Analysis of loans: Many experts and professionals’ views differ on the question of whether the limited liability partnership (LLP) is allowed to accept a loan or deposit from the individual or not?
Some of them believe that businesses having online LLP registration is permitted and can take loans or deposits from the individuals and some others have to say that they cannot. This is the approach to quell the ambiguity over it. Whatever will be shared in this blog would be crucial. Still, it is advisable to carry out your own research and understanding of the Act before making any vital decision for your business. If you opt for LLP as a business structure, then you can conduct an online LLP registration process in India.
Applicable statutes for the LLP concerning taking of loan or deposit and so forth.
– LLP Act.
– The banning of unregulated deposit schemes ordinance, 2019 and the banning of unregulated deposit schemes Act, 2019.
– The companies act, 2013.
– RBI circulars are allowing LLP to take ECB (external commercial borrowing) loans.
Analysis of loans taken by an LLP
- The banning of unregulated deposit schemes ordinance, 2019 and the banning of unregulated deposit schemes act, 2019.
– BUDS act includes all the categories of a person such as HUF, individual, societies, an association of person, LLP and corporate body.
– u/s two an unregulated deposit scheme means that the deposit which is not included in column-3 of the first schedule.
– First schedule of the BUDS act suggests that the type of regulated deposit scheme allowed under the Act and its regulator. The meaning of regulator and regulated deposit scheme has been given u/s 2. The first schedule is silent about the regulator or allowed regulated deposit scheme concerning LLP. Thus, one can understand that the LLP can take a loan or deposit. Ambiguity is there concerning LLP in BUDS Act.
– Section 3 of the said Act proscribes deposit takers from issuing any advertisement or solicit deposits.
2. That’s why there is no regulator, regulated deposit scheme or regulation governing acceptance of loan or deposit by LLP in LLP act or companies act or BUDS act.
3. MCA has not issued any notification to extend the provisions governing deposits under the companies act to LLP.
2. The LLP Act does not speak of anything in this regard as it is silent as to whether the LLP can take the loan or the deposit. Nonetheless, here are some of the worth considering provisions as given below;
– According to section 66 of the LLP Act, the partner might lend money to and transact other business with the LLP and has the same obligations and rights concerning the loan or other related transactions as the individual who is not the partner.
– As per section 71 of the LLP Act, the provisions of this Act (LLP Act) should be in addition to, and not in derogation of, the provisions of any other law for the time being in force.
– As per section 67 of the LLP Act, the central government has the power by way of notification in the official gazette on the applicability of any of the provisions of the companies Act to LLP. We do not have any circular extending provisions on deposits to LLP.
– There is no provision to get the charges registered under the LLP Act, 2008 and LLP rules, 2009, unlike the companies act, 2013. But annual filing of LLP in form 8 is to be submitted by the LLP that can be either as annual form or interim. Also, form 8 allows the declaration of designated partners in part A (statement of solvency), explaining that the creation of charge modification or satisfaction has been submitted till the present financial year.
This suggests the LLP is allowed to borrow secured loans. It is the only way by which one can draw inference from reading the contents of form 8. That’s why, when LLP takes the loan and wants to create a charge, it will have to submit interim form 8 to make a charge. Also, read the declaration in the statement of solvency. We have already submitted the statement indicating creating charges or modification or satisfaction thereof until the present financial year. Here, the word solvency is not mentioned in the LLP Act, the companies act, or even in IBC, 2016.
– LLP can take loans or deposits from its partners as allowed u/s 66 of the LLP act.
– LLP can take a secured loan as per the inference from section 66 of the LLP act.
– From June 2019, LLP can take a loan under the ECB scheme according to the circular issued by RBI.
– All unsecured loans and deposits taken becomes unregulated as per the first schedule’s purview of the BUDS act.
– There is no specific legislation currently governing loans or deposits of LLP and no definition for solvency.