FAQs on SBO LLP - MMJC

On 27^th October 2023 and 9^th November 2023 respectively, Ministry of Corporate Affairs (MCA) notified LLP of third amendment rules and LLP SBO rules. As per these rules, the LLPs are required to maintain register of partners and disclose to the Registrar of Companies (ROC)about the holders of beneficial interest other then registered partners and also about the significant beneficial owners of LLP.

Even though the rules had prescribed forms for notifying all this information to ROC, the said forms were not yet notified by MCA. Now the MCA has notified these forms on V3 portal of MCA website under the heading LLP filings. LLPs are required to inform ROC about holders of beneficial interest in partnership other then registered partners in form 4D and about significant beneficial owners in form LLP BEN-2. The following FAQs are aimed at providing some basic guidance WRT applicability of the forms and other important details pertaining to them.

1. What is the due date for filing initial return in form LLP BEN-2 and Form 4D?

As per rule 22B of LLP rules, form 4D has to be filed by reporting LLP within 30 days from receipt of intimation regarding creation or change in beneficial interest. However, the first filing of this form after its notification has to be done on or before 1^st July 2024.

Similarly, in case of form LLP BEN-2, the regular due date is ‘within 30 days from receipt of declaration regarding holding of significant beneficial ownership in form BEN-1. However, in case of first time filing, it has to be done on or before 1^st July 2024.

2. Which Limited Liability Partnerships are required to file Form 4D?

As per rule 22B of LLP rules, form 4D is required to be filed by all such LLPs in which beneficial interest is held by persons other then the partners whose names are mentioned in the LLP agreement.

3. Is filing of form 4D applicable to small LLP also?

Yes. The rule 22B does not provide any clear exemption to small LLPs from doing this compliance. Therefore, reporting of beneficial interest is applicable to small LLPs as well.

4. Which Limited Liability partnership are required to file form BEN-2?

As per LLP significant Beneficial Ownership rules, form LLP BEN-2 has to be filed by such LLPs wherein body corporates are partners and significant interest in such partnership is held by individuals. The form has to be filed for disclosing the details of persons holding significant beneficial ownership in the reporting LLP.

5. If all partners in a LLP are Individuals and hold beneficial interest themselves, whether such LLP will be required to file form 4D?

Form 4D is required to be filed by such LLPs wherein the partners whose name is entered in the LLP agreement, do not hold the beneficial interest in such LLP. Therefore, in the case wherein, the partners are individuals, and the beneficial interest is also held by themselves, there is no requirement of filing form 4D.

6. If all the registered partners in a LLP are Individuals but such registered individual holds beneficial interest on behalf of, Hindu undivided family (HUF or a Trust, then in such case which form is required to be filed by such LLP?

As per section 5 of LLP Act 2008, only individual or body corporate can become partner of a LLP. Section 42 says that the economic rights of the partner to receive share in profit or loss can be transferred and this does not amount to dissolution of partnership. By the virtue of this provision, a trust, HUF or a firm can become partner through its trustee , Karta or a partner respectively. These individuals may become partners of LLP and the economic/beneficial interest shall be transferred by them to trust or HUF or firm as the case may be. Therefore, if a HUF or a trust is desirous of becoming a partner in a LLP, it has to nominate an individual whose name shall be entered as partner in the agreement. In such case, the individual shall become registered partner and the HUF or the trust shall be considered as beneficial partner. Therefore, the individual will have to inform the LLP that he is registered partner and the HUF or the trust as the case may be, holds the beneficial interest. Thereafter, the LLP will have to file form 4D.

7. If a partner of LLP is body corporate, which forms is it required to file?

As per section 42 of the LLP Act it is possible for the partners of LLP to transfer their economic interest in the LLP to someone else. Therefore, it is possible that one person is a partner but does not hold economic interest. So now, As per rule 22B of LLP rules, if any partner is A registered partner, that is, his name is entered or registered in LLP agreement as a partner but the beneficial interest is held by someone else, then the registered partner has to disclose this fact to LLP along with details of beneficial  owner in Form 4B, and the beneficial owner also needs to declare this fact to the LLP in Form 4C, within 30 days of the name of registered partner being entered in the register of partners and thereafter for any changes in that regard. Thereafter, the LLP will have to file these disclosures received in Form 4B and 4C to ROC in an e-form 4D.

