The Ministry of Corporate Affairs (“MCA”) has recently introduced an amendment to the Limited Liability Partnership Rules, 2009 (“LLP Rules”) vide notification number G.S.R 425(E) dated August 5, 2024 (“Notification”).

Background:

The Central Government vide MCA notification S.O. 1269(E) dated March 17, 2023, established a Centre for Processing Accelerated Corporate Exit (“C-PACE”) at the Indian Institute of Corporate Affairs, Gurgaon, Haryana. C-PACE is intended to centralize the application process for the voluntary closure of body corporates, aiming to reduce the burden on local registrars and enhance the efficiency of corporate exits. This initiative is a part of the broader efforts to improve the ease of doing business in India by providing a hassle-free, timely, and organized method for body corporates to strike off their names from the registry.

Subsequently, the MCA vide notification G.S.R. 298(E) dated April 17, 2023 amended the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 to the effect that all applications for removal of company names under section 248(2) of the Companies Act, 2013 must be made to the Registrar, C-PACE, instead of the Registrar of Companies. Consequently, as a result of this amendment, the MCA reported that the average time to voluntarily close a business reduced from 195 days in FY23 to 93 days in FY24

Amendment:

The authority of C-PACE has now been extended to processing applications for the closure of Limited Liability Partnerships (“LLPs”). The Notification has amended Rule 37 of the LLP Rules, designating C-PACE as the authority responsible for striking off the names of LLPs from the register, instead of the Registrar of Companies. The amended LLP Rules will be effective from August 27, 2024.

An explanation has also been added to clarify that the Centre for Processing Accelerated Corporate Exit means the office of Centre for Processing Accelerated Corporate Exit established by the Central Government, vide notification number S.O. 1269(E), dated 17th March, 2023 issued under sub-sections (1) and (2) of section 396 of the Companies Act, 2013.

Author`s View:

These amendments represent a significant advancement in accelerating the corporate exit process for LLPs. This technology-driven approach supports the government's initiative to improve the ease of doing business, thereby fostering (i) a faster and more seamless exit process for businesses, (ii) reduced processing time and increased efficiency, (iii) a cleaner and more up-to-date registry, and (iv) elimination of human errors.

Please find a copy of the Notification, here.

This update has been contributed by Neha Madan (Partner) and Mishika Bedi (Associate).

Argus Knowledge Centre is now on WhatsApp! Send us a message on +91 8433523504 to receive updates from our Knowledge Centre.