The Ministry of Corporate Affairs (MCA) has notified that the effective date for the provisions of the Limited Liability Companies (Amendment) Act 2021 will be 1 April 2022.
“In exercising the powers conferred by subsection (2) of section 1 of the Limited Liability Companies (Amendment) Act 2021 (31 of 2021), the Central Government hereby appoints the 1st April 2022 as the date on which the provisions of Articles 1 to 29 of the said law will come into force,” reads the notification.
The Amendment Act introduced the concept of Small LLP which aims to be in line with the concept of small businesses under the Companies Act 2013. The Amendment Act defined Small LLP as a limited liability company. whose contribution may reach INR 2,500,000 or any other prescribed amount, not exceeding INR 5,000,000; and whose turnover does not exceed INR 40,000,000 or any other prescribed amount, not exceeding INR 500,000,000, for the preceding financial year.
Under the amending law, small LLPs and start-up LLPs will have an advantage over other LLPs when subject to penalties for default.
The amending law provides that the penalty payable for non-compliance with the LLP law by a small LLP or start-up LLP or its partner or designate partner will be half of the specified penalty, subject to a maximum of 1 INR. 00,000 for limited liability companies and INR 50,000 for each partner or named partner or any other person as the case may be.
Under the LLP Act, each LLP must have at least 2 named partners, of which at least 1 must be a resident of India. The LLP Act previously defined the term resident of India as a person who has resided in India for 182 (one hundred and eighty two) days in the previous year. As per the Amendment Act, a person who has lived in India for at least 120 (one hundred and twenty) days in the fiscal year is also eligible to become a Designated Partner of an LLP.
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