8. Are these forms 4D and LLP BEN-2, required to file at once or on continuous basis in case of change in beneficial interest?

Forms BEN-2 and 4D are to be filed for the first time when the beneficial interest in the LLP is created for the first time. Thereafter it is to be filed after every change in beneficial interest.

9. Can you explain concept of Beneficial owner (BO) and concept of Significant Beneficial owner SBO with the help of an example?

Let us understand this with an example. Suppose there is one LLP wherein there are 3 partners. 1 body corporate holding 95% contribution and 2 individuals holding 4% and 1% contribution each. The individuals are registered partners as well as beneficial owners. In this case, since both individuals are partners in their individual capacity, so only SBO analysis need to be done by the body corporate holding 95% contribution. If there is any SBO, then LLP BEN-1 will have to be given by SBO to LLP and then LLP will have to file only e-form LLP BEN-2. There is no need for the LLP to file e-form 4D.

Let’s take another scenario. There is one LLP wherein there are 2 partners. 1 body corporate holding 99% contribution and 1 individual holding 1% contribution. That individual is a nominee of the other body corporate partner holding 99% contribution and this arrangement is just because of the reason that LLP needs at least 2 partners. In this case, for the 99% contribution held by body corporate partner, the SBO analysis needs to be done and LLP BEN-1 must be given and the e-form LLP BEN-2 must be filed. But for the remaining 1% contribution, the declarations in Form 4B and Form 4C need to be received from the nominee, i.e., registered partner and the beneficial owner, and then the LLP should file e-form 4D. So, in this case, both e-form 4D and e-form LLP BEN-2 need to be filed by that LLP.

10. What are the steps for identification of SBO?

Identification of SBO is a complex process. It requires detailed analysis of the structure of LLP, analysing structures of its body corporate partners, analysis of who are individuals who have significant influence over LLP or body corporate partners etc. This analysis would differ depending on case-to-case basis i.e. it would differ in case of each LLP.

11. If the partner of a LLP is a HUF, then who is SBO?

As per explanation III to definition of SBO as prescribed under LLP SBO rules, if a HUF is a partner of LLP through its Karta, then the indirect beneficial interest in LLP is held by the Karta. Therefore, the SBO in such case will be the Karta of the HUF.

12. If the partner of a LLP is a Trust, then Who shall be considered as SBO?

In case where the trust is a partner of LLP through its trustee, then who shall be the SBO will depend upon the type of trust:

• If the trust is a specific trust then all beneficiaries shall be considered as SBO,
• If the trust is a discretionary or charitable trust, then all trustees shall be considered as SBO
• If the trust is a revocable trust, then its author or settlor shall be considered as SBO.

13. If the partner of a LLP is a partnership firm, then who shall be considered as SBO?

If partnership firm is a partner of a LLP, then the partner of that firm shall be considered as SBO. Further, if the partner of a partnership firm is a body corporate, then the person holding majority stake in that body corporate shall be considered as SBO.

14. If one LLP is a Partner in another LLP (reporting LLP), then who shall be considered SBO?

As per definition of partnership entity provided in LLP SBO rules, LLP is a partnership entity. Therefore, like the partners of any partnership firm are considered as SBO of reporting LLP, same is the case with partner LLP. All individual partners of partner LLP shall be considered as SBO. Further, if the partner of the holding partnership is a body corporate, then the individual holding majority stake in the body corporate will be the SBO of the reporting LLP.

14. If a LLP has already filed form 4D giving information about beneficial owners then still is it required to file Form BEN-2 as well?

Form 4D is filed to intimate ROC about holding of beneficial interest in LLP by any person other than registered partner. As per explanation II of definition of SBO under LLP SBO rules, holding of beneficial interest declared through form 4D is considered as direct holding and hence there is no requirement to file form BEN-2 again.

