Alas!, now LLP compliances will also increase

Over the years LLPs was preferred to Pvt Ltd Companies as they offered benefits of Pvt Ltd companies like limited liabilities but were subject to less compliances. But with latest developments, LLPs compliances are set to increase in line with Companies Act. This will affect its preference. Cost of compliance will go up and businesses may not like it. Some experts feel that The beauty of LLP was simplification, which will be lost soon.

LLPs had helped to bring many business from unorganised sector into organised sector, such steps will now forced businesses to go back to unorganised sector.

The ministry plans to introduce curbs on number of LLPs in which person can be appointed as DP. This will affect business for genuine businessmen.

Recently there was an announcement that many of the offences will be decriminalised for LLP which was a welcome step but now this announcement of extending certain sections of the Companies Act to the LLP Act will create issues for businesses.

There can be better ways to govern than this. Whether Compliances are for business or business is for compliances!

Some Experts feel, Unfortunately, in India we have seen people misusing the authorities. Basically, there is a limit on companies in which a person can be director. Same logic may apply here. 10-15 LLP limit should not affect genuine businessman.

But counter argument may be, There are businessman like Elon Musk who is set to become CEO of 5 companies worth 100s of billions of $. There are many in India who are going to feel such provisions very restrictive. We understand governance part but genuine businessman should not be affected.

A total of eight sections relating to the register of significant beneficial owners, disqualifications of directors, conduct of inquiries and inspections and non-cognisable offences will soon be applicable to LLPs, the MCA said.

Clauses of Section 164 of the Companies Act shall apply to LLPs. This section states that a director of a company which has defaulted on filing financial statements or annual returns for three consecutive years will be disqualified as director.

The application of the provision causing disqualification of directors of a company that has not complied with filings for three years to LLP is a major change.

More the forms applicable to LLPs, more will be late fees and same consequences which companies are facing now, LLPs will face.

We feel some of the provisions are required but certain provisions will be restrictive for businesses. Cost of Compliance will go up and it will harm business.