Limited Liability Partnership (LLP) as a form of an entity was introduced by the Govt. of India through the Limited Liability Partnership Act 2008. In a span of over a decade in existence, LLP has gained a lot of popularity and has become a preferred mode of entity for small and medium businesses.
A lot of entrepreneurs have also started their business as an LLP and later moved on to form a company after acquiring growth and revenue in the LLP. However, at the same time, there are several entrepreneurs who started an LLP and ceased to carry on their business and have also missed the filing of statutory returns and other documents required to be filed with the Ministry of Corporate Affairs every year. The omission of filing of returns and documents has led to a huge penalty that has piled up over the years and has left the entrepreneurs and founders with no option but to face prosecution.
The Govt. of India in a move to facilitate the ease of doing business has thus introduced the LLP Settlement Scheme 2020 which is being considered as a big relief for LLP and boon for the millions of entrepreneurs, founders, and partners of LLP which have defaulted in the filing of statutory returns and documents within the due date. The Govt. of India has vide circular dated 4th March 2020 decided to give a one-time relaxation to the LLPs which have defaulted in the filing of documents and returns with a limited penalty. Also, the founders and partners would not be liable for any prosecution if they avail the LLP Settlement Scheme 2020 and fulfill the necessary compliances within the timeline as a measure of one-time condonation of delay.
The LLP Settlement 2020 Scheme was further modified vide another circular dated 30th March 2020 which shall come into effect from 1st April 2020 and shall remain in force till 30th September 2020. This modification comes in the wake of another circular dated 30th March 2020 which has been notified for the benefit of companies in the name of Companies Fresh Start Scheme (CFSS) 2020.
Some of the Frequently Asked Questions (FAQs) are highlighted below to further elaborate the LLP Settlement Scheme 2020:
1) What is LLP Settlement Scheme 2020?
LLP Settlement Scheme 2020 is an amnesty scheme notified by the Ministry of Corporate Affairs, Govt. of India, on 4th March 2020 which would grant defaulting LLP a one-time relaxation in penalty and additional fees for filing of pending annual returns and other applicable documents within a given time frame.
This was further modified on 30th March 2020 which would come into effect from 1st April 2020 and would remain in force till 30th September 2020.
2) What is the time frame of this Scheme?
As per the cicular dated 4th March 2020, issued by the Ministry of Corporate Affairs, Govt. of India, this scheme shall come into force on 16th March 2020 and shall be valid till 13th June 2020.
However, as per notification dated 30th March, the scheme has been modified and the modified LLP Settlement Scheme 2020 shall come into effect from 1st April 2020 and remain in force till 30th September 2020.
3) When was the LLP Settlement Scheme 2020 notified by the Govt.?
The Scheme was notified by the Ministry of Corporate Affairs, Govt. of India, on 4th March 2020. This has been further modified on 30th March 2020.
4) Is it applicable to all the LLP?
No, the LLP Settlement Scheme 2020 can be availed only by the defaulting LLP.
5) Who is a defaulting LLP?
Any LLP which has not filed Form 11, Form 8, Form 3, and Form 4 for any of the financial years and as and when applicable shall be considered as a defaulting LLP.
6) Does it affect my LLP in any way if I have filed all my Form 8 and Form 11 within due dates?
If your LLP has duly filed Form 8 and Form 11 within the due dates, it shall not affect your LLP. However, it has to be confirmed if the LLP has also complied with Form 3 and Form 4 as and when applicable. In case, the filing of Form 3 and Form 4 are applicable, the LLP should avail the facility of the LLP Settlement Scheme 2020. Please check this with your consultant.
7) My LLP has complied with all the filings for all the financial years; however, Form 11 was not filed for FY 2012-13. Should I avail the benefit of the Scheme?
Any LLP which has not complied with any of the returns or filing of documents for any of the financial years till 31st August 2020 may avail the benefit of the Scheme.
8) My LLP has not filed the Income Tax Return for the last two years. Will the LLP Settlement Scheme help me?
The LLP Settlement Scheme is restricted to the filings required under the LLP Act 2008. If the LLP has not filed the Income Tax Return it cannot avail the LLP Settlement Scheme as filing of Income Tax Return is guided by the Income Tax Act.
9) What is the additional fee normally applicable in case of a default in filing?
Any LLP which has defaulted in filing of returns and documents as required under the LLP Act 2008 is required to pay a delayed penalty of Rs.100 per day per form after the due date till the default is made good. For example, an LLP which has defaulted in filing of Form 11 for 365 days shall pay an additional fee of Rs.36500 as a penalty.
10) How are things and fees different in case of the LLP Settlement Scheme 2020?
The Scheme would allow a defaulting LLP to complete the filings with an additional fee of Rs.10 per day per form up to a maximum of Rs.5000 per form as an additional fee which shall be effective till 31st March 2020.
And as per the modified LLP Settlement Scheme 2020, the Ministry has given relief in terms of total additional fees which shall be valid till 30th September 2020,
11) What are forms which are allowed to be filed under the LLP Settlement Scheme 2020?
Form 11, Form 8, Form 3, and Form 4 are allowed to be filed under the LLP Settlement Scheme 2020.
12) When is Form 11, Form 8, Form 3, and Form 4 required to be filed?
Form 11 is filed for Annual Return of LLP
Form 8 is filed for Statement of Account & Solvency (Annual or Interim)
Form 3 is filed for filing Information with regard to LLP agreement and changes, if any
Form 4 is filed for Notice of appointment, cessation, change in name / address / designation of Partner / Designated Partner, and his consent to become a Partner / Designated Partner, etc.
13) I have an LLP that is inoperative and has not filed the statutory returns and documents except Income Tax Return. Now I wish to close the LLP. Can I do so?
No, before an LLP can file for closure it has to first close all the statutory filings required under the LLP Act 2008.
14) If I avail the one-time relaxation under the LLP Settlement Scheme 2020, will I still be prosecuted?
No, if a defaulting LLP has filed the pending documents till 30th September 2020 and made good the default, it shall not be subject to any further prosecution.
15) I have already filed for the closure of my LLP which is pending approval for the last 6 months; do I need to avail the benefit of the LLP Settlement Scheme 2020?
The LLP Settlement Scheme 2020 shall not apply to LLPs which have made an application in Form 24 to the Registrar, for striking off its name from the register as per provisions of Rule 37(1) of the LLP Rules, 2009.
16) Will the Partners / Designated Partners be prosecuted if they have failed to comply with the filings as required under the LLP Act 2008?
Yes, an LLP which has failed to comply with the statutory requirements under the LLP Act 2008 shall be liable to be prosecuted in case of a default.
17) What will happen if I do not avail the LLP Settlement Scheme 2020 till 30th September 2020?
Upon the conclusion of the time frame given under the LLP Settlement Scheme 2020, the Ministry of Corporate Affairs may take necessary legal action under the LLP Act 2008 and all the defaulting parties shall be subject to prosecution in case of default.
18) Will there be any immunity granted to a person who has failed to avail the LLP Settlement Scheme 2020 due to medical reasons?
There is no such circular or notification in this regard as to what would happen in case of failure to avail the scheme due to medical reasons. Hence, the last date to avail the LLP Settlement Scheme 2020 is 30th September 2020.
If you have any queries, please write to us.