beneficial interest in the contribution of the LLP.

The amendments are briefly discussed below:

A. Amendment to Limited Liability Partnership Rules - Limited Liability Partnership (Third Amendment) Rules, 2023:

I. Insertion of Rule 22A (Register of Partners)

• As per the amendment every LLP shall from the date of its incorporation or an existing LLP shall within 30 (Thirty) days of this LLP (Third Amendment) Rules maintain a register of its partners in Form 4A, which shall be kept at the registered office of the LLP.

• The register shall contain such details of partner as required to be maintained under the provisions of this Rule. The entries in the register shall be made within 7 (Seven) days pursuant to any change made in the contribution amount, or in name and details of the partners in the LLP, or in cases of cessation of partnership interest.

• Any rectification made in the register maintained under this rule by the LLP pursuant to any order passed by the competent authority under any law, the necessary reference of such order shall be indicated in the respective register and for reasons to be recorded in writing.

II. Insertion of Rule 22B (Declaration in respect of beneficial interest in any contribution)

Similar to the compliance requirement of reporting in Form MGT-6 of the beneficial interest not registered in the beneficial owner’s name under the Companies Act, 2013, the LLP (Third Amendment) Rules has introduced Form 4B, Form 4C and Form 4D through which reporting of declaration of beneficial interest in any contribution held in the name of registered owner is to be made to the Registrar. The below points summarize the reporting required; person responsible for reporting; and timeline for such reporting:

• A person whose name is entered in the register of partners of an LLP but does not hold any beneficial interest fully or partly in contribution (hereinafter “registered partner”), such person shall file with the LLP, a declaration to that effect in Form 4B within 30 (Thirty) days from the date on which his name is entered in the register of partners, specifying the name and other particulars of the person who actually holds any beneficial interest in such contributions.

  Further, whenever any change occurs in the beneficial interest in such contribution, the registered partner shall make a declaration of such change to the LLP in Form 4B within a period of 30 (Thirty) days from the date of such change.

• Person who holds or acquires a beneficial interest in contribution of an LLP but his name is not registered in the register of partners (hereinafter “beneficial partner”) shall file with LLP, a declaration disclosing such interest in Form 4C within a period of 30 (Thirty) days after acquiring such beneficial interest in the contribution of the LLP, specifying the nature of his interest, particulars of the partner in whose name the contribution stand registered in the books of the LLP.

  Further, if any change occurs in the beneficial interest in such contribution, the beneficial partner shall, within a period of 30 (Thirty) days from the date of such change, make a declaration of such change to the LLP in Form 4C.

  Further, it is provided that if the beneficial interest of registered partner is limited to the contribution stated against his name in the register of partners but he does not hold beneficial interest in contribution against any other registered partner, then, he shall not be required to file such declaration.

• Any declaration under sub-rule (1) or sub-rule (2) in Form 4B and Form 4C is received by the LLP from the Registered Partner and the Beneficial Partner respectively, the LLP shall record such declaration in the register of partners and shall file a return in Form 4D with the Registrar within a period of 30 (Thirty) days from the date of receipt of declaration by it.

• Every LLP shall specify a designated partner, who shall be responsible for furnishing of and extending co-operation for providing, information with respect to beneficial interest in contribution in LLP to the Registrar or any other officer authorized by the Central Government and shall file information of such designated partner with the Registrar in Form 4.

  Until a designated partner is specified under sub-rule (4), every designated partner shall be deemed to be responsible for furnishing of, and extending co-operation for providing, information with respect to beneficial interest in contribution under this sub-rule.

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