Amendments in the Companies Act, 2013
Amendments in the Companies Act, 2013 during the calendar year 2023
The Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023
MCA vide its notification dated November 09, 2023, notified “the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023” (“the Rules”) which shall come into force from the date of its publication in the Official Gazette.
The provisions of these rules shall specifically apply to all the Limited Liability Partnerships (LLPs). The conferred under section 79 of the Limited Liability Partnership Act, 2008, directs to regulate and identify significant beneficial owners in LLPs and such individuals to make a declaration in Form No. LLP BEN-I.
An SBO concerning a Reporting LLP entity is an individual who whether acting alone or through one or more persons or trusts, indirectly or together with any direct holdings exceeding 10% of (a) the contribution or (b) voting rights in respect of the management or policy decisions or (c) has the right to receive or participate in distributable profits, or any other distribution or (d) has right to exercise or actually exercises, significant influence or control in the Reporting LLP.
However, any individual directly holding any right or entitlement exceeding 10% of (a) to (d) mentioned above is not an SBO.
An indirect right or entitlement could be established basis the Partner of the Reporting LLP is a Body Corporate, LLP, HUF, Partnership Firm, or Pooled Investment vehicle.
The Rule provides the following
1.Rule 3- Key Definitions:
The Rules define control, majority stake, a significant beneficial owner (SBO), significant influence, ultimate holding company and acting together etc.
2.Rule 4- Duty of the Reporting LLP:
The Reporting LLP to take necessary steps to find out if there is any individual who is an SBO, in relation to that Reporting LLP and if so, identify him and cause such individual to make a declaration in Form No. LLP BEN-1. Any non-individual holding a minimum of 10% contributions or voting rights or having the right to receive or participate in the distributable profits or any other distribution in a FY, then the Reporting LLP needs to notify it by sending Form No.LLP BEN-4 and determine SBO, if any.
3.Rule 5- Declaration of SBO:
The SBO is to submit Form LLP BEN-1 to the Reporting LLP within 90 days of the commencement of the Rule and if an individual becomes or undergoes changes as an SBO, the SBO is to declare such changes within 30 days of acquiring or modifying the SBO status.
Where an individual becomes an SBO or where his interest as an SBO undergoes any change, within 90 days of the commencement of the Rules, it shall be deemed that such individual became the SBO or any change therein happened on the date of expiry of 90 days from such commencement, and the period of 30 days for filing will be reckoned accordingly.
4.Rule 6- Return of SBO in contribution:
The Reporting LLP is to file Form LLP BEN-2 with the Registrar within 30 days of receiving the declaration from the SBO.
5.Rule 7- Register of SBO:
The Reporting LLP to maintain a Register of SBO in Form LLP BEN-3 and keep it open for inspection during business hours for such reasonable time not less than 2 hours on every working dy as may be decided by LLP Agreement or by partners of the LLP on payment of such fee as may be specified by the LLP which can not exceed Rs.50 for each inspection.
6.Rule 8- Notice seeking information about SBO:
Reporting LLP to seek information about SBO by sending a Notice in Form LLP BEN-4.
7.Rule 9- Application to the Tribunal:
If any person fails to give the information to the Reporting LLP after it sent Form LLP BEN-4 or when the Reporting LLP finds that the information given is not satisfactory, it can apply to the Tribunal for order directing that the contribution in question be subject to such restrictions as Tribunal deems fit, including-
(a) restrictions on the transfer of interest attached to the contribution in question;
(b) suspension of the right to receive profits or any other distribution in relation to the contribution in question;
(c) suspension of voting rights in relation to the contribution in question;
(d) any other restriction on all or any of the rights attached with the contribution in question.
8.Rule 10- Non- applicability:
These rules shall not apply to the extent the contribution of the Reporting LLP is held by:
- Central Government/ State Government/ Local Authority;
- Reporting LLP/ body corporate/ entity controlled by Central or State Governments;
- An investment vehicle registered and regulated by SEBI such as Mutual Funds, Alternative Investment Funds (AIF), Real Estate Investment Trusts (REITs), or Infrastructure Investment Trust (lnVITs);
- An investment vehicle regulated by RBI or IRDA, or Pension Fund Regulatory and Development Authority.
Conclusion
The cost of compliance for LLP will be increased. In many LLPs under the arrangement, Family Trust, is a Partner holding rights as a partner through Trustees, now such Family arrangements are to be disclosed to the Registrar.