LIMITED LIABILITY PARTNERSHIP-PART-XVI - Annual Return, Inspection and Related Issues

[Dr. Sanjiv Agarwal]

Annual Return

Section 35 of LLP Act, 2008 seeks to provide that every LLP shall be required to file with the Registrar an annual return duly authenticated every year. It also seeks to empower the Central Government to prescribe, by rules, the contents and manner of filing of such annual return. The clause also seeks to provide that any LLP which fails to comply with these provisions shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and the designated partner of such LLP shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

Section 35 of LLP Act, 2008 read with rule 25 of the LLP Rules, 2009 prescribes that every year, an LLP is required to file an Annual Return with the Registrar in Form 11.

An annual return is a snapshot of information at the made-up date. It is separate from a limited liability partnership's annual accounts. An annual return must contain the following information:

(a) the name of the limited liability partnership;

(b) its registered number;

(c) its registered office address;

(d) the address where certain limited liability partnership registers are kept if not at the registered office;

(e) The name and address of each member and his respective contribution;

(f) If only some members are designated members, which of them are designated members.

The above annual return shall be accompanied by a certificate from a company secretary that he has verified the particulars including from the books and records of the limited liability partnership and found them to be true and correct.

Non-compliance of above provisions entails a two-fold penalty - one on the LLP and the other on the designated partners of LLP. The provisions prescribe that any LLP which fails to comply with the provisions of this section shall be punishable with fine which shall be minimum of twenty-five thousand rupees but which may extend to five lakh rupees and every designated partner of such limited liability partnership shall be punishable with fine which shall be minimum of ten thousand rupees but which may extend to one lakh rupees.

Inspection of documents kept by Registrar (Section 36)

Section 36 of LLP Act, 2008 seeks to provide that the incorporation document, names of partners and changes, if any, made therein, Statement of Account and Solvency and Annual Return filed by each LLP with the Registrar shall be available for inspection in the office of the Registrar by the public. It also seeks to empower the Central Government to prescribe by rules, the manner and amount of fees for such inspection.

Section 36 of LLP Act, 2008 confers upon the members of the public the right of inspection and of obtaining copies of documents filed with the Registrar.

It may be noted that unlike in the case of companies, the LLP provision restricts the right to inspect documents to the specified documents filed by the LLP. These are:

(1) Incorporation document;

(2) Names of partners and changes, if any, made therein;

(3) Statement of Account and Solvency;

(4) Annual Return.

Apart from the above documents, the provision does not empower public to inspect any other documents. Thus, along with many other documents, Form 3, which contains particulars of LLP agreement, is not open for public inspection.

Penalty for false statement (Section 37)

Section 37 of LLP Act, 2008 seeks to provide that if any person makes any statement in any return, statement or other document under this Act which is false in any material particular, or which omits any material fact, knowingly, he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine which may extend to five lakh rupees but which shall not be less than one lakh rupees.

The purpose of section 37 is to ensure correctness of the information and statements filed by an LLP or its partners with the Registrar as these are public information and third parties (as also government) dealing with the LLP relies upon this information with respect to their dealings.

The provision under the LLP Act provides that if any person makes any false statement in any return, statement or other document under this Act in any material particular, or omits to mention any material fact, knowingly, he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine which would be minimum of one lakh rupees which may be extended to five lakh rupees.

Power of Registrar to obtain Information (Section 38)

Section 38 of LLP Act, 2008 seeks to empower the Registrar to call for information, for the purposes of carrying out the provisions of this Act, from any person including any present or former partner or designated partner or employee of the LLP and in case of non-receipt of any information from them or information furnished being insufficient, to summon them before him. The clause seeks to provide that any person who, without lawful excuse, fails to comply with any summons or requisition of the Registrar under this clause shall be punishable with fine which shall not be less than two thousand rupees but which may extend to Rs 25,000 (twenty-five thousand rupees).

The section gives wide powers to the Central Government to require LLPs, or its past or present partners or employees to any information or statistics, which the Registrar considers necessary, within a reasonable time.

This provision is more stringent in comparison to the corresponding provision contained in section 615 of the Companies Act, 1956. Under the said provision, the Central Government can require any company to furnish information or statistics on any matter in connection with its constitution and working and within any time as may be specified in the order. Further, such an order has to be published in the Official Gazette.

In case of LLPs, the provision gives a complete discretion to the Registrar to ask for information which he considers necessary while in case of companies, the Central Government may ask for the information or statistics on any matter in connection with its constitution and working of the company. Further, unlike companies, LLP's provision does not require any order by way of publication in the Official Gazette. Thus, the provision can be used more frequently by a Registrar.

Further, in case of LLP, the Registrar shall have power to summon a person to appear before him or an inspector or any other public officer whom the Registrar may designate, to answer any question or make such declaration or supply such details about LLP:

(a) If such person has not answered the question made by the Registrar or

(b) Did not make such declaration or

(c) Did not supply such details or particulars asked for by the Registrar

(d) Within a reasonable time or time given by the Registrar or

(e) When the Registrar is not satisfied with the reply, declaration, details, or particulars provided by such person.

Any person who, without lawful excuse, fails to comply with any summons or requisition of the Registrar under this section shall be punishable with fine which is minimum of two thousand rupees but which may extend to Rs 25,000 (twenty-five thousand rupees).