Skip to main content

Black money drive: Govt to weed out dormant LLPs

Black money drive: Govt to weed out dormant LLPs
After cracking its whip on suspected shell companies, the government has turned its focus on the growing number of Limited Liability Partnership (LLPs) firms.
In suchapartnership, partners can´t be held liable for another´s misconduct or negligence.
As a first step, the government is in the process of identifying and deregistering inactive LLP firms.
“The Registrar of Companies (RoC) is onaspree to strike off inactive LLPs from its register,” says Vikas Gupta, partner, Nangia &Co.
The government has been onadrive against generation of black money and money laundering through use of shell companies.
In his Independence Day speech, Prime Minister Narendra Modi said that the government had identified over 300,000 shell companies and registrations of 175,000 such firms had been cancelled.
Experts point out, just like shell companies, inactive LLPs could be used for tax evasion and money laundering.
The trend of converting existing companies into LLPs and creation of new LLPs spiked after the Companies Act, 2013, came into effect in April 2014, seemingly to tide over the higher compliance requirements.
Around 6,000odd companies converted themselves into the LLP structure as of June 2017 over the last twothree years.
Corporate lawyers say that on an average, 2,5003,000 LLPs get registered every month.
According to the data from the ministry of corporate affairs (MCA), there were 94,304 active LLPs as of June 2017.
What has caught the attention of the government is the steady rise in the number of LLPs in the last one year, peaking at 3,518 in March 2017. In the three months from April to June 2017, 8,019 new LLPs got registered, according to the MCA data.
Many legal experts feel that the demonetisation of highvalue currency notes in November last year gaveafillip to LLPs.
The rise in the number of LLPs could also have been fuelled by the fact that obtaining government approval is notarequirement to convert certain companies into LLPs.
The minimal compliance and regulatory requirements under the LLP structure may have caught the fancy of business owners.
On  a yearly basis, an LLP is only required to file an annual return, andastatement of account and solvency.
All other filings are eventbased, triggered by any change in LLP partners, retirement, resignation and change of address, among others.
Over the past two years, the government and the Reserve Bank of India have also liberalised norms for allowing foreign direct investment in LLPs, while allowing the appointment of foreign partners.
A recent RBI amendment allowed LLPs to avail of external commercial borrowing (ECB), including masala bonds.
Going forward, legal experts expect LLPs to attractagreater slice of foreign direct investment.
The Business Standard, New Delhi, 18th August 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…