LLP Settlement Scheme, 2020 -  A boon for Defaulting LLPs

The Limited Liability Partnership (LLP) is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. Since it contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’, the LLP has become the preferred option for small enterprises. Every LLP must ensure filing of prescribed statutory documents with the Registrar on yearly basis as well as for event based filings.

However, a large number of registered LLPs are not filing their due statutory documents in a timely manner with the Registrar of Companies. In the event of requisite forms not being filed within prescribed time limit, presently LLPs have to pay an additional fee of Rs.100/- for every day of delay in addition to the normal fees payable, therefore amounting to a huge financial burden on the defaulting LLPs. Further, LLPs and their designated partners are liable for criminal prosecution and the said LLPs cannot be closed till all compliances are completed.

To promote ease of doing business and to give one-time relaxation in additional fees to the defaulting LLPs, the Central Government has introduced a scheme namely “LLP Settlement Scheme 2020” vide General Circular No.06/2020 dated 04^th March 2020 which was subsequently modified vide General Circular No.13/2020 dated 30^th March 2020. The Scheme allows a one-time condonation to the LLPs for delay in filing statutory documents with the Registrar of Companies. The features of this Scheme are explained below:

FAQs on the LLP Settlement Scheme, 2020

1.	What is the objective of the LLP Settlement Scheme, 2020?
Ans:	To promote ease of doing business and in order to support and enable the LLPs to focus on taking necessary measures to address the COVID-19 threat and to reduce their compliance burden,  the Government has decided to give a Onetime relaxation in additional fees to the defaulting LLPs and make good their default by filing pending documents and to serve as a compliant LLP in future.
2.	What is the validity of the LLP Settlement Scheme, 2020?
Ans:	There are two LLP Settlement Schemes:
	(i)		Original Scheme dated 4th March, 2020 - Applicable from 16th March, 2020 to 31st March, 2020
	(ii)		Modified Scheme dated 30th March, 2020 - Applicable from 1st April, 2020 to 30th September, 2020
3.	What is the applicability of this Scheme?
Ans:	This Scheme is available for all defaulting LLPs and they are permitted to file belated documents which were due for filing till 31st August 2020 in accordance with the provisions of this Scheme. The forms can be filed till 30th September 2020 under this Scheme.
4.	What is Defaulting LLP as per the Scheme?
Ans.	Defaulting LLP means a LLP registered under the Limited Liability Partnership Act, 2008 and which has made a default in filing of documents on the due date(s) specified under the LLP Act, 2008 and rules made thereunder.
5.	What does “belated documents” mean?
Ans.	Belated documents means all documents or forms which are required to be filed in the MCA-21 registry under the provisions of LLP Act, 2008 and the Rules made thereunder.
6.	What are the benefits available to LLPs under the Scheme?
Ans:	1)  The Defaulting LLPs can now file belated documents under this Scheme without payment of any additional fees. Only normal fees is payable.
	2)  The defaulting LLPs, which have filed their belated documents till 30th September 2020 and made good the default, shall be granted immunity from prosecution by the Registrar for such defaults.
7.	Which forms are allowed to be filed under this Scheme?
Ans:	The Scheme is applicable for filing of all pending forms and documents by LLPs. As per the Original Scheme, it was applicable only for Form No. 3, Form No. 4, Form No. 8 and Form No. 11 and no other forms. However, now the Scheme stands modified and is applicable to all the LLP forms, viz. Form 3, Form 4, Form 5, Form 8, Form 11, Form 12, Form 15, Form 22, Form 23, Form 27, Form 29 and Form 31.
8.	Whether an LLP is required to file an application to the Registrar to avail the Scheme?
Ans:	No, the defaulting LLPs may themselves avail of the scheme for filing documents which have not been filed or registered in time on payment of statutory fee. No separate application is required to be filed for availing this Scheme.
9.	For which LLPs this Scheme is not applicable?
