CONCEPT PAPER ON LIMITED LIABILITY PARTNERSHIPS

EXPLANATORY NOTES

INTRODUCTION

1. The main purpose of this Concept Paper (hereinafter referred to as ‘The Paper’) isto create a basic framework, which will facilitate the creation of a new legal entity inIndia viz. the limited liability partnership ("LLP"). The essential feature of an LLP isthat it combines the organisational flexibility and tax status of a partnership withlimited liability for its partners. An LLP is a body corporate having perpetualsuccession and separate legal entity.

2. The paper is only an approach to the introduction of a bill in the Parliament andhas not been vetted by the Legislative Department, Ministry of Law.

3. The aim of this paper is only to provoke critical examination of the provisionscontained in this paper by all chambers of commerce, business organizations,professional bodies, academicians and persons connected with corporate sector.

4. The Ministry will feel rewarded if it stimulates widest possible public debate so thatthe bill as and when introduced in the Parliament will duly take into account thevarious points of view.

5. The Ministry invites suggestions for improvement of the paper. Once the conceptsare frozen after public debate and completion of consultation process, necessarychanges will be proposed and finalized. Thereafter, the Limited Liability PartnershipBill will be framed for introduction in the Parliament.

6. It will be appreciated if the suggestions are given, in a tabular form, against eachsection. All suggestions must, however, reach the Ministry (by post addressed to ShriB M Anand, Joint Director, Ministry of Company Affairs, Room No 539, A Wing,Shastri Bhawan, New Delhi or by e-mail at cl5.dca@sb.nic.in) latest by 31-12-2005.

7. These explanatory notes have been made to assist the reader in understandingthe paper and need to be read in conjunction with the paper. However, they are notmeant to be a comprehensive description of the paper.

BACKGROUND

8. The idea that there should be the opportunity in India to organise as an LLPemerged out of the Report of the Naresh Chandra Committee on Regulation ofPrivate Companies and Partnership and Report of the Expert Committee onCompany Law (Dr. J. J. Irani Committee).

9. In India, businesses mainly operate as companies, sole proprietorships andpartnerships. Each of these is subject to different regulatory and tax regimesreflecting their organisation and ownership. Introducing LLPs as a new businessstructure would fill the gap between business firms such as sole proprietorship and

partnership which are generally unregulated and Limited Liability Companies whichare governed by the Companies Act, 1956.

In addition to an alternative business structure, LLPs would foster the growth of theservices sector. The regime of limited liability partnership will provide a platform tosmall and medium enterprises and professional firms of Company Secretaries,Chartered Accountants, Advocates etc. to conduct their business/professionefficiently which would in turn increase their global competitiveness.

10. The Indian Partnership Act, 1932 sets out special rules relating to the liability ofpartners to persons dealing with them. A partner acts as the agent of the firm and ofother partners for the purpose of the business of the firm. Further, every partner isliable, jointly and severally, with all the other partners, for all acts of the firm donewhile he is a partner.

11. The unlimited liability for partners in case of general partnerships has becomean increasing cause for concern in the light of general increase in the incidence oflitigation for professional negligence, the size of claims and the risk to a partner'spersonal assets when a claim exceeds the sum of the assets of the partnership. The‘unlimited liability’ of partners has been the chief reason why partnership firms ofprofessionals, have not grown in size to successfully meet the challenges posedtoday by international competition, WTO, GATS etc.

As an alternative corporate business vehicle, limited liability partnership goes someway towards addressing these concerns. A limited liability partnership has unlimitedcapacity and provides the internal flexibility of a partnership i.e. by allowing thepartners to adopt whatever form of internal organisation they prefer while at thesame time limiting their liability with respect to the LLP to their individualcontributions.

12. The Concept paper comprises of divided in sixteen chapters and five schedulesas under:

Chapters

1. Chapter I – Preliminary 2. Chapter II – Applicability 3. Chapter III – Incorporation4. Chapter IV – Partnership 5. Chapter V - Extent and Limitation of Liability 6.Chapter VI - Duties and Standards of Conduct 7. Chapter VII – Contributions 8.Chapter VIII - Financial Disclosures 9. Chapter IX – Taxation 10.Chapter X -Assignment and Transfer of Partnership Rights 11.Chapter XI – Investigation12.Chapter XII - Conversion to Limited Liability Partnership 13.Chapter XIII - ForeignLimited Liability Partnership 14.Chapter XIV – Amalgamation, Merger and Demergerof Limited Liability Partnerships 15.Chapter XV - Winding Up and Dissolution16.Chapter XVI - Miscellaneous

Schedules

1. First Schedule – Default provisions for limited liability partnerships. 2. SecondSchedule - Conversion from firm to limited liability partnership. 3. Third Schedule -Conversion from private company to limited liability partnership. 4. Fourth Schedule- Conversion from unlisted public company to limited liability partnership. 5. Fifth

Schedule – Penalties. 14. COMMENTARY ON CHAPTERS Chapter I - PreliminaryThepreliminary chapter contains the provisions relating to short title, commencementand extent of the proposed Act and the definitions of key terms used in the paper.Chapter II - Applicability

An LLP is a body corporate having perpetual succession and a legal personality of itsown. It shall have at least two partners but there is no limit on the maximumnumber of partners that it can have. If at any time the number of partners of an LLPfalls below two and the business is carried on for more than six months, a personwho is a partner of the LLP during the time that it so carries on business after thosesix months and is cognizant of this fact shall be liable jointly and severally with theLLP for the obligations of the LLP incurred during that period.

Any individual or body corporate may be a partner in an LLP. An LLP being a bodycorporate, the law relating to partnerships is generally not applicable to a limitedliability partnership. Similarly, any change in the partners does not affect theexistence, rights and liabilities of the LLP.

Every LLP shall ensure that it has a manager who is an individual and is resident inIndia. The role of a manager is to perform the administrative and filing duties of theLLP and will be held personally liable for all penalties imposed on the LLP unless hesatisfies the Tribunal that he should not be held liable. Further, in all cases where themanager is liable the LLP shall also be liable to the same extent for such defaults.The particulars of such person, his consent to act as a manager and any change ofmanager shall be lodged with the registrar in the prescribed manner and form. Amanager need not be a partner of the LLP. However, if no manager is appointed,each partner who is resident in India shall be treated as a manager. The LLP shallappoint another person as the manager within sixty days from the date on which aperson ceases to be a manager.

Chapter III - Incorporation

To form an LLP, there must at the outset be at least two persons who are associatedfor carrying on a lawful business with a view to profit and who subscribe their namesto a document called an "incorporation document".

The incorporation document must be delivered to the Registrar in the prescribedform and manner. A statement must also be delivered to the Registrar that there hasbeen compliance with all the requirements of this Act and Regulations with respect toincorporation and matters precedent and incidental thereto. The statement must bemade by a subscriber to the incorporation document and by either an advocate, or aCompany Secretary, or a Chartered Accountant in whole time practice in India, whois engaged in the formation of the LLP.

The incorporation document must contain information such as the name of the LLP,its proposed business, address of its registered office, the name, address andphotographs of the persons who are to be its partners and manager (s) onincorporation. If a person makes a statement under Section 8 (1) (c) that he knowsto be false or does not believe to be true he shall be punishable under the Act.

When the registrar receives the incorporation document he will retain and register it.Once the documents have been registered, the registrar will issue a certificate that

the LLP is incorporated by the name specified in the incorporation document. Astatement that is delivered under section 8(1) (c) may be accepted by the registraras sufficient evidence that the requirement in section 8(1) (a) has been compliedwith. The certificate issued by the registrar is an evidence that all the requirementshave been complied with.

Every LLP is required to have a registered office in India to which all communicationswill be made and received. Any change in the registered office shall be intimated tothe Registrar.

An LLP, shall by its name has the power to sue and being sued, hold and disposeproperty, have a common seal and to do and suffer such other acts as bodiescorporate may lawfully do and suffer.

Every LLP is required to have either the words “limited liability partnership” or theacronym “LLP” as the last words of its name. An LLP shall not be allowed to registerwith a name, which is undesirable or identical to a name of any other LLP or bodycorporate or to a registered trade mark, or a trade mark which is subject of anapplication for registration, of any other person under the Trade Marks Act, 1999.The name shall be printed on all its invoices and official correspondence along with astatement that it is registered with limited liability.

Chapter IV – Partnership

The first partners of an LLP are those who sign the incorporation document. Afterincorporation, any person may become a partner of an LLP by agreement with theexisting partners.

The rights and duties of the partners of an LLP to one another and to the LLP aregoverned by the provisions of any agreement between the partners. In case, amatter has not been specifically dealt with in the agreement, the provisions set outin the First Schedule shall apply. Certain particulars contained in the LLP agreementas may be prescribed and any changes made therein shall be filed with the Registrar.

A person may cease to be a partner by death, dissolution of the LLP or in accordancewith any agreement with the other partners of the LLP. Where there is no agreementa partner may cease to be a partner by giving 30 days notice to the other partners.However, a person shall be regarded as a partner, in relation to any person dealingwith the LLP unless the third person has notice that the former partner has ceased tobe a partner or a notice in this regard has been delivered to the Registrar. Moreover,a former partner shall continue to be liable for the acts done in his tenure.

Where a person ceases to be a partner of an LLP, a person entitled to his share inconsequence to death or insolvency may not interfere with the management oradministration of the LLP, but may receive any amount to which he is entitled.

Where a person becomes or ceases to be a partner, the manager of the LLP shallwithin thirty days from the date on which the partner becomes or ceases to be apartner notify the registrar in the prescribed form and manner. In case of admissionof a partner, a statement by the incoming partner that he consents to be a partnershould also be filed in the prescribed form and manner. Similarly where there is any

change in the name or address of a partner, the same shall be notified. If a personceases to be a partner and believes that the LLP shall not lodge the statement withthe Registrar, he shall himself lodge it.

Chapter V - Extent and Limitation of Liability

Each partner of the LLP is an agent of the LLP but not of other partners. Therefore, apartner shall be held personally liable for his own wrongful act or omission, but willnot be liable for the wrongful act or omission of any other partner of the LLP. An LLPis however, not bound by the actions of a partner where that partner has noauthority to act for the LLP, and the person dealing with the partner is aware of thisor does not know or believe that the partner was in fact a partner of the LLP.

Further, where a partner of an LLP is liable to a person for a wrongful act or omissionin the course of business of the LLP or with its authority, the LLP will be liable to thesame extent as the partner. An LLP being a separate legal entity is liable for anobligation arising in contract or otherwise and the liabilities of the LLP shall be metout of its property.

A partner will not be held personally liable, directly or indirectly for an obligation ofthe LLP, solely by reason of being a partner of the limited liability partnership.However, this liability shield will be withdrawn in case of an act carried out by a LLPwith the intent to defraud creditors or for any other fraudulent purposes.

