With effect from 1st April, the Ministry of Corporate Affairs has legitimized procedural negligence and technical defaults by LLPs; an official communication was released today by the Centre. This announcement gives impetus to the amendments done to the LLP Act in 2021.
Generally, start-ups prefer the LLP form of establishments and in the service business as well. There are more than 200,000 such start-ups in India.
The LLP (Amendment/Redraft) Act of 2021 minimizes penal provisions from 24 to 22 while legitimizing 12 other provisions. The negligence that got decriminalized was procedural or technical in nature. With the onset of this Amendment, it would no longer be necessary to take these cases to the company law tribunals for arbitration as no offensive objective is regarded to be involved in them.
Interestingly, under the Act the arbitrating officers will be designated Registrars of Companies with effect from 1st April 2022; Regional Directors will look into all the Appeals separately.
Regional Directors have the authority to punish only with a fine to a compounded/mixture of offences. Certain standards have been set by the Centre for accounting and auditing for certain LLPs. A special court has been set up by the centre to deal with offences under this Amendment Act immediately.
The whole idea is to enhance the ease of doing business. The government already has redrafted the Companies Act twice to legitimize procedural or technical violations in order to decrease the diligence of compliance and to give way to ease of doing business.
