New Delhi: In order to improve the ease of doing business for small businesses, the law committee of the ministry of corporate affairs has recommended creation of a new class of LLPs (limited liability partnership) to be known as small LLPs, which will be subject to easier compliance and reduced payment of fees and penalties. The panel also suggested decriminalisation of 12 offences in the LLP Act in addition to permitting the LLPs to issue non-convertible debentures (NCDs) for easily raising capital from the debt market among other things, ETV Bharat has learnt.
The panel recommended insertion of a new clause (ta) in section 2(1) in the LLP Act to define a small LLP.
According to the recommendation, a small LLP will have less than Rs 25 lakh or a higher amount as contribution from partners and a turnover of Rs 40 lakh or such higher amount in the immediately preceding financial year as may be prescribed in the amended to law to qualify as a ‘Small LLP’.
These small LLPs will be subject to reduced compliance, less fee payment and subject to reduced penalties on the basis of their turnover or contribution.
In order to further increase the ease of doing business, the panel also recommended relaxation of payment of fee under section 69 of the Act for other LLPs as well.
“The recommendations of the panel will result in incentivizing micro and small businesses to convert into body corporate such as LLPs and will create a congenial business climate based on trust and compliances," said Rajesh Verma, Secretary in the Ministry of Corporate Affairs.
Allow LLPs to issue debt
In order to allow LLPs to easily raise loans from the debt market, the panel recommended that LLPs should be allowed to issue non-convertible debentures (NCDs).