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Brief analysis of LLP Settlement Scheme, 2020

The Limited Liability Partnership is viewed as an alternative corporate business vehicle that provides the benefits of not only limited liability but also allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement. In order to give an opportunity to the long-standing non-compliant LLPs to make their default good and make a fresh start, the Ministry of Corporate Affairs has introduced LLP Settlement Scheme, 2020 vide it’s Circular dated 04th March 2020 which was further modified by another circular dated 30th March 2020 with the aim to provide onetime relaxation in payment of additional fees to such defaulting LLPs.

Accordingly, in this article, we shall study the basic features of the LLP Settlement Scheme, 2020 in the form of some frequently asked questions (FAQs) as following:

  1. What was the need for the introduction of such a scheme?

It was noted by the Government that a large number of LLP have defaulted in filing various event-based forms and returns as required. Thus, to address the threat in relation to COVID-19 and reduce the financial burden on LLPs, this scheme has been implemented to provide an onetime condonation of delay in filing necessary statutory returns.

  1. What is the time period for which this scheme is operative?

In accordance with the modified scheme, this scheme shall come into force with effect from 1st April 2020 and shall remain operative up to 30th September 2020.

  1. Is there any specific statutory form to which this scheme is applicable?

Yes, this scheme is applicable to only the following forms that are required to be filed by an LLP:

  • Form 8 (Statement of Account & Solvency (Annual or Interim)
  • Form 11 (Annual Return of LLP)
  • Form 3 (Information w.r.t. LLP Agreement)
  • Form 4 (Notice of Appointment of Partner/ Designated Partner)

Further, it is important to note that Form 8 and Form 11 are required to be filed annually by every LLP whereas Form 3 and 4 are event-based forms.

  1. Are there any exclusions (non-applicability) to LLP Settlement Scheme, 2020?
  • This scheme shall not be applicable to any other eForms except as mentioned in point no. 3.
  • This scheme shall also not apply to LLPs which have applied for Striking off under Form-24 of the Act.
  1. Is there complete relaxation from paying the additional fees?

Earlier, when this scheme was notified, it was concluded that 1/10th of the fees shall be payable instead of Rs. 100 per day for the total number of days of the period of default. However, after the modification, it has been a boon from the government to waive off the entire additional fees to be paid by the defaulting LLP for any belated return/form, irrespective of its due date, which was due for filing till 31st August 2020. To be precise, any form that is required to be filed by the concerned LLP till 31st August 2020 and if the same has not been filed, then it can be filed under this scheme without any additional fees.

  1. Will we get any immunity from prosecution as well?

Yes, the Scheme shall provide immunity to all the defaulting LLPs who have filed their belated documents and returns till 30th September 2020 from any prosecution by the Registrar against such defaults.

  1. What are the penal provisions in case the benefit of this scheme is not availed?

This scheme comes as an opportunity to LLPs who are in financial distress and are not able to complete their filing or have missed some due to lack of knowledge of the law and it is recommended to take all possible steps to take maximum benefits of this scheme.  On the conclusion of the Scheme, the Registrar shall take necessary action under the LLP Act, 2008 against the LLPs which have not availed this Scheme and are in default in filing of documents as required under the provisions of LLP Act, 2008 in a timely manner.


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TaxClue Team
Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.

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