The Ministry of Corporate Affairs (MCA) has issued new compliance requirements for LLPs under the LLP Act, 2008. These requirements are detailed in the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023. This guide will help you understand and comply with these rules by July 1, 2024.
Important Terms
- LLP (Limited Liability Partnership): A type of business structure where partners have limited liabilities.
- SBO (Significant Beneficial Owner): An individual who has significant control or benefits from the LLP.
Who is a Significant Beneficial Owner (SBO)?
An SBO is an individual who, alone or with others, directly or indirectly:
- Owns at least 10% of the contribution to the LLP.
- Holds at least 10% of voting rights in the LLP.
- Has the right to receive at least 10% of the profits from the LLP.
- Exercises significant influence or control in the LLP.
Compliance Requirements for LLPs
Steps for Compliance
Identify SBOs
- Determine if any individual meets the criteria for being an SBO.
Notify SBOs
- Request SBOs to declare their status using Form LLP BEN-1.
File with MCA
- Submit Form LLP BEN-2 within 30 days of receiving Form LLP BEN-1 from SBOs.
Maintain Records
- Keep an up-to-date Register of SBOs using Form LLP BEN-3.
Regular Updates
- Ensure all changes and declarations are timely recorded and reported.
Detailed Steps for Compliance
1. Identify SBOs
An SBO can be identified based on:
- Contribution: Owns at least 10% of the contribution to the LLP.
- Voting Rights: Holds at least 10% of voting rights in the LLP.
- Profit Sharing: Has the right to receive at least 10% of the profits from the LLP.
- Control: Exercises significant influence or control in the LLP.
Indirect Holding Examples:
- Body Corporate: The SBO is the person who holds the majority stake (>50% equity or voting rights) in the body corporate.
- Partnership Firm: The SBO is an individual who is a partner or holds a majority stake in the partner entity.
- Trusts: The SBO can be a trustee, beneficiary, or settlor, depending on the type of trust.
- Pooled Investment Vehicles: The SBO can be a general partner, investment manager, or chief executive officer.
2. Notify SBOs
LLPs must notify individuals who are identified as SBOs to declare their status. This can be done using Form LLP BEN-4.
Form LLP BEN-4 Notification Steps:
- Send the form via email or post to the identified SBO.
- Include instructions for completing Form LLP BEN-1.
3. File with MCA
After receiving the SBO declaration in Form LLP BEN-1, the LLP must file Form LLP BEN-2 with the MCA within 30 days.
Filing Steps:
- Collect completed Form LLP BEN-1 from SBOs.
- Submit Form LLP BEN-2 electronically to the MCA portal.
- Ensure submission is done within the 30-day window to avoid penalties.
4. Maintain Records
LLPs are required to maintain a Register of SBOs using Form LLP BEN-3. This register should include details of all SBOs and be kept at the LLP's registered office.
Form LLP BEN-3 Details:
- Names of SBOs.
- Details of their contributions.
- Date of declaration.
- Changes in their status.
5. Regular Updates
LLPs must ensure that any changes in the SBO status are declared and recorded promptly.
Update Process:
- SBOs must declare any changes using Form LLP BEN-1 within 30 days of the change.
- LLPs must update the Register of SBOs and file the updated information with the MCA using Form LLP BEN-2.
Key Dates and Forms
| Action | Form | Deadline |
|---|---|---|
| SBO Declaration | LLP BEN-1 | Within 90 days of rule start |
| Notify Partners | LLP BEN-4 | As required |
| File SBO Information with Registrar | LLP BEN-2 | Within 30 days of LLP BEN-1 |
| Maintain SBO Register | LLP BEN-3 | Ongoing |
| File Register of Partners | Form 4A | Within 30 days of rule start |
| Declare Beneficial Interest | Form 4B | Within 30 days of name entry |
| Record Change in Beneficial Interest | Form 4C | Within 30 days of change |
| Update Registrar on Beneficial Declarations | Form 4D | Within 30 days of declaration |
Exceptions
These rules do not apply if the contribution is held by:
- Government entities (Central/State).
- Investment vehicles registered with SEBI.
- Entities regulated by RBI.
Register of Partners (Form 4A)
Every LLP must maintain a Register of Partners in Form 4A. This includes detailed information about each partner and any changes in their beneficial interest.
Sample Format of Form 4A
| S. No. | Details |
|---|---|
| 1. | Name of the Partner |
| 2. | Corporate Identification Number |
| 3. | Unique Identification Number |
| 4. | Address |
| 5. | Email ID |
| 6. | Father's/Mother's/Spouse's Name |
| 7. | Status |
| 8. | Occupation |
| 9. | PAN No. |
| 10. | Citizen of India (Yes/No) |
| 11. | Nationality |
| 15. | Total amount of contribution |
| 16. | % share in total contribution |
| 17. | % change in total contribution by admission of Partner |
| 19. | Date of declaration under rule 22B |
| 20. | Name and address of beneficial partner |
| 21. | Amount of contribution by beneficial partner |
| 22. | Date of receipt of nomination |
| 23. | Name and address of nominee |
| 24. | Date of cessation of partnership |
| 25. | Reason of cessation |
| 26. | Name of transferee, if any |
| 26A | SRN number and date of filing E-form-3 |
| 27. | Remarks |
| 28. | Authentication/Signature |
Conclusion
To comply with the SBO rules:
- Identify and notify SBOs.
- File necessary forms on time.
- Maintain accurate records.
- Ensure regular updates for any changes.
By following these steps, your LLP will remain compliant, transparent, and avoid any legal issues.
Remember: File Forms LLP BEN-2 and Form 4D by July 1, 2024, to avoid fees and penalties.
