BENEFICIAL INTEREST IN LLP CONTRIBUTION

The Ministry of Corporate Affairs, New Delhi recently issued a significant notification dated 27 October 2023, amending Limited Liability Partnership Rules (LLP), 2009. The amendment introduces key changes relating to Register of partners and declaration of beneficial interest in any contribution. In this article we will delve into the Significant Beneficial Owners changes brought by Rule 22B on beneficial interest aligning with the provisions of Section 89 of Companies Act 2013. But before understanding the topic let us understand some basic concepts.

Who is a Registered Owner?

According to Companies (Significant Beneficial Owners) Rules, 2018 registered owner means a person

•  Whose name is entered in the register of members of a company as the holder of shares in that company and
•  Who does not hold beneficial interest in such shares.

Who is Significant beneficial owner?

Companies (Significant Beneficial Owners) Rule 2018 defines significant owner as an individual

• Referred to in sub-section (1) of section 90 (holding ultimate beneficial interest of not less than ten per cent.)
• But whose name is not entered in the register of members of a company as the holder of such shares.

What is Beneficial Interest?

Section 89 of Companies Act defines interests of two types. One is legal interest vested with the registered holders of the shares, who is also referred as the ‘registered or ostensible member’. Another is a beneficial interest vested with the beneficial owner or the beneficial member.

A beneficial interest is the right to receive benefits on shares held by another party. Beneficial interest is often referred to in matters concerning trusts, whereby one has a vested interest in the trust’s assets. A beneficial interest is “that right which a person has in a contract made with another third party”.

The Recent Amendment

Rule 22B requires the declaration to be made in respect of beneficial interest in any contribution by both Registered and Significant owner.

• Declaration by Registered Partner: Clause (1) of rule 22B states that registered partner shall file a declaration in Form 4B specifying the name and other particulars of the person who actually holds any beneficial interest in such contributions within a period of thirty days from the date on which his name is entered in the register of partners.
• Declaration by Beneficial Partner : Clause(2) of rule 22B states that Beneficial partner shall file a declaration disclosing such interest in Form 4C specifying the nature of his interest, particulars of the partner in whose name the contribution stand registered in the books of the limited liability partnership within a period of thirty days after acquiring such beneficial interest in the contribution of the Limited Liability Partnership
• Return to be filed by LLP: According to clause (3) declaration received by LLP in clause (1) and (2) shall be recorded in register of partners and a return shall be filed in Form 4D within thirty days from the date of receipt of declaration.
• Designation of a Partner: Every Limited Liability Partnership shall specify a designated a partner who shall be responsible for furnishing of and extending co-operation for providing, information with respect to beneficial interest in contribution in Limited Liability Partnership to the Registrar or any other officer authorised by the Central Government and shall file information of such designated partner with the Registrar in Form 4.

What is contribution in LLP?

Partner’s contribution under LLP Act consist of both tangible and intangible property and any other benefit to LLP. The monetary value of contribution of each partner shall be accounted for and disclosed in the accounts of the limited liability partnership in the manner as prescribed in the rules.

LLP Capital contribution fees

Under Limited Liability Partnership Act every LLP has to pay fees according to the capital contribution made by them for registration, filing etc. The following table depicts the same:

• For registration of Limited Liability Partnership including conversion of a firm or a private company or an unlisted public company into Limited Liability Partnership:
  

  Capital Contribution Limit	Fees
  Not exceeding Rs. 1 lakh	Rs. 500
  Exceeding Rs. 1 lakh but not exceeding Rs. 5 lakh	Rs. 2000
  Exceeding Rs. 5 lakh but not exceeding Rs. 10 lakh	Rs. 4000
  Exceeding Rs 10 lakh	Rs. 5000

• For filing, registering or recording any document, form, statement, notice, Statement of Accounts and Solvency and annual return:
  

  Capital Contribution Limit	Fees
  Not exceeding Rs. 1 lakh	Rs. 50
  Exceeding Rs. 1 lakh but not exceeding Rs. 5 lakh	Rs. 100
  Exceeding Rs. 5 lakh but not exceeding Rs. 10 lakh	Rs. 150
  Exceeding Rs 10 lakh	Rs. 200

Conclusion

The amendments brought by the Ministry of Corporate Affairs make significant changes in the LLP regulations. The rules mainly address the maintenance of a Register of Partners and the declaration of beneficial interest in contributions. It is therefore mandatory for all the LLPs to adhere to those rules and implement such changes to avoid any legal complications. Complying to such rules will bring efficiency and transparency in the working of LLPs. Therefore, in order to stay updated with all new regulations, a team of experts from Legal Window is here to assist you at every step. Feel free to reach us at admin@legalwindow.in