Chapter VI - Duties and Standards of Conduct

This chapter deals with the duties and standards of conduct of partners. The moreimportant of these provisions include obligations of loyalty, due care and good faith.

Chapter VII - Contributions

This chapter deals with the form and liability of partner’s contribution.

Chapter VIII - Financial Disclosures

A limited liability partnership is required to maintain proper books of accounts at itsregistered office relating to its affairs for each year of its existence on accrual basisand according to the double entry system of accounting. An LLP shall takereasonable precautions to maintain the records so as to prevent loss or destruction,falsification of entries and facilitate detection and correction of inaccuracies. Ifdefault is made in complying with these provisions, the manager shall be punishableunder the Act.

The manager of an LLP shall lodge with the Registrar a declaration as to whether inhis opinion the LLP appears to be able to pay its debts in the normal course ofbusiness or not. The declaration is to be lodged within 15 months of registration andsubsequently every financial year at intervals of not more that 15 months. If themanager fails to lodge the declaration or makes a declaration without havingreasonable grounds for his opinion, he shall be punishable under the Act. Further, ifany person makes a statement or furnishes information to a manager that is false or

misleading in a material particular, then that person shall also be punishable underthe Act.

The Registrar shall have the power to call for further information as he may requireand any person, who fails to comply with any summons or requisition of theRegistrar or provides false information, shall be punishable under the Act. He shallalso have the powers to enforce the lodging or filing of any return, account or otherdocument. Further, the Registrar may destroy any document lodged, filed orregistered with it, if it is no longer necessary or desirable to retain the same.

Regulations to the Act shall prescribe the offences which may be compounded by theCentral Government under this Act.

A limited liability partnership shall take all reasonable precautions to maintain therecords it is required to maintain under sub-section (1) of section 27 in a manner soas to prevent loss or destruction thereof prevent falsification of entries and facilitatedetection and correction of inaccuracies.

Chapter IX - Taxation

This chapter ensures that the partners of an LLP which is carrying on a business witha view to profit are treated for the purposes of income tax and capital gains tax as ifthey were partners carrying on a business in partnership, despite the fact that an LLPis a body corporate. It also provides that the property of the LLP shall be treated forthose purposes as property of its partners. This ensures that partners will beindividually liable to tax on their share of the profits of the trade, profession orbusiness carried on by the LLP.

Further, the assets of the LLP shall be treated as assets held by the partners for thepurpose of taxing capital gains. This ensures that the partners of the LLP, rather thanthe LLP itself, will be liable to tax for capital gains on the disposal of LLP assets. Thechapter brings LLPs in line with the approach adopted for partnerships, whichsimilarly treats assets as held by the partners rather than by the partnership.

Chapter X - Assignment and Transfer of Partnership Rights

This chapter deals with the partner’s transferable interest. A partner’s economicrights, which include the rights of the partner to a share of the profits and losses ofthe partnership and to receive distributions in accordance with the limited liabilitypartnership agreement, are freely transferable. However, a transfer in whole or inpart of the transferable interest does not imply the partner’s disassociation ordissolution and winding up of the LLP’s activities. Further, they do not entitle theassignee to participate in the management or conduct of the LLP’s activities oraccess information concerning the LLP’s transactions. Moreover, the non-economicrights of a partner shall not be transferable unless specified by the LLP Agreement.

Chapter XI - Investigation

This chapter deals with the investigation of the affairs of a limited liabilitypartnership.

Chapter XII - Conversion to Limited Liability Partnership

This chapter contains provisions which provide for the conversion from firm, privatecompany and unlisted public company to a limited liability partnership. The SecondSchedule contains provisions for conversion from firm to LLP; the Third Schedulecontains provisions for conversion from private company to LLP and the FourthSchedule provides for conversion from unlisted public company to LLP.

Chapter XIII - Foreign Limited Liability Partnership

This chapter deals with the foreign limited liability partnership. The Regulations shallmake provisions about the features of foreign limited liability partnership.

Chapter XIV – Amalgamation, Merger and Demerger of Limited LiabilityPartnerships

This chapter deals with the amalgamation, merger and demerger of limited liabilitypartnerships. The Regulations shall make provisions for the same.

Chapter XV - Winding Up and Dissolution

This chapter deals with the winding up and dissolution of limited liabilitypartnerships. The winding up of a limited liability partnership may be either voluntaryor by the Tribunal. The Regulations shall make provisions for the winding up anddissolution of limited liability partnerships.

Chapter XVI - Miscellaneous

This chapter deals with business transaction of partner with partnership, applicationof company law etc., electronic filing service, penalties, application of other laws,enabling provision for Regulations, powers of Registrar, offences by limited liabilitypartnerships, jurisdiction of the Tribunal and general penalties.

CONCEPT PAPER ON LIMITED LIABILITY PARTNERSHIP

CONTENTS

Sr.No

Particulars PageNo.

1 Chapter I –Preliminary

1

2 Section 1 Short title, commencementand extent.

1

3 Section 2 Definitions 14 Chapter II –

Applicability2

5 Section 3 Limited Liability Partnership 26 Section 4 Non-applicability of

partnership law2

7 Section 5 Partners 3

8 Section 6 Minimum and MaximumNumber of Partners

3

9 Section 7 Manager 310 Chapter III –

Incorporation4

11 Section 8 Incorporation Document 412 Section 9 Incorporation by Registration413 Section 10 Registered Office 514 Section 11 Powers 515 Section 12 Names of limited liability

partnerships5

16 Section 13 Publication of name andlimited liability

6

17 Chapter IV -Partnership

7

18 Section 14 Partner 719 Section 15 Relationship of Partners 720 Section 16 Cessation of partnership

interest7

21 Section 17 Registration of changes inpartners

8

22 Chapter V - Extentand Limitation ofLiability

9

23 Section 18 Partner as agent 924 Section 19 Extent of liability of the

limited liability partnership9

25 Section 20 Extent of liability of apartner

9

26 Section 21 Unlimited liability in case offraud

9

27 Section 22 Liability for personal acts 1028 Chapter VI - Duties

and Standards ofConduct

10

29 Section 23 Duties of Partners 1030 Section 24 General Standards of

Partner's Conduct10

31 Chapter VII -Contributions

11

32 Section 25 Form of Contribution 1133 Section 26 Liability for Contribution 1134 Chapter VIII -

FinancialDisclosures

11

35 Section 27 Maintenance of records 1136 Section 28 Annual declaration of

solvency11

37 Section 29 Power of Registrar to obtain 12

further information38 Section 30 Penalty for providing false

information to the Registrar12

39 Section 31 Composition of offences 1240 Section 32 Destruction of old records 1341 Section 33 Enforcement of duty to make

returns13

42 Section 34 Keeping of limited liabilitypartnership records

13

43 Chapter IX -Taxation

14

44 Section 35 Income Tax and CapitalGains

14

45 Chapter X -Assignment andTransfer ofPartnership Rights

14

46 Section 36 Partner's transferableinterest

14

47 Section 37 Transfer of partner'stransferable interest

14

48 Chapter XI -Investigation

14

49 Section 38 Investigation of the affairs ofa limited liability partnership

14

50 Section 39 Application by partners to besupported by evidence andpower to call for security.

15

51 Section 40 Firm, body corporate orassociation not to beappointed as inspector.

15

52 Section 41 Power of inspectors to carryout investigation into affairsof related entities, et.

16

53 Section 42 Production of documents andevidence.

16

54 Section 43 Seizure of documents byinspector.

17

55 Section 44 Inspectors' report 1856 Section 45 Prosecution. 1857 Section 46 Application for winding up of

limited liability partnershipor other entity

18

58 Section 47 Proceedings for recovery ofdamages or property.

19

59 Section 48 Expenses of investigation. 1960 Section 49 Inspectors' report to be

evidence.20

61 Chapter XII –Conversion to

20

Limited LiabilityPartnership

62 Section 50 Conversion from firm tolimited liability partnership

20

63 Section 51 Conversion from privatecompany to limited liabilitypartnership

20

64 Section 52 Conversion from unlistedpublic company to limitedliability partnership

20

65 Chapter XIII - ForeignLimited LiabilityPartnership

20

66 Section 53 Foreign Limited LiabilityPartnership

20

67 Chapter XIV –Amalgamation,Merger and Demergerof Limited LiabilityPartnerships

20

68 Section 54 Amalgamation, Merger andDemerger of Limited LiabilityPartnerships

20

69 Chapter XV -Winding Up andDissolution

21

70 Section 55 Winding Up and Dissolution 2171 Chapter XVI -

Miscellaneous21

72 Section 56 Business Transactions ofPartner with Partnership

21

73 Section 57 Application of Company Law 2174 Section 58 Electronic filing service 2175 Section 59 Penalty 2276 Section 60 Application of other laws not

barred22

77 Section 61 Power to make regulations 2278 Section 62 Power to remove difficulties 2279 Section 63 Power of Registrar to strike

defunct limited liabilitypartnership off register

23

80 Section 64 Offences by limited liabilitypartnerships

24

81 Section 65 Jurisdiction of the Tribunal 2482 Section 66 General penalties 2483 FIRST SCHEDULE DEFAULT PROVISIONS FOR

LIMITED LIABILITYPARTNERSHIPS

25

84 SECOND SCHEDULE CONVERSION FROM FIRM TOLIMITED LIABILITY–

26

PARTNERSHIP85 THIRD SCHEDULE CONVERSION FROM

PRIVATE COMPANY TOLIMITED LIABILITYPARTNERSHIP

29

86 FOURTH SCHEDULE CONVERSION FROMUNLISTED PUBLIC COMPANYTO LIMITED LIABILITYPARTNERSHIP

32

87 FIFTH SCHEDULE PENALTIES 3588 LLP REGULATIONS

200639

CONCEPT PAPER ON LIMITED LIABILITY PARTNERSHIPS

Chapter I

Preliminary

1. Short title, commencement and extent.

(1) This Act may be called the Limited Liability Partnerships Act, 2006.

(2) It shall come into force on such date as the Central Government may, bynotification in the Official Gazette, appoint.

(3) It extends to the whole of India.

