Introduction of the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023

Ministry of Corporate Affairs (“MCA”) vide its notification dated November 09, 2023, has introduced the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023.

These rules come in addition to MCA’s notification last year extending the applicability of section 90 of Companies Act, 2013 to limited liability partnership (LLP) firms. They aim at strengthening compliance for identification of ‘significant beneficial owners’ (SBOs) of LLPs in India.

In the ever-evolving landscape of corporate governance and regulatory compliance in India, the government has consistently aimed to promote transparency and accountability within the Indian corporate sector. By this notification, a significant stride has been made for identification of Significant Beneficial Owners (SBOs) in Indian corporates.

By virtue of introduction of this rule, MCA has mandated all Significant Beneficial Owners (SBOs) identified under the SBO Rules to file a declaration with the LLP in the respective form within 90 days from the notification of the said rules. LLPs are also required to take steps and give notice(s) to persons with the objective of identifying such SBO(s).

Every individual who subsequently attains status of a SBO or where his or her significant beneficial ownership undergoes any change, is required file a declaration in Form No. LLP BEN-I to the reporting LLP, within 30 days of acquiring such significant beneficial ownership or any change therein.

Meaning of Significant Beneficial Owner in LLP

A significant beneficial owner (SBO) in a reporting limited liability partnership (LLP) is basically an Individual acting alone or together with one or more persons satisfies the following conditions:

• holds indirectly or together with any direct holdings not less than 10% of the contribution;
• holds indirectly or together with any direct holding voting rights not less than 10% of voting rights in respect of the management or policy decisions in such LLP;
• has right to receive or participate in not less than 10% of the total distributable profits, or any other distribution, in a financial year through indirect holdings alone or together with any direct holdings;
• has right to exercise or actually exercises, significant influence or control, in any manner other than through direct-holdings alone

Reporting to Registrar of Companies:

1. Identification of SBO

• The reporting LLPs shall endeavour to find out if there is any SBO, in relation to that reporting LLP, and if so, identify him or her and cause such individual to make a declaration in Form No. LLP BEN-I.
• The reporting LLPs are required to give notice in Form No. LLP BEN-4 (seeking information pertaining to SBO) to every non-individual partner who holds not less than 10% of its contribution or voting rights or right to receive or participate in the distributable profits or any other distribution payable in a financial year.

2. Reporting to Registrar of Companies Upon identification of SBO,

The reporting LLPs required to file a return in Form No. LLP BEN-2 with the Registrar of Companies within a period of 30 days from the date of receipt of declaration and shall maintain a register of SBOs in Form No. LLP BEN-3.

Exemptions:

These rules shall not apply to the extent the contribution of the reporting LLP is held by:

1. the Central Government, State Government or any local authority;
2. a reporting LLP or a body corporate or an entity, controlled by the Central Government or by one or more State Government, or partly by the Central Government and partly by one or more State Government;
3. investment vehicles registered with, and regulated by the SEBI, such as mutual funds, alternative investment funds (AIF), Real Estate Investment Trusts (REITs), Infrastructure Investment Trust (InVITs).
4. an investment vehicle regulated by the Reserve Bank of India, or the Insurance Regulatory and Development Authority of India, or the Pension Fund Regulatory and Development Authority.

The notification can be accessed at the below link:

https://www.mca.gov.in/bin/dms/getdocument?mds=pJZaasqhxL5W9F46Ukp5lw%253D%253D&type=open