Ans:	The Scheme does not apply to the LLPs which has made an application in Form 24 to the Registrar for striking off its name from the Register of LLPs.
10.	Whether this Scheme is permanent?
Ans:	No, the Scheme is for a fixed period and it is one-time relaxation. As part of Government's constant efforts to promote ease of doing business it has been decided to give a Onetime relaxation in additional fees to the defaulting LLPs to make good their default by filing certain pending documents and to serve as a compliant LLP in future. The Scheme will be available only till 30th September 2020.
11.	What is the quantum of fee payable for filing belated documents under this Scheme?
Ans:	Only normal fees as applicable for the respective forms is payable at the time of filing under the Scheme.
12.	Whether any additional fee payable for filing forms under this Scheme?
Ans:	No additional fee is payable for filing any belated document under the Scheme.
13.	Whether Indemnity Bond be executed on Non-Judiciary Stamp Paper? If yes, then on what denomination?
Ans:	No indemnity bond is required under the LLP Settlement Scheme.
14.	In the original LLP Settlement Scheme, the additional fee was to be paid at INR 10 per day up to a maximum of INR 5000, in the modification LLP Settlement Scheme there is no additional fees. Is the understanding correct?
Ans.	Yes
15.	An LLP is under non-compliance of one form. The LLP has applied for strike off in February 2020. Whether such an LLP can withdraw strike off application and file the form?
Ans:	There is no specific process available for withdrawal of Form 24. If Form 24 is not yet approved, LLP may approach the jurisdictional ROC to ‘reject’ the form so that status of LLP gets marked to ‘Active’ and relevant filings can be made.
16.	LLP is not in operation since incorporation in FY 2015-16, now wants to strike off from the register. LLP has already Form 11 for FY 15-16 but not Form 8, is it mandatory to file Form 8 availing LLP scheme before filing Form 24?
Ans:	No. For list of attachments while filing Form 24, please refer to instruction kit available on the portal.
17.	As under CFSS, CFSS Form needs to be filed between 01st October to 31st March, is it required to file any such form under LLP Modified Settlement Scheme to get immunity?
Ans:	No such requirement for LLPs who have availed the benefit under the LLP Modified Settlement Scheme.
18.	Can LLP with Under Strike off or ‘Defunct’ status file form 8 and form 11 for past 3-4 years? (as per the scheme or even in general)?
Ans.	No.
19.	Form 8 is not allowing prefill for an LLP which is under defunct status. How should we avail the scheme for such LLP? Is the scheme available? Will new forms be made available then?
Ans.	An LLP under struck off (Defunct) status cannot avail the benefit of LLP Modified Settlement Scheme.
20.	What action Registrar can take on the defaulting LLPs which have not availed this Scheme after conclusion of the same?
Ans.	On the conclusion of the Scheme, the Registrar shall take necessary action under the LLP Act, 2008 against the LLPs which have not availed this Scheme and are in default in filing of documents as required under the provisions of LLP Act, 2008 in a timely manner. The defaulting LLPs may be subjected to prosecution by Registrar for such defaults.
21.	What is the difference between the Original LLP Settlement Scheme 2020 and the Modified Scheme dated 30th March 2020?
Ans:	1)	The Original Scheme was applicable for filing of only 4 pending Forms, viz..Form 3, Form, Form 8 and Form 11 whereas the Modified Scheme allows filing of all forms under the provisions of LLP Act, 2008 and the rules made thereunder.
	2)	Under the Original Scheme, an additional fees of Rs.10/-per day for delay in filing the documents was payable (in addition to the normal fee payable) subject to a maximum amount of Rs.5000/- whereas under the Modified Scheme, no additional fees is payable.

Disclaimer: This blog is made available only for educational purpose as well as to give you general information and a general understanding of the law, not to provide specific professional advice. The blog should not be used as a substitute for professional advice. Accordingly, before taking any actions based upon such information, we encourage you to consult with the appropriate professionals. The use or reliance of any information contained in this blog is solely at your own risk.