2. Definitions.

In this Act, unless the context otherwise requires,-

(1) "address" in relation to a partner of a limited liability partnership, means-

(a) if an individual, his usual residential address, and

(b) if a body corporate , address of its registered office;

(2) “Appellate Tribunal” means the National Company Law Appellate Tribunalconstituted under the Companies Act, 1956;

(3) “body corporate” means a company as defined in section 3 of the CompaniesAct, 1956 and includes:

(a) a limited liability partnership registered under this Act;

(b) a limited liability partnership incorporated outside India; and

(c) a company incorporated outside India

but does not include-

(i) a corporation sole;

(ii) a co-operative society registered under any law relating to co-operative societies;and

(iii) any other body corporate (not being a company as defined above), which theCentral Government may, by notification in the Official Gazette, specify in thisbehalf;

(4) "business" includes every trade, profession and occupation;

(5) “chartered accountant” means a chartered accountant as defined in clause (b) ofsub-section (1) of section 2 of the Chartered Accountants Act, 1949 and who hasobtained a certificate of practice under sub-section (1) of section 6 of that Act;

(6) “company secretary” means a company secretary as defined in clause (b) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 and who has obtaineda certificate of practice under sub-section (1) of section 6 of that Act;

(7) "court" means court as defined under the Companies Act, 1956;

(8) "economic rights" means the rights of the partner to a share of the profits andlosses of the partnership and to receive distributions in accordance with the limitedliability partnership agreement;

(9) “financial year” means in relation to a limited liability partnership, the period inrespect of which any profit and loss account of the limited liability partnership ismade up, and shall not be less than six months but not exceed fifteen months.

(10) “foreign limited liability partnership" means a partnership that is

1. formed, registered or incorporated outside India which, after the commencementof this Act, establishes a place of business within India; and

2. formed, registered or incorporated outside India which have, before thecommencement of this Act, established a place of business within India and continueto have an established place of business within India at the commencement of thisAct; and

3. which if incorporated in India, would be a limited liability partnership within themeaning of this Act.

(11) "incorporation document" shall be construed in accordance with section 8;

(12) "limited liability partnership" has the meaning given to it by section 3;

(13) "limited liability partnership agreement" means any written agreement of thepartners as to the affairs of a limited liability partnership and the conduct of itsbusiness;

(14) “manager” in relation to a limited liability partnership, means any person(whether or not a partner of the limited liability partnership) who is concerned in ortakes part in the management of the limited liability partnership;

(15) "modification" shall include the making of additions and omissions;

(16) "name" in relation to a partner of a limited liability partnership, means-

(a) if an individual, his forename, middlename and surname, and

(b) if a body corporate, its registered name;

(17) "partner" in relation to a limited liability partnership, means any person who hasbeen admitted as a partner in the limited liability partnership in accordance with thelimited liability partnership agreement;

(18) “register” means any register kept and maintained under this Act;

(19) "Registrar" means Registrar as defined in theCompanies Act, 1956;

(20) “Tribunal” means the National Company Law Tribunal constituted under theCompanies Act, 1956.

Chapter II

Applicability

3. Limited Liability Partnership.

(1) A limited liability partnership is a body corporate which is formed by beingincorporated under this Act and which has legal entity separate from that of itspartners.

(2) A limited liability partnership shall have perpetual succession.

(3) Any change in the partners of a limited liability partnership shall not affect theexistence, rights or liabilities of the limited liability partnership.

4. Non-applicability of partnership law.

Except as otherwise provided by this Act or any other enactment, the law relating topartnerships shall not apply to a limited liability partnership.

5. Partners.Any individual or body corporate may be a partner in a limited liability partnership.

6. Minimum and Maximum Number of Partners.

(1) Every limited liability partnership shall have at least two partners.

(2) If at any time the number of partners of a limited liability partnership, isreduced, below two, and the limited liability partnership carries on business for morethan six months while the number is so reduced, a person who is a partner of thelimited liability partnership during the time that it so carries on business after thosesix months and is cognizant of the fact that it is carrying on business with fewer thantwo partners shall be liable jointly and severally with the limited liability partnershipfor the obligations of the limited liability partnership incurred during that period.

(3) A limited liability partnership may have any number of partners.

7. Manager.

(1) Every limited liability partnership shall have a manager who is an individual andis resident in India.

(2) For the purpose of sub-section (1), resident in India includes a person who hasbeen staying in India for a continuous period of not less than twelve monthsimmediately preceding the date of his appointment as a manager and who has cometo stay in India, -

(a) for taking up employment in India, or

(b) for carrying on a business or vocation in India.

(3) Every limited liability partnership shall within 30 days ensure that theparticulars of every person who acts as manager of the limited liability partnership,his consent to act as such and any change of manager are lodged with the Registrarin such manner and form as may be prescribed.

(4) If the incorporation document specifies who is to be a manager -

(a) that person shall be the manager on incorporation, and

(b) if no manager is appointed, each partner resident in India shall be deemed to bea manager.

(5) Every limited liability partnership shall appoint a person as manager within sixtydays from the date on which a person ceases to be a manager.

(6) A manager shall be —

(a) answerable for the doing of all acts, matters and things, as are required to bedone by the limited liability partnership; and

(b) personally liable to all penalties imposed on the limited liability partnership forany contravention of those sections unless he satisfies the Tribunal that he shouldnot be so liable.

(7) If a limited liability partnership contravenes any sub-section of this section, thelimited liability partnership and every partner of the limited liability partnership shallbe punishable under the Act.

Chapter III

Incorporation

8. Incorporation Document.

(1) For a limited liability partnership to be incorporated-

(a) two or more persons associated for carrying on a lawful business with a view toprofit must have subscribed their names to an incorporation document,

(b) there must have been delivered to the Registrar of the State in which theregistered office of the limited liability partnership is to be situate, the incorporationdocument in a manner as may be prescribed, and

(c) there must have been so delivered a statement in the prescribed form, made byeither an advocate, or a Company Secretary, or, a Chartered Accountant, who isengaged in the formation of the limited liability partnership and by anyone whosubscribed his name to the incorporation document, that all the requirements of thisAct and Regulations thereunder have been complied with, in respect of incorporationand matters precedent and incidental thereto.

(2) The incorporation document must-

(a) be in a form as may be prescribed,

(b) state the name of the limited liability partnership,

(c) state the proposed business of the limited liability partnership;

(d) state the address of the registered office of the limited liability partnership,

(e) state the name and address of each of the persons who are to be partners of thelimited liability partnership on incorporation,

(f) state the name and address of the person (s) who is/are to be manager (s) of thelimited liability partnership on incorporation;

(g) be accompanied by the photographs of the persons who are to be partners andmanager(s) of the limited liability partnership.

(3) If a person makes a statement under sub-section (1)(c) which he-

(a) knows to be false, or

(b) does not believe to be true,

he shall bepunishable under the Act.

9. Incorporation by Registration.

(1) When the requirements imposed by clause (b) and (c) of sub-section (1) ofsection 8 have been complied with, the Registrar shall retain the incorporationdocument and, unless the requirement imposed by clause (a) of that sub-section hasnot been complied with, he shall within a period of 14 days-

a. register the incorporation document, and

b. give a certificate that the limited liability partnership is incorporated by the namespecified in the incorporation document.

(2) The Registrar may accept the statement delivered under clause (c) of sub-section(1) of section 8 as sufficient evidence that the requirement imposed by clause (a) ofthat sub-section has been complied with.

(3) The certificate shall be signed by the Registrar and authenticated by his officialseal.

(4) The certificate is conclusive evidence that the requirements of sub-section 2 ofsection 8 are complied with and that the limited liability partnership is incorporatedby the name specified in the incorporation document.

10. Registered Office.

(1) Every limited liability partnership shall have a registered office to which allcommunications and notices may be addressed and where they shall be received.

(2) A document may be served on a limited liability partnership or a partner ormanager thereof by sending it by post under a certificate of posting or by registeredpost or by any other mode, which may be prescribed, or by leaving at its registeredoffice.

(3) A limited liability partnership may change the address of its registered office bylodging with the Registrar notice of such change in such manner and form as may beprescribed and any such change shall take effect only upon such lodgment.

(4) A person guilty of an offence under sub-section (3) shall be punishableunder theAct.

11. Powers.

A limited liability partnership shall, by its name have the power of-

(a) suing and being sued;

(b) acquiring, owning, holding and developing or disposing of property, bothmovable and immovable;

(c) having a common seal; and

(d) doing and suffering such other acts and things as bodies corporate may lawfullydo and suffer.

12. Names of limited liability partnerships.

(1) Every limited liability partnership shall have either the words “limited liabilitypartnership” or the acronym “LLP” as the last words of its name.

(2) No limited liability partnership shall be registered by a name which, in theopinion of the Central Government is -

(a) undesirable;

(b) identical or too nearly resembles to that of any other limited liability partnershipor body corporate or to a registered trade mark, or a trade mark which is subject ofan application for registration, of any other person under the Trade Marks Act, 1999.

(3) A person may apply in the prescribed manner to the Registrar for thereservation of a name set out in the application as —

(a) the name of a proposed limited liability partnership; or

(b) the name to which a limited liability partnership proposes to change its name.

(4) Upon receipt of an application under sub-section (3) and on payment of theprescribed fee, the Registrar may, if he is satisfied that the name to be reserved isnot one which may be rejected on any ground referred to in sub-section (2), reservethe name for a period of three months from the date of intimation by the Registrar.

(5) Notwithstanding anything contained in this section, where the CentralGovernment is satisfied that a limited liability partnership has been registered(whether through inadvertence or otherwise and whether originally or by a change ofname) under a name which —

(a) is a name referred to in sub-section (2); or

(b) so nearly resembles the name of any other limited liability partnership or bodycorporate or other name as to be likely to be mistaken for it, the CentralGovernment may direct the limited liability partnership to change its name, and thelimited liability partnership shall comply with the direction within three months afterthe date of the direction or such longer period as the Central Government may allow.

(6) Any person may apply, in a manner as may be prescribed, to the Registrar togive a direction to any limited liability partnership, on a ground referred to in sub-section (5), to change its name.

(7) The Registrar shall not consider any application under sub-section (6) to give adirection to a limited liability partnership on the ground referred to in sub-section (5)(b) unless the Registrar receives the application within twelve months from the dateof registration of the limited liability partnership under that name.

(8) Any limited liability partnership which fails to comply with a direction givenunder sub-section (5) shall be punishable under the Act.

(9) Any limited liability partnership may change its name by lodging with theRegistrar notice of such change in such manner and form as may be prescribed.

13. Publication of name and limited liability.

(1) Every limited liability partnership shall ensure that its invoices and officialcorrespondence bear the following:

(a)the name and registration number of the limited liability partnership; and

(b) a statement that it is registered with limited liability.

(2) Any limited liability partnership which contravenes sub-section (1) shall bepunishable under the Act.

Chapter IV

Partnership

14. Partner.

(1) On the incorporation of a limited liability partnership its partners are the personswho subscribed their names to the incorporation document.

(2) Any other person may become a partner of a limited liability partnership by andin accordance with an agreement with the existing partners.

15. Relationship of Partners.

(1) Except as far as otherwise provided by this Act or any other enactment, themutual rights and duties of the partners of a limited liability partnership, and themutual rights and duties of a limited liability partnership and its partners, shall begoverned by agreement between the partners, or between the limited liabilitypartnership and its partners.

(2) The contents as may be prescribed in Regulations and form part of limitedliability partnership agreement and any changes made therein shall be filed with theRegistrar in the manner and form as may be prescribed.

