MCA withdrawn Restriction of manufacturing activities in LLP
Manufacturing & allied activities were restricted in LLPs vide OM No. CRC/LLP/e-Forms dated 06.03.2019. This OM invoking the restriction regarding manufacturing & allied activities has been withdrawn with immediate effect.
MCA has earlier mentioned that incorporation of LLPs and conversion into LLPs with the proposed business activity(ies) including manufacturing & allied activities are not to be allowed.
Institute of Company Secretaries of India (ICSI), has advocated on the eligibility of Manufacturing Businesses to form an LLP and objected to for such restrictions made by MCA. Institute of Company Secretaries of India (ICSI) in it Letter dated April 8, 2019 to MCA represented that it has been noticed that in recent times the manufacturing businesses are being restricted from incorporating as LLP on the ground that manufacturing activities does not fall under the definition of `Business’ as per the Limited Liability Partnership Act, 2008. Similarly the conversion of private and unlisted companies into LLP has been restricted now on the same grounds.
Institute of Company Secretaries of India (ICSI) further represented that India is going extra mile to improve ease of doing business and corporatisation of unincorporated activities. Corporatization is the need of the hour and introduction of LLP and OPC was one such step to achieve the goal. One Person Company is a perfect combination of the characteristics of a company and the freedom of a sole proprietorship. The concept opens up an avenue of possibilities for entrepreneurs who can take the advantages of limited liability and corporatization. Similarly a Limited Liability Partnership opens avenues for those who want to avail the benefits of limited liability but do not want to open a company and rather join hands with one or more partners to conduct a business as an incorporated entity.
The entire world is gradually shifting towards one global market without any trade barriers between the countries. A small organization led by few partners or professionals cannot think of growth on large scale without corporatising itself and Government of India is also taking number of initiatives like reduction of corporate tax rates, simplification of company registration process. DIN and name approval system etc., in this regard.
The genesis of LLP law and the recommendation of J.J. Irani Committee in 2005 read under:
“In view of the potential for growth of the service sector, requirement of providing flexibility to small enterprises to participate in joint ventures and agreements that enable them to access technology and bring together business synergies and to face the increasing global competition enabled through WTO etc., the formation of Limited Liability Partnerships (LLPs) should be encouraged.”
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