Limited Liability Partnership

Compounding of Offence under LLP Act

Offence under LLP

In simple words, Offence means a breach of a Law or Rule. Offences and Penalties come from non-compliance with the provisions of the Act. When it comes to LLP Act, there are various provisions to elaborate Offence under LLP Act.

Offences and penalties arising from the non-compliance of the provisions of the Act are explained under the Act. Any default/non-compliance like non-filing of forms within a stipulated time can be filed with the additional late fee. The late fee would be payable at the rate of rupee one hundred per day after the expiry of the date of filing (as prescribed in relevant provision) up to a period of three hundred days.

What is Compounding of Offence?

Compound means to settle a matter by payment of the monetary penalty. In simple word, it is an admission of guilt. In the compounding process, the applicant may either himself or on receipt of notice of default of prosecution, admits the commission of default. The applicant makes an application for compounding of the offence. The Central Government levies the penalty to the defaulters for such defaults.

In the Compoundable offences, the applicant has the right to compound the matter with accused.

Offences under LLP can be classified into two parts:

  1. Offences with payment of a fine;
  2. Offences with payment of fine as well as imprisonment.

The offences which are punishable only by the fine can be compounded under the LLP Act. The Central Government has the right to compound the offence by collecting fine which may extend to maximum fine prescribed for the offence.

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The Judicial Magistrate of the first class or the Metropolitan Magistrate shall have jurisdiction to try offences under the LLP Act[1].

The Offences in the Act provide for punishment by way of charging fine or imprisonment. Such punishment has been provided for in respect of violations relating to:

  • Making a false statement at the time of incorporation of LLP;
  • Carrying on the business of LLP with intent to defraud or for any fraudulent purposes;
  • Making, knowingly, false statements or omitting any material fact, in any return, documents etc. under the Act.

How to File an Application for Compounding of an Offence?

The application shall be filed in LLP Form no. 31 to Registrar. The details to be filled in Form 31 are as follows:

  • Select the category of LLP, whether- LLP, Foreign LLP or others;
  • The application can be filed for LLP, FLLP, Designated Partner, Partner, Authorised Representative;
  • The application can be filed; a maximum of 10 persons;
  • Mention the details of Section violated;
  • Mention the penalty provisions of the Act;
  • Mention the details of the Offence under LLP, if any has been made good; and
  • Attach necessary attachments like the copy of the detailed application, a copy of show cause notice (if issued), copy of the latest statement of asset and liability (if applicable).
  • ROC shall forward along with their comment to the Central Government.
  • Any order issued by Central Government in respect to Compounding of offence shall be intimated to ROC within by 7 days by LLP.

Latest Update-

The MCA has proposed to decriminalize few of the compoundable offences under LLP Act involving minor procedural violations or technical violations. This is in order to ensure greater ease of doing business in India.

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The ministry stated that they have decided to review the penal provisions to decriminalize compoundable offences that don’t involve any harm to public interest. The government had earlier taken a lot of similar actions with decriminalization of certain offences under Companies Act.  

The offences that are proposed to be decriminalized include non-compliance with eligibility and appointment of designated partner, non-compliance with maintenance of books of accounts or other records or non-compliance with filing of annual return. This could be a major relief for small businesses.

Conclusion

Many start-ups choose to be registered as LLP because of its benefits for the small scale business. There was an increase of 55% in LLP registration. The provision of compounding of offence has come as a huge relief for many people. In case you wish to know more on it, contact Enterslice.

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