(3) An agreement in writing made before the incorporation of a limited liabilitypartnership between the persons who subscribe their names to the incorporationdocument may impose obligations on the limited liability partnership as a pre-incorporation agreement, provided such agreement is ratified by all the partnersafter the incorporation of the limited liability partnership.

(4) In the absence of agreement as to any matter, the mutual rights and duties ofthe partners and the mutual rights and duties of the limited liability partnership andthe partners shall be determined by any provision relating to that matter as is setout in the First Schedule.

16. Cessation of partnership interest.

(1) A person may cease to be a partner of a limited liability partnership inaccordance with an agreement with the other partners or, in the absence ofagreement with the other partners as to cessation of being a partner, by giving 30days notice to the other partners of his intention to resign as partner.

(2) A person may also cease to be a partner of a limited liability partnership by hisdeath or by dissolution of the limited liability partnership firm.

(3) Where a person has ceased to be a partner of a limited liability partnership, theformer partner is to be regarded (in relation to any person dealing with the limitedliability partnership) as still being a partner of the limited liability partnership unless-

(a) the person has notice that the former partner has ceased to be a partner of thelimited liability partnership, or

(b) notice that the former partner has ceased to be a partner of the limited liabilitypartnership has been delivered to the Registrar.

(4) A partner's disassociation from the limited liability partnership does not by itselfdischarge the partner from any obligation to the limited liability partnership or to theother partners which he incurred while being a partner.

(5) Where a partner of a limited liability partnership ceases to be a partner, unlessotherwise provided in the limited liability partnership agreement, the former partneror a person entitled to his share in consequence of the death or insolvency of theformer partner, shall be entitled to receive from the limited liability partnership anamount —

(a) equal to the former partner’s capital contribution to the limited liabilitypartnership and his right to share in the accumulated profits of the limited liabilitypartnership after the deduction of losses of the limited liability partnership; and

(b) determined as at the date the former partner ceased to be a partner.

(6) For the avoidance of doubt, a former partner or a person entitled to his share inconsequence of the death or insolvency of the former partner shall not interfere inthe management of the limited liability partnership.

17. Registration of changes in partners.

(1) A limited liability partnership must ensure that-

(a) where a person becomes or ceases to be a partner, notice is

delivered to the Registrar within 30 days, and

(b) where there is any change in the name or address of a partner,

notice is delivered to the Registrar within 30 days.

(2) A notice delivered under sub-section (1)-

(a)shall be in a form as may be prescribed, and

(b)shall be signed by the manager of the limited liability partnership andauthenticated in a manner as may be prescribed, and,

(c) if it relates to admission of partner, shall contain a statement by the incomingpartner that he consents to becoming a partner, signed by him and authenticated ina manner as may be prescribed.

(3) If a limited liability partnership fails to comply with sub-section (1), the managershall be punishable under the Act.

(4) Any person who ceases to be a partner of a limited liability partnership mayhimself lodge with the Registrar the statement referred to in sub-section (2) if he hasreasonable cause to believe that the limited liability partnership will not lodge thestatement with the Registrar.

Chapter V

Extent and Limitation of Liability

18. Partner as agent.

Every partner of a limited liability partnership is the agent of the limited liabilitypartnership, but not of other partners.

19. Extent of liability of the limited liability partnership.

(1) A limited liability partnership is not bound by anything done by a partner indealing with a person if-

(a) the partner in fact has no authority to act for the limited liability partnership indoing a particular act, and

(b) the person knows that he has no authority or does not know or believe him to bea partner of the limited liability partnership.

(2) The limited liability partnership is liable if a partner of a limited liabilitypartnership is liable to any person as a result of a wrongful act or omission on hispart in the course of the business of the limited liability partnership or with itsauthority.

(3) An obligation of the limited liability partnership whether arising in contract orotherwise, is solely the obligation of the limited liability partnership.

(4) The liabilities of the limited liability partnership shall be met out of the propertyof the limited liability partnership.

20. Extent of liability of a partner.

(1) A partner is not personally liable, directly or indirectly for an obligation referredto in sub-section (3) of section 19 solely by reason of being a partner of the limitedliability partnership.

(2) Sub-section (3) of section 19 and sub-section (1) of this section shall not affectthe personal liability of a partner for his own wrongful act or omission, but a partnershall not be personally liable for the wrongful act or omission of any other partner ofthe limited liability partnership.

21. Unlimited liability in case of fraud.

(1) In the event of an act carried out by a limited liability partnership, or any of itspartners, with intent to defraud creditors of the limited liability partnership or anyother person, or for any fraudulent purpose, the liability of the parties shall beunlimited for all or any of the debts or other liabilities of the limited liabilitypartnership.

(2) Where any business is carried on with such intent or for such purpose asmentioned in sub-section (1), every person who was knowingly a party to thecarrying on of the business in the manner aforesaid shall be punishable under theAct.

22. Liability for personal acts.

A partner shall have unlimited liability for his or her personal acts which are not donefor and on behalf of the limited liability partnership, and were committed in his or herpersonal capacity.

Chapter VI

Duties and Standards of Conduct

23. Duties of Partners.

A partner shall discharge his duties to the limited liability partnership and the otherpartners under this Act or under the partnership agreement and exercise any rightconsistent with the obligation of good faith.

24. General Standards of Partner's Conduct.

(1) The fiduciary duties that a partner has to the limited liability partnership and theother partners are the duties of loyalty and due care as specified under sub-section(2) and (3).

(2) A partner's duty of loyalty to the limited liability partnership shall include:

(a) to account to the limited liability partnership and hold as trustee for it anyproperty, profit, or benefit derived by the partner in the conduct and winding up ofthe limited liability partnership's activities or derived from a use by the partner oflimited liability partnership property, including the appropriation of a limited liabilitypartnership opportunity;

(b) to refrain from competing with the limited liability partnership in the conduct orwinding up of the limited liability partnership's activities; and

(c) refrain from dealing with the limited liability partnership in the conduct or windingup of the limited liability partnership's activities as or on behalf of a party having aninterest adverse to the limited liability partnership.

(3) A partner’s duty of due care to the limited liability partnership and the otherpartners in the conduct and winding up of the limited liability partnership's activitiesis to refrain from engaging in grossly negligent or reckless conduct and fromcontravening any of the provisions of this Act and any other law for the time being inforce.

Chapter VII

Contributions

25. Form of Contribution.

A contribution of a partner may consist of tangible or intangible property or otherbenefit to the limited liability partnership, including money, services performed,promissory notes, other agreements to contribute cash or property, and contracts forservices performed or to be performed.

26. Liability for Contribution.

(1) A partner's obligation to contribute money or other property or other benefit orto perform services for a limited liability partnership shall be as per the partnershipagreement.

(2) A creditor of a limited liability partnership, which extends credit or otherwise actsin reliance on an obligation described in that agreement, without notice of anycompromise under this sub-section, may enforce the original obligation against suchpartner.

Chapter VIII

Financial Disclosures

27. Maintenance of records.

(1) The limited liability partnership shall maintain proper books of accounts relatingto its affair for each year of its existence on accrual basis and according to thedouble entry system of accounting, and shall maintain the same at its registeredoffice for a period as may be prescribed.

(2) If default is made in complying with sub-section (1), the manager shall bepunishable under the Act.

28. Annual declaration of solvency.

(1) Every limited liability partnership shall lodge with the Registrar a declaration byits manager that in his opinion, the limited liability partnership either —

(a)appears as at that date to be able to pay its debts as they become due in thenormal course of business; or

(b) does not appear as at that date to be able to pay its debts as they become due inthe normal course of business.

(2) The declaration referred to in sub-section (1) shall be lodged not later than 15months after the registration of the limited liability partnership and subsequentlyonce in every financial year at intervals of not more than 15 months.

(3) Notwithstanding sub-section (2), the Registrar may, on application by a limitedliability partnership and if he thinks fit, grant an extension of time for the lodging ofthe declaration referred to in sub-section (1).

(4) If a limited liability partnership fails to lodge the declaration referred to in sub-section (1) within the time or extended time referred to in sub-sections (2) and (3),the manager shall be punishable under the Act.

(5) A manager who makes a declaration referred to in sub-section (1) (a) withouthaving reasonable grounds for his opinion, shall be punishable under the Act; and

(6) Any person who, in connection with a declaration made under this section,makes a statement or furnishes information (whether directly or indirectly) to amanager that is false or misleading in a material particular, when he knows or oughtreasonably to have known that the statement or information is false or misleading ina material particular, shall be punishable under the Act .

(7) If an offence under this section is committed with an intent to defraud creditorsof the limited liability partnership or for a fraudulent purpose, the offender shall bepunishable under the Act .

29. Power of Registrar to obtain further information.

(1) In order to obtain such information as the Registrar may consider necessary forthe purposes of carrying out the provisions of this Act, the Registrar may —

(a)require any present or former partner or manager of a limited liability partnershipto answer any question in writing which the Registrar may consider necessary to askfor the purposes specified in this sub-section; or

(b) summon that person to appear before him or an inspector or any other publicofficer whom the Registrar may designate to answer any such question orally.

(2) The Registrar may further require the person referred to in sub-section (1) tomake such further declaration or supply such further particulars as the Registrar mayrequire.

(3) Any person who, without lawful excuse, fails to comply with any summons orrequisition of the Registrar under this section shall be punishable under the Act.

30. Penalty for providing false information to the Registrar.

Any person who makes any statement or furnishes any information to the Registrarunder the provisions of this Act which is false in any material particular or by reasonof the omission of any material particular and which he either knows or has reason tobelieve is false, shall be punishable under the Act.

31. Composition of offences.

(1) The Central Government may, compound any offence under this Act which isprescribed as a compoundable offence by collecting from a person reasonablysuspected of having committed the offence a sum which may extend to the amountof the maximum fine that is prescribed for the offence, or a sum prescribed underthe Act, whichever is lower.

(2) The Central Government may make regulations to prescribe the offences whichmay be compounded.

32. Destruction of old records.

The Registrar may destroy any document lodged, filed or registered with theRegistrar and which has been microfilmed or converted to electronic form if in hisopinion it is no longer necessary or desirable to retain the document.

33. Enforcement of duty to make returns.

(1) If any person is in default in complying with —

(a) any provision of this Act or of any other law which requires the lodging or filing inany manner with the Registrar of any return, account or other document or thegiving of notice to him of any matter; or

(b) any request of the Registrar to amend or complete and resubmit any documentor to submit a fresh document, and fails to make good the default within 14 daysafter the service on the person of a notice requiring it to be done, Tribunal may, onapplication by the Registrar, make an order directing that person or (if that person isa corporation) any officer of the body corporate to make good the default within suchtime as is specified in the order.

(2) Any such order may provide that all the costs of and incidental to theapplication shall be borne by that person or by any officer of the body corporate whois responsible for the default if that person is a body corporate.

