Limited Liability Partnership (Significant Beneficial
Ownership) Rules 2013
Notification
Link:
Effective
date: 09/11/2023
Objectives/Rationale:
These Rules are issued to strengthen the Significant
Beneficial Interest Disclosures. MCA by issuing notification G.S.R 110(E) some
of the provisions of Companies Act, 2013 applicable to LLPs. One of such
provisions were related to Disclosure of Significant Beneficial Ownership.
However, there were no Separate Rules under Limited Liability Partnership Act,
2008.
Applicability: The provisions of these rules shall apply to any
Limited Liability Partnership.
Non-applicability:
These rules shall not apply to the extent the
contribution of the reporting limited liability partnership is held by.-
(a)
the
Central Government, State Government or any local authority;
(b)
(i) a
reporting limited liability partnership, or
(ii) a body
corporate, or
(iii) 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;
(c)
an
investment vehicles registered with, and regulated by the Securities and
Exchange Board of India, such asmutual funds, alternative investment funds
(AIF), Real Estate Investment Trusts (REITs), Infrastructure Investment Trust
(lnVITs).
(d)
an
investment vehicles regulated by the Reserve Bank of India, or the Insurance
Regulatory and Development Authority of India, or the Pension Fund Regulatory
and Development Authority.
Important Definitions:
Control:
Control shall include the right to appoint majority
of the designated Partners or control the management or policy decisions
exercisable by a person or persons acting individually or in concert, directly
or indirectly, including by virtue of their contribution or management rights
or limited liability partnership agreements or other agreements or in any other
manner;
Significant Influence:
"significant influence" means the power to
participate, directly or indirectly, in the financial and operating policy
decisions of the reporting limited liability partnership but is not control or
joint control of those policies.
Majority stake:
Majority Stake means:
(i)
holding
more than one-half of the equity share capital in the body corporate; or
(ii)
holding
more than one-half of the contribution in a partnership entity; or
(iii)
holding
more than one-half of the voting rights in the body corporate; or
(iv)
having
the right to receive or participate in more than one-half of the distributable
dividend or distributable profits or any other distribution by the body
corporate including a partnership entity as the case may be;
Significant Beneficial Owner (SBO):
"significant beneficial owner" in relation
to a reporting limited liability partnership, means an individual who acting
alone or together or through one or more persons or trust, possesses one or
more of the following rights or entitlements in such reporting limited
liability partnership, namely:-
(i)
holds
indirectly or together with any direct holdings, not less than ten per cent of
the contribution;
(ii)
holds
indirectly or together with any direct holdings, not less than ten percent of
voting rights inrespect of the management or policy decisions in such limited
liability partnership;
(iii)
has right
to receive or participate in not less than ten per cent of the total
distributable profits, or any other distribution, in a financial year through
indirect holdings alone or together with any direct holdings;
(iv)
has right
to exercise or actually exercises, significant influence or control, in any
manner other than through direct-holdings alone:
If an individual does not hold any right or
entitlement indirectly, he shall not be considered to be a significant
beneficial owner.
Identification
of Indirect holding of SBO
An individual shall be considered to hold a right or entitlement
indirectly in the reporting limited liability partnership, if he satisfies any
of the following criteria, in respect of a partner of the reporting limited
liability partnership, namely:
A.
where the
partner of the reporting limited liability partnership is a body corporate (whether
incorporated or registered in India or abroad) other than a limited liability
partnership, and the individual:
(a) holds majority stake in that partner; or
(b) holds majority stake in the ultimate holding
company (whether incorporated or registered in India or abroad) of that
partner;
B.
where the
partner of the reporting limited liability partnership is a Hindu undivided
family (through Karta)
the individual is the karta of the Hindu undivided
family;
C.
where the
partner of the reporting limited liability partnership is a partnership entity
(through itself or apartner), and the individual,-
(a)
is a
partner; or
(b)
holds
majority stake in the body corporate which is a partner of the partnership
entity; or
(c)
holds
majority stake in the ultimate holding company of the body corporate which is a
partner of the partnership entity.
