The Ministry of Corporate Affairs vide notification dated 9th November, 2023 has issued the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023. To ensure transparency and curb illicit financial activities, the Ministry of Corporate Affairs in India has introduced rules pertaining to significant beneficial owners in LLPs.
Duty of the Reporting LLP: Identifying Significant Beneficial Owners
The first and foremost responsibility of a reporting LLP is to identify if there is any individual who qualifies as a significant beneficial owner (SBO). This involves scrutinizing individuals who hold at least ten percent of the contribution, voting rights, or the right to receive distributable profits. Once identified, the SBO must make a declaration using Form No. LLP BEN-1.
Moreover, the reporting LLP must extend this scrutiny to its partners, excluding individuals, who meet the criteria mentioned above. In such cases, the LLP is obligated to send a notice in Form No. LLP BEN-4, seeking information in accordance with section 90 of the Companies Act, 2013.
Declaration of Significant Beneficial Ownership
Individuals who qualify as significant beneficial owners must file a declaration (Form No. LLP BEN-1) to the reporting LLP within ninety days from the commencement of these rules. Subsequent changes in significant beneficial ownership must be reported within thirty days.
In cases where an individual becomes an SBO or undergoes changes within the first ninety days of the rule commencement, the filing period is adjusted accordingly.
Return Filing and Register Maintenance
Upon receiving declarations, reporting LLPs must file a return (Form No. LLP BEN-2) with the Registrar within thirty days, accompanied by the prescribed fees. Additionally, LLPs are required to maintain a register of significant beneficial owners in Form No. LLP BEN-3, open for inspection during business hours, subject to reasonable fees.
Notice and Application to the Tribunal
LLPs must issue notices (Form No. LLP BEN-4) seeking information about significant beneficial owners. If a person fails to provide the required information or if the information given is unsatisfactory, the reporting LLP can apply to the Tribunal for necessary orders, including restrictions on contributions, transfer of interests, and voting rights.
Non-Applicability to Certain Entities
It’s important to note that these rules do not apply to specific entities, such as contributions held by the Central Government, State Government, local authorities, or certain regulated investment vehicles.