(3) Nothing in this section shall limit the operation of any other provision of this Actor any written law imposing penalties (in respect of any default referred to in thissection) on that person or an officer of a body corporate if that person is a bodycorporate.

34. Keeping of limited liability partnership records.

(1) A limited liability partnership shall take reasonable precautions to maintain therecords it is required to maintain under sub-section (1) of section 27 in such amanner so as to

(a) prevent loss or destruction thereof;

(b) prevent falsification of entries;

(c) facilitate detection and correction of inaccuracies.

(2) If a default is made in complying with sub-section (1), the manager shallbepunishable under the Act.

Chapter IX

Taxation

35. Income Tax and Capital Gains.

(1) For the purposes of taxation, any activity carried on by a limited liabilitypartnership with a view to profit shall be treated as carried on in partnership by itspartners (and not by the limited liability partnership as such) and, accordingly, theproperty of the limited liability partnership shall be treated for those purposes asproperty of the partners.

(2) Where a limited liability partnership carries on a trade or business with a viewto profit-

(a) assets held by the limited liability partnership shall be treated for the purposes oftax in respect of capital gains as held by its partners; and

(b) any dealings by the limited liability partnership shall be treated for thosepurposes as dealings by its partners in partnership (and not by the limited liabilitypartnership as such),in respect of capital gains accruing to the partners of the limitedliability partnership on the disposal of any of its assets shall be assessed and chargedon them separately.

Chapter X

Assignment and Transfer of Partnership Rights

36. Partner's transferable interest.

A partner's economic rights in the limited liability partnership are freely transferablein accordance with section 37. Non-economic rights of a partner are not transferableunless specified by the limited liability partnership agreement.

37. Transfer of partner's transferable interest.

A transfer in whole or in part of a partner's transferable interest is permissible anddoes not by itself cause the partner's disassociation or a dissolution and winding upof the limited liability partnership's activities and does not entitle the assignee toparticipate in the management or conduct of the limited liability partnership'sactivities, nor access information concerning the limited liability partnership'stransactions.

Chapter XI

Investigation

38. Investigation of the affairs of a limited liability partnership.

(1) The Central Government may appoint one or more inspectors to investigate theaffairs of an LLP and to report on them in such manner as it may direct.

(2) The appointment shall be made if, Tribunal, either suo moto, or on an applicationreceived from not less than one fifth partners of LLP, by order, declares that theaffairs of LLP ought to be investigated;

(3) The appointment may be made:-

(a) on the basis of the report of the Registrar to the effect that the affairs of LLPought to be investigated;

(b) on the application (alongwith supporting evidence and security amount as maybe prescribed) of not less than one fifth of total number of partners of LLP;

(c) if LLP, by a resolution passed, declares that the affairs of the LLP ought to beinvestigated; and

(d) if in the opinion of the Central Government/Tribunal, there are circumstancessuggesting

(i) that the business of the limited liability partnership is being conducted with anintent to defraud its creditors, partners or any other persons, or otherwise for afraudulent or unlawful purpose, or in a manner oppressive or unfairly prejudicial tosome or any of its partners, or that the limited liability partnership was formed forany fraudulent or unlawful purpose;

(ii) that the partners of LLP have been guilty of fraud, misfeasance or othermisconduct towards the limited liability partnership or towards any of its partners; or

(iii) that the partners of the limited liability partnership have not been given all theinformation with respect to its affairs which they might reasonably expect, includinginformation relating to the remuneration payable to a manager of the limited liabilitypartnership.

39. Application by partners to be supported by evidence and power to callfor security.

An application by partners of the limited liability partnership shall be supported bysuch evidence as the Tribunal may require for the purpose of showing that theapplicants have good reason for requiring the investigation; and the CentralGovernment may, before appointing an inspector, require the applicants to givesecurity, for such amount as may be prescribed, for payment of the costs of theinvestigation.

40. Firm, body corporate or association not to be appointed as inspector.

No firm, body corporate or other association shall be appointed as an inspector.

41. Power of inspectors to carry investigation into affairs of relatedentities, etc.

(1) If an inspector appointed by the Central Government to investigate the affairsof the limited liability partnership thinks it necessary for the purposes of hisinvestigation to investigate also the affairs of an entity which has been associated inthe past or is presently associated with the limited liability partnership or anypresent or former partner or manager of the limited liability partnership, theinspector shall have the power to do so and shall report on the affairs of the otherentity or partner or manager, so far as he thinks that the results of his investigationthereof are relevant to the investigation of the affairs of the limited liabilitypartnership.

(2) In the case of any entity or partner or manager referred to in sub-section (1),the inspector shall not exercise his power of investigating into, and reporting on, itsor his affairs without first having obtained the prior approval of the CentralGovernment thereto:

Provided that before according approval under this sub-section, the CentralGovernment shall give the entity or partner or manager a reasonable opportunity toshow cause why such approval should not be accorded.

42. Production of documents and evidence.

(1) It shall be the duty of the manager and partners of the limited liabilitypartnership, -

(a) to preserve and to produce to an inspector or any person authorised by him inthis behalf with the previous approval of the Central Government, all books andpapers of, or relating to, the limited liability partnership or, as the case may be, or ofrelating to the other entity, which are in their custody or power; and

(b) otherwise to give to the inspector all assistance in connection with theinvestigation which they are reasonably able to give.

(2) The inspector may, with the previous approval of the Central Government,require any entity other than an entity referred to in sub-section (1) to furnish suchinformation to, or produce such books and papers before, him or any personauthorised by him in this behalf with the previous approval of that Government as hemay consider necessary if the furnishing of such information or the production ofsuch books and papers is relevant or necessary for the purposes of his investigation.

(3) The inspector may keep in his custody any books and papers produced undersub-section (1) or sub-section (2) for six months and thereafter shall return thesame to the limited liability partnership, other entity or individual by whom or onwhose behalf the books and papers are produced:

Provided that the inspector may call for the books and papers if they are neededagain:

Provided further that if certified copies of the books and papers produced under sub-section (2) are furnished to the inspector, he shall return those books and papers tothe entity or person concerned.

(4) An inspector may examine on oath

(a) any of the persons referred to in sub-section (1) ; and

(b) with the previous approval of the Central Government, any other person, inrelation to the affairs of the LLP, as the case may be ; and may administer an oathaccordingly and for that purpose may require any of those persons to appear beforehim personally.

(5) If any person fails without reasonable cause or refuses

(a) to produce to an inspector or any person authorised by him in this behalf withthe previous approval of the Central Government any book or paper which it is hisduty under sub-section (1) or sub-section (2) to produce ; or

(b) to furnish any information which it is his duty under sub-section (2) to furnish ;or

(c)to appear before the inspector personally when required to do so under sub-section (4) or to answer any question which is put to him by the inspector inpursuance of that sub-section ; or

(d) to sign the notes of any examination,

he shall be punishable under the Act.

(6) Notes of any examination under sub-section (4) shall be taken down in writingand shall be read over to or by, and signed by, the person examined, and maythereafter be used in evidence against him.

43. Seizure of documents by inspector.

(1) Where in the course of investigation, the inspector has reasonable ground tobelieve that the books and papers of, or relating to, limited liability partnership orother entity or partner or manager of such limited liability partnership may bedestroyed, mutilated, altered, falsified or secreted, the inspector may make anapplication to the Magistrate of First Class or, as the case may be, the MetropolitanMagistrate, having jurisdiction for an order for the seizure of such books and papers.

(2) After considering the application and hearing the inspector, if necessary, theMagistrate may by order authorise the inspector

(a) to enter, with such assistance, as may be required, the place or places wheresuch books and papers are kept ;

(b) to search that place or those places in the manner specified in the order ; and

(c) to seize books and papers he considers necessary for the purposes of hisinvestigation.

(3) The inspector shall keep in his custody the books and papers seized under thissection for such period not later than the conclusion of the investigation as heconsiders necessary and thereafter shall return the same to the concerned entity orperson from whose custody or power they were seized and inform the Magistrate ofsuch return:

Provided that the inspector may, before returning such books and papers asaforesaid, place identification marks on them or any part thereof.

(4) Save as otherwise provided in this section, every search or seizure made underthis section shall be carried out in accordance with the provisions of the Code ofCriminal Procedure, 1898, relating to searches or seizures made under that Code.

44. Inspectors' report.

(1) The inspectors may, and if so directed by the Central Government shall, makeinterim reports to that Government, and on the conclusion of the investigation, shallmake a final report to the Central Government. Any such report shall be written orprinted, as the Central Government may direct.

(2) The Central Government

(a) shall forward a copy of any report (other than an interim report) made by theinspectors to the limited liability partnership at its registered office, and also to anyother entity or person dealt with or related to the report;

(b) may, if it thinks fit, furnish a copy thereof, on request and on payment of theprescribed fee, to any person or entity related to or affected by the report;

(c) may also cause the report to be published.

45. Prosecution.

If, from the report it appears to the Central Government that any person in relationto the limited liability partnership or in relation to any other entity whose affairs havebeen investigated, been guilty of any offence for which he is liable, the CentralGovernment may, after taking such legal advice as it thinks fit, prosecute suchperson(s) for the offence; and it shall be the duty of all partners, manager and otheremployees and agents of the limited liability partnership or other entity, as the casemay be, to give the Central Government all assistance in connection with theprosecution which they are reasonably able to give.

46. Application for winding up of limited liability partnership or other entity.

If any such limited liability partnership or other entity is liable to be wound up underthis Act or any other legislation for the time being in force, and it appears to theCentral Government from any such report as aforesaid that it is expedient to do soby reason of any such circumstances as are referred to in sub-clause (i) or (ii) ofclause (d) of sub-section (3) of section 38, the Central Government may, unless thelimited liability partnership or entity is already being wound up by the Tribunal causeto be presented to the Tribunal by any person authorised by the Central Governmentin this behalf, a petition for the winding up of the limited liability partnership orentity on the ground that it is just and equitable that it should be wound up.

47. Proceedings for recovery of damages or property.

(1) If from any such report as aforesaid, it appears to the Central Government thatproceedings ought, in the public interest, to be brought by the limited liabilitypartnership or any entity whose affairs have been investigated,

(a) for the recovery of damages in respect of any fraud, misfeasance or othermisconduct in connection with the promotion or formation, or the management ofthe affairs, of such limited liability partnership or such other entity; or

(b) for the recovery of any property of such limited liability or such other entity,which has been misapplied or wrongfully retained;

the Central Government may itself bring proceedings for that purpose in the name ofsuch limited liability partnership or such other entity.

(2) The Central Government shall indemnify such limited liability partnership orsuch other entity against any costs or expenses incurred by it in, or in connectionwith, any proceedings brought by virtue of sub-section (1).

