Centre readies automated compliance system for LLPs

The corporate affairs ministry has successfully piloted the IT-heavy architecture designed to streamline compliance management for limited liability partnerships, a legal structure favoured by the services industry, said a person in the know seeking anonymity.

The system is likely to be rolled out later this year though the Centre has not yet set a deadline, as it is currently upgrading the statutory filing system for companies with better security and authentication requirements.

The exercise will soon be completed, he added.

Once rolled out, the ‘limited liability partnership compliance module of the MCA21 portal run by the ministry will also send alerts to Registrars of Companies (RoCs) informing them about the auto-generated notices issued to businesses under their jurisdictions to follow-up, adjudicate and issue orders.

The move is part of the massive revamp in the administration of the Companies Act and LLP Act with a new IT infrastructure, which is expected to transform the governance and compliance of Indian companies.

Both limited liability partnership-related and company-related forms have to be filed on the same portal, which was rebuilt from scratch by LTIMindtree, a group company of Larsen and Toubro.

Experts said the tech-driven oversight of limited liability partnerships based on extensive analysis of data would be a game changer in regulation.

“Fully automating compliance management with technology will transform the regulatory and compliance landscape. It will make businesses be on their toes in following their statutory obligations and make professionals more cautious about their duty," said D. Nagendra Rao, former president of the Institute of Company Secretaries of India (ICSI).

“With the system itself generating notices to defaulting businesses, there will be less room for any laxity in compliance," said Rao.

The deployment of the limited liability partnership compliance module will be timed in such a way that it does not come in the way of the ongoing transition of the way companies have to file various forms and reports, a transition that started last year and has now stabilized.

According to an official update posted on the ministry’s website, since 23 January, when close to 50 new high-security web-based forms were rolled out for company-related filings, more than 350,000 forms have been filed in the new version of the MCA21 portal up to 26 April.

The numbers suggest the ongoing upgrade of the portal is going on as per plan.

What has enabled the proposed rollout of the new compliance monitoring system for limited liability partnerships is a similar transition from PDF forms to web-based forms for these legal entities last year itself.

A similar system of auto-generation of notices and alerts relating to defaults will be implemented for companies, too, later on.

An email sent to the ministry on Wednesday seeking comments for the story remained unanswered at the time of publishing.