The Ministry of Corporate Affairs (MCA) has notified the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023 on 9th November 2023. These rules aim to regulate the identification and reporting of significant beneficial owners (SBOs) in Limited Liability Partnerships (LLPs) in India.
MCA Notification dated 09/11/2023: LLP SBO Rules 2023
Introduction
The LLP SBO rules have been introduced based on Section 90 of the Companies Act, 2013. They mandate the disclosure of ultimate beneficial ownership and control structures in LLPs to improve transparency and accountability. Some key highlights of the LLP SBO Rules 2023 are:
1. Definitions
i) “Control” includes the right to appoint majority designated partners or control management decisions directly or indirectly.
ii) “Majority stake” means holding more than 50% equity share capital, contribution, voting rights, or rights to receive profits/distributions.
iii) “Significant beneficial owner” means an individual holding ≥10% contribution, voting rights, rights to receive profits/distributions, or exercising significant influence or control through other means.
2. Key Provisions
i) All LLPs must take steps to identify SBOs and ensure they submit declarations in Form LLP BEN-1.
ii) Existing SBOs must file declarations within 90 days of commencement of rules. New SBOs must file within 30 days.
iii) Upon receiving declarations, LLPs must file returns with the Registrar (Form LLP BEN-2) and maintain a register of SBOs (Form LLP BEN-3).
iv) LLPs must issue notices (Form LLP BEN-4) to partners holding ≥10% stake seeking information about beneficial interests.
v) Non-compliance can lead to restrictions on economic rights attached to contributions by the competent authority’s order.
Analysis
The LLP SBO Rules 2023 are a significant move to enhance transparency and accountability in LLP structures. LLPs now have clear procedures for identifying and documenting beneficial ownership. LLPs should promptly evaluate their ownership structures and ensure compliance with the SBO reporting norms within the stipulated timelines. Overall, these rules will lead to better corporate governance and reduce misuse of LLP structures for money laundering, tax evasion and other illegal activities.
Conclusion
The LLP SBO Rules 2023 mark an important milestone in strengthening the disclosure regime for LLPs in India. LLPs should take proactive steps for timely compliance and maintain up-to-date registers of their significant beneficial owners. This will foster a culture of transparency and trust in LLPs as robust vehicles for doing business.