48. Expenses of investigation.

(1) The expenses of and incidental to an investigation by an inspector appointed bythe Central Government under this Act shall be defrayed in the first instance by theCentral Government; but the following persons shall, to the extent mentioned below,be liable to reimburse the Central Government in respect of such expenses:

(a)any person who is convicted on a prosecution, or who is ordered to pay damagesor restore any property in proceedings brought by virtue of section 47, may, in thesame proceedings, be ordered to pay the said expenses to such extent as may bespecified by the Tribunal convicting such person, or ordering him to pay suchdamages or restore such property, as the case may be;

(b) any entity in whose name proceedings are brought as aforesaid shall be liable, tothe extent of the amount or value of any sums or property recovered by it as a resultof the proceedings ; and

(c) unless, as a result of the investigation, a prosecution is instituted in pursuance ofsection 45,

(i)any entity, a partner or manager or any other person dealt with by the report ofthe inspector shall be liable to reimburse the Central Government in respect of thewhole of the expenses, unless and except in so far as, the Central Governmentotherwise directs; and

(ii)the applicants for the investigation, where the inspector was appointed inpursuance of the provisions of sub-section (2) of section 38, shall be liable to suchextent, if any, as the Central Government may direct.

(2) Any amount for which a limited liability partnership or other entity is liable byvirtue of clause (b) of sub-section (1) shall be a first charge on the sums or propertymentioned in that clause.

(3) The amount of expenses in respect of which any limited liability partnership,entity, a partner or manager or any other person is liable under sub-clause (i) ofclause (c) of sub-section (1) to reimburse the Central Government shall berecoverable as an arrear of land revenue.

(4) For the purposes of this section, any costs or expenses incurred by the CentralGovernment or in connection with proceedings brought by virtue of section 47(including expenses incurred by virtue of sub-section (2) thereof) shall be treated asexpenses of the investigation giving rise to the proceedings.

49. Inspectors' report to be evidence.

A copy of any report of any inspector or inspectors appointed under this Act,authenticated in such manner, of any, as may be prescribed, shall be admissible inany legal proceeding as evidence of the opinion of the inspector or inspectors inrelation to any matter contained in the report.

Chapter XII

Conversion to Limited Liability Partnership

50. Conversion from firm to limited liability partnership.

The provisions of the Second Schedule shall apply to the conversion from firm to alimited liability partnership.

51. Conversion from private company to limited liability partnership.

The provisions of the Third Schedule shall apply to the conversion from privatecompany and unlisted public company to a limited liability partnership.

52. Conversion from unlisted public company to limited liabilitypartnership.

The provisions of the Fourth Schedule shall apply to the conversion from unlistedpublic company to a limited liability partnership.

Chapter XIII

Foreign Limited Liability Partnership

53. Foreign Limited Liability Partnership.

Regulations shall make provision regarding a foreign limited liability partnership.

Chapter XIV

Amalgamation, Merger and Demerger of Limited Liability Partnerships

54. Amalgamation, Merger and Demerger of Limited Liability Partnerships.

Regulations shall make provision about the amalgamation, merger and demerger oflimited liability partnerships.

Chapter XV

Winding Up and Dissolution

55. Winding Up and Dissolution.

(1) The winding up of a limited liability partnership may be either voluntary or bythe Tribunal.

(2) Regulations shall make provision about the winding up and dissolution oflimited liability partnerships.

(2) Regulations may make other provisions about the winding up anddissolution of limited liability partnerships, and provision about the windingup and dissolution of foreign limited liability partnerships.

Chapter XVI

Miscellaneous

56. Business Transactions of Partner with Partnership.

A partner may lend money to and transact other business with the limited liabilitypartnership and has the same rights and obligations with respect to the loan or othertransactions as a person who is not a partner.

57. Application of Company Law etc.

The Central Government may direct that any of the provisions of the Companies Act,1956 or any other enactment as may be prescribed: -

a. shall apply to any limited liability partnership; or

b. shall apply to any limited liability partnership with such exception, modificationand adaptation as may be prescribed.

58. Electronic filing service.

(1) The Registrar may require any document to be lodged under this Act to be filedelectronically with the Registrar using the service provided by the Registrar wherebydocuments under this Act may be filed with or submitted to the Registrarelectronically.

(2) Where any document is required to be filed with or submitted to the Registrarelectronically by any person using the service referred to in sub-section (1), theRegistrar may allow the document to be filed or submitted by a prescribed person onbehalf of the first-mentioned person, subject to such conditions as may be imposedfrom time to time by the Registrar on the prescribed person.

(3) Where the Registrar provides a service whereby documents required under thisAct may be filed electronically with the Registrar, the Registrar and its officers oremployees shall not be liable for any loss or damage suffered by any person byreason of any error or omission of whatever nature or however caused appearing inany document obtained by any person under the service, if the error or omission —

(a) is made in good faith and in the ordinary course of the discharge of the duties ofsuch officers or employees; or

(b) has occurred or arisen as a result of any defect or breakdown in the service or inany of the equipment used for the service.

(4) A copy of or an extract from any document electronically filed with or submittedto the Registrar using the service referred to in sub-section (1) which is supplied orissued by the Registrar and certified through digital signature to be a true copy of orextract from such document shall, in any proceedings, be admissible in evidence asof equal validity with the original document.

(5) Any information supplied by the Registrar that is certified by the Registrarthrough digital signature to be a true extract from any document filed or lodged withor submitted to the Registrar using the service referred to in sub-section (1) shall, inany proceedings, be admissible in evidence and be presumed, unless evidence to thecontrary is adduced, to be a true extract from such document.

(6) Sub-sections (4) and (5) shall have effect notwithstanding the provisions of anyother written law.

59. Penalty.

Penalty for the violation of various provisions of this Act shall be as specified in theFifth Schedule.

60. Application of other laws not barred.

The provisions of this Act shall be in addition to, and not in derogation of, theprovisions of any other law for the time being in force.

61. Power to make Regulations.

(1) The Central Government may, by notification, make regulations consistent withthis Act in order to carry out the purposes of the Act.

(2) Every regulation made under this Act shall be laid, as soon as may be after it ismade, before each House of Parliament, while it is in session, for a total period ofthirty days which may be comprised in one session or in two or more successivesessions, and if, before the expiry of the session immediately following the session orthe successive sessions aforesaid, both Houses agree in making any modification inthe regulation, or both Houses agree that the regulation should not be made, theregulation shall thereafter have effect only in such modified form or be of no effect,as the case may be; so, however that any such modification shall be withoutprejudice to the validity of anything previously done under that regulation.

62. Power to remove difficulties.

(1) If any difficulty arises in giving effect to the provisions of this Act, the CentralGovernment may, by order published in the Official Gazette, make such provisions,not inconsistent with the provisions of this Act as may appear to it to be necessaryfor removing the difficulty.

(2) Every order made under this section shall be laid, as soon as may be after it ismade, before each House of Parliament.

63. Power of Registrar to strike defunct limited liability partnership offregister.

(1) Where the Registrar has reasonable cause to believe that a limited liabilitypartnership is not carrying on business or in operation, he shall write a letter to thelimited liability partnership inquiring whether the limited liability partnership iscarrying on business or in operation.

(2) If the Registrar does not within one month of sending the letter receive anyanswer thereto, he shall, within fourteen days after the expiry of the month, send tothe limited liability partnership by post a registered letter referring to the first letter,and stating that no answer thereto has been received and that, if an answer is notreceived to the second letter within one month from the date thereof, a notice will bepublished in the Official Gazette with a view to striking the name of the limitedliability partnership off the register.

(3) If the Registrar either receives an answer from the limited liability partnershipto the effect that it is not carrying on business or in operation, or does not within onemonth after sending the second letter receive any answer, he may publish in theOfficial Gazette, and send to the limited liability partnership by registered post, anotice that, at the expiration of three months from the date of that notice, the nameof the limited liability partnership mentioned therein will, unless cause is shown tothe contrary, be struck off the register and the limited liability partnership will bedissolved.

(4) If, in any case where a limited liability partnership is being wound-up, theRegistrar has reasonable cause to believe either that no liquidator is acting, or thatthe affairs of the limited liability partnership have been completely wound-up, andany returns required to be made by the liquidator have not been made for a periodof six consecutive months, the Registrar shall publish in the Official Gazette and sendto the limited liability partnership or the liquidator, if any, a like notice as is providedin sub-section (3).

(5) At the expiry of the time mentioned in the notice referred to in sub-section (3)or (4), the Registrar may, unless cause to the contrary is previously shown by thelimited liability partnership, strike its name off the register, and shall publish noticethereof in the Official Gazette; and on the publication in the Official Gazette of thisnotice, the limited liability partnership shall stand dissolved.

(6) If a limited liability partnership, or any partner, manager or creditor thereof,feels aggrieved by the limited liability partnership having been struck off the register,the Tribunal, on an application made by the limited liability partnership, partner,manager or creditor before the expiry of twenty years from the publication in theOfficial Gazette of the notice aforesaid, may, if satisfied that the limited liabilitypartnership was, at the time of the striking off, carrying on business or in operationor otherwise that it is just that the limited liability partnership be restored to theregister, order the name of the limited liability partnership to be restored to theregister; and the Tribunal may, by the order, give such directions and make suchprovisions as seem just for placing the limited liability partnership and all other

persons in the same position as nearly as may be as if the name of the limitedliability partnership had not been struck off.

(7) Upon a certified copy of the order under sub-section (6) being delivered to theRegistrar for registration, the limited liability partnership shall be deemed to havecontinued in existence as if its name had not been struck off.

64. Offences by limited liability partnerships.

Where an offence under this Act committed by a limited liability partnership isproved —

(a) to have been committed with the consent or connivance of a partner(s) ormanager of the limited liability partnership; or

(b) to be attributable to any neglect on the part of the partner(s) or manager ofthat limited liability partnership, the partner(s) or manager of the limited liabilitypartnership (as the case may be) as well as that limited liability partnership shall beguilty of the offence and shall be liable to be proceeded against and punishedaccordingly.

65. Jurisdiction of the Tribunal.

Notwithstanding any provision to the contrary in any Act for the time being in force,the Tribunal shall have jurisdiction to try any offence under this Act and shall havepower to impose the penalty or punishment in respect of the offence.

66. General penalties.

Any person guilty of an offence under this Act for which no penalty is expresslyprovided shall be liable to a fine which may extend toa sum as may be prescribedunder the Act.

FIRST SCHEDULE – DEFAULT PROVISIONS FOR LIMITED LIABILITY PARTNERSHIPS

1. The mutual rights and duties of the partners and the mutual rights and duties ofthe limited liability partnership and the partners shall be determined, subject to theterms of any limited liability partnership agreement, by the provisions in thisSchedule.

2. All the partners of a limited liability partnership are entitled to share equally in thecapital, profits and losses of the limited liability partnership.