D.
where the
partner of the reporting limited liability partnership is a trust (through
trustee), and the individual,-
(a)
is a
trustee in case of a discretionary trust or a charitable trust;
(b)
is a
beneficiary in case of a specific trust;
(c)
is the
author or settlor in case of a revocable trust.
E.
where the
partner of the reporting limited liability partnership is,-
(a)
a pooled
investment vehicle; or
(b)
an entity
controlled by the pooled investment vehicle,
based in member State of the Financial Action Task
Force on Money Laundering and the regulator of the securities market in such
member State is a member of the International Organization of Securities
Commissions, and the individual in relation to the pooled investment vehicle,-
(A) is a general partner; or
(B) is an investment manager; or
(C) is a chief executive officer where the investment
manager of such pooled vehicle is a body corporate or a partnership entity.
Duty of
the reporting limited liability partnership.-
1.
Every
reporting limited liability partnership shall take necessary steps to find out
if there is any individual who is a significant beneficial owner, in relation
to that reporting limited liability partnership, and if so, identify him and
cause such individual to make a declaration in Form No. LLP BEN-1.
2.
Every
reporting limited liability partnership shall in all cases where itspartner
(other than an individual), holds not less than ten per cent. of its-
(a)
contribution;
or
(b)
voting
rights; or
(c)
right to
receive or participate in the distributable profits or any other distribution
payable in a financial year,-
give notice to such partner in Form No. LLP BEN-4,
seeking information in accordance with sub-section (5) of section 90 of the
Companies Act, 2013 as applied to the limited liability partnership as per the
notification.
Declaration
of significant beneficial ownership:
(1)
On the
commencement of these rules, every individual who is a significant beneficial
owner in a reporting limited liability partnership, shall file a declaration in
Form No. LLP BEN-1 to the reporting limited liability partnership within
90 days from such commencement.
(2)
Every
individual, who subsequently becomes a significant beneficial owner, or where
his significant beneficial ownership undergoes any change shall file a
declaration in Form No. LLP BEN-1 to the reporting limited liability
partnership, within thirty days of acquiring such significant beneficial
ownership or any change therein.
(3)
Where an
individual becomes a significant beneficial owner, or where his significant
beneficial ownership undergoes any change, within ninety days of the
commencement of these rules, it shall be deemed that such individual became the
significant beneficial owner or any change therein happened on the date of
expiry of ninety days from such commencement, and the period of thirty days for
filing will be reckoned accordingly.
Return of
significant beneficial owners in contribution.-
Upon receipt of SBO declaration, the reporting limited
liability partnership shall file a return in Form No. LLP BEN-2 within a
period of 30 days from the date of receipt of such declaration by it.
Register
of significant beneficial owners.-
The limited liability partnership shall maintain a
register of significant beneficial owners in Form No. LLP BEN-3.
Notice
seeking information about significant beneficial owners.-
A limited liability partnership shall give notice in Form
No. LLP BEN-4 seeking information in accordance with sub-section (5) of
section 90 as applied to the limited liability partnership by the notification.
Application
to the Tribunal.
The reporting limited liability partnership shall
apply to the Tribunal:
a.
when a
person fails to give information of significant beneficial ownership as
required under law or
b.
has
provided unsatisfactory information.
for order directing that the contribution in question
be subject to such restrictions as Tribunal deems fit, including-
(a)
restrictions
on the transfer of interest attached to the contribution in question;
(b)
suspension
of the right to receive profits or any other distribution in relation to the
contribution in question;
(c)
suspension
of voting rights in relation to the contribution in question;
(d)
any other
restriction on all or any of the rights attached with the contribution in
question.
Conclusion:
The new LLP SBO Rules brings the similar provisions
which Companies follow to identify and uncover the individual who ultimately
holds the beneficial interest.