The Ministry of Corporate Affairs (MCA) has recently notified the Limited Liability Partnership (Third Amendment) Rules, 2023, which amend the Limited Liability Partnership Rules, 2009. These Amended Rules, effective from 27 October 2023, introduce significant changes for Disclosure of Beneficial Interest by Limited Liability Partnerships (LLPs) in India.
MCA Notification dated 27/10/2023: Rules Amended for Disclosure of Beneficial Interest by LLPs
Register of Partners
One of the key highlights of the Amended Rules is the requirement for all LLPs to maintain a register of partners at their registered office. This register, to be maintained in Form 4A, must be updated according to the following timelines:
i) For LLPs proposed to be incorporated: From the date of the LLP’s incorporation.
ii) For LLPs existing on the date of commencement of the Amended Rules: Within a period of 30 days from the date of commencement of the said Amended Rules.
Entries in the register must be made within seven days of any change in the details. Additionally, details of beneficial ownership (if any) must also be updated in the register.
Declaration of Beneficial Interests
In line with section 89 of the Companies Act, 2013 (CA 2013), the Amended Rules also require all LLPs to declare the names of persons holding interest in the LLP (by way of contributions) through a nominee or registered holder-beneficial owner relationship. This declaration is mandatory for:
i) A person whose name is entered into the register of partners of an LLP but does not hold any beneficial interest, fully or partly, in the contribution (referred to as the ‘registered partner’).
ii) A person who holds or acquires a beneficial interest in the contribution, but whose name is not registered in the register of partners (referred to as the ‘beneficial partner’).
The registered partner and beneficial partner need to declare details in Forms 4B and 4C, respectively, within 30 days from the date on which their name is entered into the register of partners or the beneficial interest is acquired. Any change in the beneficial interest in the contribution must be declared within 30 days from the date of such change.Upon receipt of the declarations, the LLP is required to record such declaration in the register of partners and file it with the Registrar within 30 days from the date of receipt of the said declarations.
Designated Partner Responsibilities
The Amended Rules also specify that the LLP must designate a partner who will be responsible for furnishing and extending cooperation to provide information regarding the beneficial interest in the contribution in an LLP to the Registrar or any other officer authorised by the Central Government. Details of such designated partner will be filed with the Registrar in Form 4. Until any designated partner is specified, all designated partners will be considered as deemed designated partners for the aforementioned purposes.
The Takeaways
Companies registered under the CA 2013 were always required to declare their nominee or beneficial owner relationships under section 89 of the CA 2013. However, no similar provisions were provided under the LLP Act, 2008. As LLPs are a popular legal entity structure, the MCA is now directing its efforts to strengthen the disclosure regime in terms of beneficial interests held by persons in the LLP.Now, LLPs must maintain a register of partners as per the timeline prescribed. However, in case of declarations of beneficial interest, the LLPs need to evaluate their structures to understand the applicability of the Amended Rules and accordingly take further steps. This is a significant step towards transparency and accountability in the functioning of LLPs in India.