3. The limited liability partnership must indemnify each partner in respect ofpayments made and personal liabilities incurred by him —

(a) in the ordinary and proper conduct of the business of the limited liabilitypartnership; or

(b) in or about anything necessarily done for the preservation of the business orproperty of the limited liability partnership.

4. Every partner may take part in the management of the limited liabilitypartnership.

5. No partner shall be entitled to remuneration for acting in the business ormanagement of the limited liability partnership.

6. No person may be introduced as a partner without the consent of all existingpartners.

7. Any matter or issue relating to the limited liability partnership shall be decided byresolution passed by a majority in number of the partners, and for this purpose, eachpartner shall have one vote. However, no change may be made in the nature ofbusiness of the limited liability partnership without the consent of all the members.

8. Each partner shall render true accounts and full information of all things affectingthe limited liability partnership to any partner or his legal representatives.

9. If a partner, without the consent of the limited liability partnership, carries on anybusiness of the same nature as and competing with the limited liability partnership,he must account for and pay over to the limited liability partnership all profits madeby him in that business.

10. Every partner must account to the limited liability partnership for any benefitderived by him without the consent of the limited liability partnership from anytransaction concerning the limited liability partnership, or from any use by him of theproperty, name or any business connection of the limited liability partnership.

11. No majority of the partners can expel any partner unless a power to do so hasbeen conferred by express agreement between the partners.

SECOND SCHEDULE - CONVERSION FROM FIRM TO LIMITED LIABILITYPARTNERSHIP

1. Interpretation.

(1) A firm may convert to a limited liability partnership by complying with therequirements as to the conversion set out in this Schedule.

(2) Upon such conversion, the partners of the firm shall be bound by the provisionsof this schedule that are applicable to them.

(3) The Central Government may, by order published in the Gazette, amend, add toor vary the provisions of this Schedule.

(4) In this paragraph, “convert”, in relation to a firm converting to a limited liabilitypartnership, means a transfer of the property, assets, interests, rights, privileges,liabilities, obligations and the undertaking of the firm to the limited liabilitypartnership in accordance with the provisions of this Schedule.

2. Eligibility for conversion.

A firm may apply to convert to a limited liability partnership in accordance with thisSchedule if and only if the partners of the limited liability partnership to which thefirm is to be converted, comprises all the partners of the firm and no one else.

3. Statements to be lodged.

A firm may apply to convert to a limited liability partnership by lodging with theRegistrar —

(a) a statement by all of its partners in such medium and form as the Registrar mayprescribe containing the following particulars:

(i) the name and registration number (if applicable) of the firm; and

(ii) the date on which the firm was registered under the Partnership Act, 1932 or anywritten law (if applicable); and

(b) incorporation document and statement referred to in section 8.

4. Registration of conversion.

On receiving the documents referred to in paragraph 3, the Registrar shall subject tothe provisions of this Act, register the documents and issue a certificate ofregistration in such form as the Registrar may determine stating that the limitedliability partnership is, on and from the date specified in the certificate, registeredunder this Act.

5. Registrar may refuse to register.

(1) Nothing in this Schedule shall be construed to require the Registrar to registerany limited liability partnership if he is not satisfied with the particulars or otherinformation furnished under the provisions of this Act.

(2) The Registrar may, in any particular case, require the documents referred to inparagraph 3 to be verified in such manner as the Registrar considers fit.

6. Effect of registration.

On and from the date of registration specified in the certificate of registration issuedunder paragraph 4

(a) there shall be a limited liability partnership by the name specified in thecertificate of registration registered under this Act;

(b) all movable and immovable property vested in the firm, all assets, interests,rights, privileges, liabilities, obligations relating to the firm and the whole of theundertaking of the firm shall be transferred to and shall vest in the limited liabilitypartnership without further assurance, act or deed; and

(c) the firm shall be deemed to be dissolved and if earlier registered under thePartnership Act, 1932 removed from the records maintained under that Act.

7. Registration in relation to property.

If any property to which paragraph 6 (b) applies is registered with any authority, thelimited liability partnership shall as soon as practicable after the date of registration,take all necessary steps as required by the relevant authority to notify the authorityof the conversion and of the particulars of the limited liability partnership in suchmedium and form as the authority may prescribe.

8. Pending proceedings.

All proceedings by or against the firm which are pending on the date of registrationmay be continued, completed and enforced by or against the limited liabilitypartnership.

9. Continuance of conviction, ruling, order or judgment.

Any conviction, ruling, order or judgment in favour of or against the firm may beenforced by or against the limited liability partnership.

10. Existing agreements.

Every agreement to which the firm was a party immediately before the date ofregistration, whether or not of such nature that the rights and liabilities thereundercould be assigned, shall have effect as from that day as if —

(a) the limited liability partnership were a party to such an agreement instead of thefirm; and

(b) for any reference to the firm, there were substituted in respect of anything to bedone on or after the date of registration a reference to the limited liabilitypartnership.

11. Existing contracts, etc.

All deeds, contracts, schemes, bonds, agreements, applications, instruments andarrangements subsisting immediately before the date of registration relating to thefirm or to which the firm is a party, shall continue in force on and after that date as ifthey relate to the limited liability partnership and shall be enforceable by or againstthe limited liability partnership as if the limited liability partnership were namedtherein or were a party thereto instead of the firm.

12. Continuance of employment.

Every contract of employment to which paragraph 10 or 11 applies shall continue inforce on or after the date of registration as if the limited liability partnership were theemployer thereunder instead of the firm.

13. Existing appointment, authority or power.

(1) Every appointment of the firm in any role or capacity which is in forceimmediately before the date of registration shall take effect and operate from thatdate as if the limited liability partnership were appointed.

(2) Any authority or power conferred on the firm which is in force immediatelybefore the date of registration shall take effect and operate from that date as if itwere conferred on the limited liability partnership.

14. Application of paragraphs 6 to 13.

Paragraphs 6 to 13 shall not apply to any approval, permit or licence issued underany written law to the firm which is in force immediately before the date ofregistration of the limited liability partnership.

15. Partner liable for liabilities and obligations of firm before conversion.

(1) Notwithstanding paragraphs 6 to 13, every partner of a firm that has convertedto a limited liability partnership shall continue to be personally liable (jointly andseverally with the limited liability partnership) for the liabilities and obligations of thefirm which were incurred prior to the conversion or which arose from any contractentered into prior to the conversion.

(2) If any such partner discharges any liability or obligation referred to in sub-paragraph (1), he shall be entitled (subject to any agreement with the limitedliability partnership to the contrary) to be fully indemnified by the limited liabilitypartnership in respect of such liability or obligation.

16. Notice of conversion in correspondence.

(1) The limited liability partnership shall ensure that for a period of 12 monthscommencing not later than 14 days after the date of registration, every officialcorrespondence of the limited liability partnership bears the following:

(a) a statement that it was, as from the date of registration, converted from a firmto a limited liability partnership; and

(b) the name and registration number (if applicable) of the firm from which it wasconverted.

(2) Any limited liability partnership which contravenes sub-paragraph (1) shall bepunishable under the Act.

THIRD SCHEDULE - CONVERSION FROM PRIVATE COMPANY TO LIMITED LIABILITYPARTNERSHIP

1. Interpretation.

(1) In this Schedule —

(a) "company" means a private company as defined under Section 3 (1) (iii) of theCompanies Act, 1956;

(b) "convert" in relation to a private company converting to a limited liabilitypartnership, means a transfer of the property, assets, interests, rights, privileges,liabilities, obligations and the undertaking of the private company to the limitedliability partnership in accordance with this Schedule.

(2) A private company may convert to a limited liability partnership by complyingwith the requirements as to the conversion set out in this Schedule.

(3) Upon such conversion, the private company, its shareholders, the limitedliability partnership to which the private company has converted and the partners ofthat limited liability partnership shall be bound by the provisions of this Schedulethat are applicable to them.

(4) The Central Government may, by order published in the Gazette, amend, add toor vary the provisions of this Schedule.

2. Eligibility for conversion.

A company may apply to convert to a limited liability partnership in accordance withthis Schedule if and only if —

(a) there is no security interest in its assets subsisting or in force at the time ofapplication; and

(b) the partners of the limited liability partnership to which it converts comprises allthe shareholders of the company and no one else.

3. Statements to be lodged.

A company may apply to convert to a limited liability partnership by lodging with theRegistrar —

(a) a statement by all its shareholders in such medium and form as the Registrarmay prescribe containing the following particulars:

(i) the name and registration number of the company; and

(ii) the date on which the company was incorporated under the Companies Act,1956; and

(b) incorporation document and statement referred to in section 8.

4. Registration of conversion.

On receiving the documents referred to in paragraph 3, the Registrar shall subject tothe provisions of this Act, register the documents and issue a certificate ofregistration in such form as the Registrar may determine stating that the limited

liability partnership is, on and from the date specified in the certificate, registeredunder this Act.

5. Registrar may refuse to Register.

(1) Nothing in this Schedule shall be construed to require the Registrar to registerany limited liability partnership if he is not satisfied with the particulars or otherinformation furnished under the provisions of this Act.

(2) The Registrar may, in any particular case, require the documents referred to inparagraph 3 to be verified in such manner as the Registrar considers fit.

6. Effect of registration.

On and from the date of registration specified in the notice of registration issuedunder paragraph 4 —

(a) there shall be a limited liability partnership by the name specified in thecertificate of registration registered under this Act;

(b) all movable and immovable property vested in the company, all assets, interests,rights, privileges, liabilities, obligations relating to the company and the whole of theundertaking of the company shall be transferred to and shall vest in the limitedliability partnership without further assurance, act or deed; and

(c) the company shall be deemed to be dissolved and removed from the records ofthe Registrar of Companies.

7. Registration in relation to property.

If any property to which paragraph 6 (b) applies is registered with any authority, thelimited liability partnership shall as soon as practicable after the date of registration,take all necessary steps as required by the relevant authority to notify the authorityof the conversion and of the particulars of the limited liability partnership in suchmedium and form as the authority may determine.

8. Pending proceedings.

All proceedings by or against the company which are pending on the date ofregistration may be continued, completed and enforced by or against the limitedliability partnership.

9. Continuance of conviction, ruling, order or judgment.Any conviction, ruling, order or judgment in favour of or against the company maybe enforced by or against the limited liability partnership.

10. Existing agreements.

Every agreement to which the company was a party immediately before the date ofregistration, whether or not of such nature that the rights and liabilities thereundercould be assigned, shall have effect as from that day as if —

(a) the limited liability partnership were a party to such an agreement instead of thecompany; and

(b) for any reference to the company, there were substituted in respect of anythingto be done on or after the date of registration a reference to the limited liabilitypartnership.