15. What are the details of beneficial owner required to be filed in form 4D as well as in form LLP BEN-2?

For filing Form 4D following details are required:

• PAN number
• Date of creation of beneficial interest
• Declaration received from registered partner.
• Copy of Partnership Deed and/or Supplementary Partnership Deed.
• Copy of Form 4B and Form 4C

Following details of beneficial owner are required to be filled in form LLP BEN-2:

• SBO ID, in case of change of SBO
• Name of beneficial owner,
• father’s name,
• date of birth
• PAN/DPIN/ passport number
• Copy of LLP BEN-1
• Copy of Partnership Deed and/or Supplementary Partnership Deed.

16. If any beneficial owner already has a SBO ID before declaring his beneficial interest in the LLP, then can he use same SBO ID for reporting beneficial interest in LLP?

Form BEN-2 allows the user to enter SBO ID even in case where the beneficial interest in LLP is being reported for the first time. Moreover, the personal details of beneficial owners get pre-filled on the basis of SBO ID therefore, it appears that same existing ID can be used.

17. What if reporting LLP files the form BEN-2 or 4D after 1^st July, 2024?

The LLP shall be liable to pay late fees as prescribed under LLP rules 2009.

18. Rule 22B sub-rule 4 of LLP rules says that every LLP should appoint a designated partner as a designated person. What is the purpose of such appointment of designated person?

The purpose of appointing a designated person is to establish point of contact for ROC within LLP for the purpose of beneficial ownership. The designated person is expected to provide all information pertaining to beneficial ownership to ROC whenever asked for by him.

19. How should a LLP intimate ROC about appointment of designated person and within how much time?

As per rule 22B(4) of LLP rules, LLP should intimate the ROC about the appointment of designated person through form 4. The rule 22B(4) does not prescribe any specific timeline for filing this form, but form 4 for change or appointment of partners has to be filed within 30 days from such appointment or change. Therefore, this intimation should also be given in 30 days from date of appointment. It needs to be noted that Form 4 is a notified form for providing details ‘change or appointment of partners in a LLP’. But this form can also be used for providing details of ‘designated persons’ in LLP. But the version of Form 4 for providing designated persons under LLP is not yet notified.

20. Is the LLP required to intimate ROC about change in designated person?

The provision does not mention any such requirement. However the form 4 allows intimation of change. But the revised form 4 is not yet notified.

21. Which documents are required to be attached to form 4D?

Declarations received from registered partner and/or beneficial partner are required to be attached to form 4D.

22. What documents are to be attached to form LLLP BEN-2?

The following documents are to be attached to form BEN-2. Declaration of significant beneficial ownership under section 90 of Companies Act. Registration certificate through which SBO ID is generated (required in case of change or removal of SBO). Instrument through which beneficial interest is created.

23. Declaration regarding holding of beneficial interest in LLP should be given in which format?

The beneficial partner should give declaration regarding his holding of beneficial interest in LLP in form 4C. and the declaration by registered partner should be given in form 4B.

24. What is the fees for filing form 4D and form LLP BEN-2?

In case of both the forms, the filing fees is as prescribed under LLP rules 2009. For form LLP BEN-2, the filing is dependent upon the amount of total contribution of LLP. The instruction kit of form LLP BEN-2 provides a detailed table to prescribe fees based on the amount of contribution.In case of form 4D, fees for small LLP is RS. 50 and that for other than small LLPs is Rs.150.

25. Is the form 4D and from LLPBEN-2 approved through STP method or otherwise?

Both, Form 4D as well as form BEN-2 are approved through STP method.

26. Can the forms 4D and LLP BEN-2 be resubmitted?

No. there is no provision for resubmission of both these forms.

27. Does form BEN-2 or form 4D require certification from qualified professional?

Form 4D does not require any certification from any practising professional. However, form LLP BEN-2 does require certification from a practising chartered accountant or a practising company secretary or a cost accountant.