LLP compliance set to get stricter as MCA applies sections of Companies Act to LLP Act

In a move aimed at improving the compliance of limited liability partnerships (LLPs) and to better regulate designated partners, the ministry of corporate affairs (MCA) has decided to extend certain sections of the Companies Act to the LLP Act.

A total of eight sections relating to the register of significant beneficial owners, disqualifications of directors, conduct of inquiries and inspections and non-cognisable offences will soon be applicable to LLPs, the MCA said in an intimation on Thursday.

“The changes are to fill the gaps in the LLP Act by applying the sections of the Companies Act to LLPs, as has been done in the past,” a senior government official said.


While these sections will be modified to fit into the LLP Act, regarding which a notification is expected to be out soon, “limited liability partnerships, partners and designated partners thereof are advised to take note of the same for appropriate action”, the ministry said.

“One significant change is the application of the clause triggering disqualification of directors of a company that has not complied with filings for three years to LLPs,” said Ankit Singhi, partner at Corporate Professionals.

Clauses of Section 164 of the Companies Act, which state that a director of a company which has defaulted on filing financial statements or annual returns for three consecutive years will be disqualified as director, shall apply to LLPs.

Similarly, those who chose to form LLPs to avoid disclosure of beneficial ownership will now have to disclose this information as clauses of Section 90 of the Companies Act will also apply to LLPs, Singhi said.

Section 67 of the LLP Act allows the government to apply sections of the Companies Act to the LLP Act by way of notification.

However, since the move is in the nature of amendments to the LLP Act, Parliament’s approval will be required as the notification must be placed in both Houses, the official said.

Designated partners (DP) of LLPs would need to structure their partnerships, according to Sumit Naib, director at Nangia Andersen India, as the ministry plans to introduce curbs on the number of LLPs in which a person can be appointed as DP.