11. Existing contracts, etc.

All deeds, contracts, schemes, bonds, agreements, applications, instruments andarrangements subsisting immediately before the date of registration relating to thecompany or to which the company is a party shall continue in force on and after thatdate as if they relate to the limited liability partnership and shall be enforceable by oragainst the limited liability partnership as if the limited liability partnership werenamed therein or were a party thereto instead of the company.

12. Continuance of employment.

Every contract of employment to which paragraph 10 or 11 applies shall continue inforce on or after the date of registration as if the limited liability partnership were theemployer thereunder instead of the company.

13. Existing appointment, authority or power.

(1) Every appointment of the company in any role or capacity which is in forceimmediately before the date of registration shall take effect and operate from thatdate as if the limited liability partnership were appointed.

(2) Any authority or power conferred on the company which is in force immediatelybefore the date of registration shall take effect and operate from that date as if itwere conferred on the limited liability partnership.

14. Application of paragraphs 6 to 13.

Paragraphs 6 to 13 shall not apply to any approval, permit or licence issued underany written law to the company which is in force immediately before the date ofregistration of the limited liability partnership.

15. Notice of conversion in correspondence.

(1) The limited liability partnership shall ensure that for a period of 12 monthscommencing not later than 14 days after the date of registration, every officialcorrespondence of the limited liability partnership bears the following:

(a) a statement that it was, as from the date of registration, converted from acompany to a limited liability partnership; and

(b) the name and registration number of the company from which it was converted.

(2) Any limited liability partnership which contravenes sub-paragraph (1) shall bepunishable under the Act.

FOURTH SCHEDULE - CONVERSION FROM UNLISTED PUBLIC COMPANY TOLIMITED LIABILITY PARTNERSHIP

1. Interpretation.

(1) In this Schedule —

(a) "company" means an unlisted public company;

(b) "convert" in relation to a company converting to a limited liability partnership,means a transfer of the property, assets, interests, rights, privileges, liabilities,obligations and the undertaking of the company to the limited liability partnership inaccordance with this Schedule;

(c)“listed company” means a listed company as defined in the SEBI (Disclosure &Investor Protection) Guidelines, 2000.

(d)“unlisted public company”, means a company which is not a listed company.

(2) A company may convert to a limited liability partnership by complying with therequirements as to the conversion set out in this Schedule.

(3) Upon such conversion, the company, its shareholders, the limited liabilitypartnership to which the company has converted and the partners of that limitedliability partnership shall be bound by the provisions of this Schedule that areapplicable to them.

(4) The Central Government may, by order published in the Gazette, amend, add toor vary the provisions of this Schedule.

2. Eligibility for conversion.

A company may apply to convert to a limited liability partnership in accordance withthis Schedule if and only if —

(a) there is no security interest in its assets subsisting or in force at the time ofapplication; and

(b) the partners of the limited liability partnership to which it converts comprises allthe shareholders of the company and no one else.

3. Statements to be lodged.

A company may apply to convert to a limited liability partnership by lodging with theRegistrar —

(a) a statement by all its shareholders in such medium and form as the Registrarmay prescribe containing the following particulars:

(i) the name and registration number of the company; and

(ii) the date on which the company was incorporated under the Companies Act,1956; and

(b) incorporation document and statement referred to in section 8.

4. Registration of conversion.

On receiving the documents referred to in paragraph 3, the Registrar shall subject tothe provisions of this Act, register the documents and issue a certificate ofregistration in such form as the Registrar may determine stating that the limitedliability partnership is, on and from the date specified in the certificate, registeredunder this Act.

5. Registrar may refuse to Register.

(1) Nothing in this Schedule shall be construed to require the Registrar to registerany limited liability partnership if he is not satisfied with the particulars or otherinformation furnished under the provisions of this Act.

(2) The Registrar may, in any particular case, require the documents referred to inparagraph 3 to be verified in such manner as the Registrar considers fit.

6. Effect of registration.

On and from the date of registration specified in the notice of registration issuedunder paragraph 4 —

(a) there shall be a limited liability partnership by the name specified in thecertificate of registration registered under this Act;

(b) all movable and immovable property vested in the company, all assets,interests, rights, privileges, liabilities, obligations relating to the company and thewhole of the undertaking of the company shall be transferred to and shall vest in thelimited liability partnership without further assurance, act or deed; and

(c) the company shall be deemed to be dissolved and removed from the records ofthe Registrar of Companies.

7. Registration in relation to property.

If any property to which paragraph 6 (b) applies is registered with any authority, thelimited liability partnership shall as soon as practicable after the date of registration,take all necessary steps as required by the relevant authority to notify the authorityof the conversion and of the particulars of the limited liability partnership in suchmedium and form as the authority may determine.

8. Pending proceedings.

All proceedings by or against the company which are pending on the date ofregistration may be continued, completed and enforced by or against the limitedliability partnership.

9. Continuance of conviction, ruling, order or judgment.Any conviction, ruling, order or judgment in favour of or against the company maybe enforced by or against the limited liability partnership.

10. Existing agreements.

Every agreement to which the company was a party immediately before the date ofregistration, whether or not of such nature that the rights and liabilities thereundercould be assigned, shall have effect as from that day as if —

(a) the limited liability partnership were a party to such an agreement instead of thecompany; and

(b) for any reference to the company, there were substituted in respect of anythingto be done on or after the date of registration a reference to the limited liabilitypartnership.

11. Existing contracts, etc.

All deeds, contracts, schemes, bonds, agreements, applications, instruments andarrangements subsisting immediately before the date of registration relating to thecompany or to which the company is a party shall continue in force on and after thatdate as if they relate to the limited liability partnership and shall be enforceable by oragainst the limited liability partnership as if the limited liability partnership werenamed therein or were a party thereto instead of the company.

12. Continuance of employment.

Every contract of employment to which paragraph 10 or 11 applies shall continue inforce on or after the date of registration as if the limited liability partnership were theemployer thereunder instead of the company.

13. Existing appointment, authority or power.

(1) Every appointment of the company in any role or capacity which is in forceimmediately before the date of registration shall take effect and operate from thatdate as if the limited liability partnership were appointed.

(2) Any authority or power conferred on the company which is in force immediatelybefore the date of registration shall take effect and operate from that date as if itwere conferred on the limited liability partnership.

14. Application of paragraphs 6 to 13.

Paragraphs 6 to 13 shall not apply to any approval, permit or licence issued underany written law to the company which is in force immediately before the date ofregistration of the limited liability partnership.

15. Notice of conversion in correspondence.

(1) The limited liability partnership shall ensure that for a period of 12 monthscommencing not later than 14 days after the date of registration, every officialcorrespondence of the limited liability partnership bears the following:

(a) a statement that it was, as from the date of registration, converted from acompany to a limited liability partnership; and

(b) the name and registration number of the company from which it was converted.

(2) Any limited liability partnership which contravenes sub-paragraph (1) shall bepunishable under the Act.

FIFTH SCHEDULE - PENALTIES

Section General nature ofoffence

Penalty Daily defaultfine (whereapplicable)

7 (1) Non-compliancewith the provisionrelating toappointment ofManager

Fine which mayextend toRupees FiveLakh subject toa minimum ofRupees TenThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesfifty.

7 (3) Non-compliancewith the provisionrelating to filing ofparticulars, consentand change ofmanager.

Fine which mayextend toRupees OneLakh subject toa minimum ofRupees TenThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesFifty.

8 (3) Making falsestatement relatingto incorporation

Imprisonmentfor a term whichmay extend totwo years andalso with a finewhich mayextend toRupees FiveLakh subject toa minimum ofRupees TenThousand.

10 (4) Non-compliancewith the provisionsrelating change ofregistered office

Fine which mayextend toRupees TwentyFive Thousandsubject to aminimum of

Which mayextend toRupees FiveHundredsubject to aminimum of

Rupees TwoThousand.

RupeesFifty.

12 (8) Non-compliancewith the direction ofthe CentralGovernment forchange of name

Fine which mayextend toRupees FiveLakh subject toa minimum ofRupees TenThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesfifty.

13 (2) Non-compliancewith the provisionrelating topublication of nameand limited liability

Fine which mayextend toRupees TwentyFive Thousandsubject to aminimum ofRupees TwoThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesFifty.

17 (4) Non-compliancewith the provisionsrelating toregistration ofchanges in partners

Fine which mayextend toRupees TwentyFive Thousandsubject to aminimum ofRupees TwoThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesFifty.

21 (2) Carrying onbusiness withfraudulent purposes

Imprisonmentfor a term whichmay extend totwo years andalso with finewhich mayextend toRupees FiveLakh subject toa minimum ofRupees FiftyThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesfifty.

27 (3) Failure to maintainrecords

Fine which mayextend toRupees OneLakh subject toa minimum ofRupees TenThousand.

28 (4) Failure to lodge thedeclaration ofsolvency

Fine which mayextend toRupees OneLakh subject toa minimum ofRupees TenThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupees

fifty.28 (5) Making declaration

without reasonablegrounds

Fine which mayextend toRupees TwentyFive Thousandsubject to aminimum ofRupees TwoThousand.

28 (6) Furnishing false ormisleadinginformation to themanager

Fine which mayextend toRupees OneLakh subject toa minimum ofRupees TenThousand.

28 (7) Declaration madewith an intent todefraud creditors

Fine which mayextend toRupees FiveLakh subject toa minimum ofRupees FiftyThousand.

29 (3) Failure to complywith any summonsor requisition of theRegistrar

Fine which mayextend toRupees TwentyFive Thousandsubject to aminimum ofRupees TwoThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesfifty.

30 Providing falseinformation to theRegistrar

Fine which mayextend toRupees OneLakh subject toa minimum ofRupees TenThousand.

31 Composition ofoffence

34 (2) Failure to takereasonableprecautions tomaintain therecords

Fine which mayextend toRupees TwentyFive Thousandsubject to aminimum ofRupees TwoThousand.

42 (5) Non-Compliance ofprovisions relatingto production ofdocuments and

Fine which mayextend toRupees TwentyFive Thousand

Which mayextend toRupees FiveHundred

evidence subject to aminimum ofRupees TwoThousand.

subject to aminimum ofRupeesfifty.

66 General Penalties Rupees FiveLakhs.

Rupees OneThousand.

SecondSchedulePara 16 Non-Compliance

with provisionsrelating to notice ofconversion incorrespondence

Fine which mayextend toRupees OneLakh subject toa minimum ofRupees TenThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesfifty.

ThirdSchedulePara 15 Non-Compliance

with provisionsrelating to notice ofconversion incorrespondence

Fine which mayextend toRupees OneLakh subject toa minimum ofRupees TenThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesfifty.

FourthSchedulePara 15 Non-Compliance

with provisionsrelating to notice ofconversion incorrespondence

Fine which mayextend toRupees OneLakh subject toa minimum ofRupees TenThousand.

Which mayextend toRupees FiveHundredsubject to aminimum ofRupeesfifty.

LLP REGULATIONS, 2006.