9/24/23, 6:10 PM Can LLP be the Subsidiary of Company

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Can LLP be the Subsidiary of Company (https://taxguru.in/company-law/llp-subsidiary-

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WHETHER A LIMITED LIABILITY PARTNERSHIP
REGISTERED UNDER LIMITED LIABILITY
PARTNERSHIP (https://taxguru.in/corporate-
law/limited-liability-partnership.html) ACT, 2008
CAN BE THE SUBSIDIARY OF A COMPANY
REGISTERED UNDER COMPANIES ACT, 2013-

We can come up with the conclusion after reading

through the analysis of following table.

TITLE OF COMPANIES ACT, 2013 LIMITED LIABILITY PARTNERSHIP ACT, 2008

DEFINITION

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9/24/23, 6:10 PM Can LLP be the Subsidiary of Company

BODY In accordance with section In accordance with section 2(1)(d) body corporate means a com
CORPORATE 2(11) of Companies Act, in section 3 of Companies Act, 1956 and includes –
2013 a limited liability partnership under limited liability partnership Ac
(https://taxguru.in/company-
law/presidents-assent-
companies-act-2013.html)
body corporate includes
any company incorporated
outside India except
following.
a. co-operative societies
registered under any law
relating to co-operative
societies ,and
b. any other body corporate
(not being a company as
defined in this Act), which
the central government may
specify in this behalf.
For the purpose of this
clause central government
specified the body
corporate for the purpose of
the qualification of auditors
in section 226 of
Companies Act, 1956 via
notification dated May 23,
2011

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9/24/23, 6:10 PM Can LLP be the Subsidiary of Company

SUBSIDIARY in accordance with section
2(87) of Companies Act,
2013
Subsidiary Company or
Subsidiary in relation to
any other company (that is
to say holding company),
means a COMPANY
which holding company-
I. controls the composition
of board of directors OR
II. EXERCISES
CONTROLS more than 50
% of the TOTAL VOTING
POWER either at its own or
together with one or more
of its subsidiary companies.
EXPLANATION : for the
purpose of section 2(87)
expression COMPANY
includes BODY
CORPORATE
No such provision in Limited Liability Partnership Act, 2008.
EXPLANATION
Limited Liability Partnership is a BODY CORPORATE and
holds 99 percent contribution in limited liability partnership it sh
amount to control the composition of Board of Directors n
exercise or control the more than 50% of total voting power.
REASON FOR ABOVE EXPLANATION.
in a. The limited liability partnership shall always hav
partners not the directors and if any body corporate
designated partners then*
b. a company cannot exercise voting power whateve
OR voting power in limited liability partnership because no
be called up except a meeting in accordance with th
section 60 (1) of the Limited Liability Partnership Act, 200
ADVERTISEMENT

TOTAL in accordance with section No such definition is defined in Limited Liability Partnership Act,
VOTING 2(89) of Companies Act,
POWER 2013 total voting power in
relation to ANY MATTER,
means the total number of
votes which may be cast in
regard to THAT MATTER
on a poll at a MEETING of
COMPANY if all the
members thereof or their
proxies having a right to
vote on THAT MATTER are
present at meeting and cast
their votes.

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9/24/23, 6:10 PM Can LLP be the Subsidiary of Company

CONTROL in accordance with section SEE MY EXPLANATION UNDER**

2(27) of Companies Act,
2013 shall include
1. right to appoint the
majority of the
DIRECTORS or
2. to CONTROL the
MANAGEMENT OR
POLICY DECISIONS
excercisable by a
persons or persons
acting individually or
in concert, directly or
indirectly, including
by virtue of their
SHAREHOLDING
OR MANAGEMENT
RIGHTS or
SHAREHOLDING
AGREEMENTS OR
VOTING
AGREEMENTS OR
IN ANY OTHER
MANNER.

*PROVISO OF SECTION 7(1) OF LIMITED LIABILITY PARTNERSHIP ACT, 2008

In accordance with the first proviso of sub section (1) of section 7 of Limited Liability Partnership
Act, 2008

“Provided that in case of a limited liability partnership in which all the partners are BODIES
CORPORATE or in which one or more partners are INDIVIDUAL AND BODIES CORPORATE, at
least TWO INDIVIDUALS who are partners of such limited liability partnership or NOMINEES OF
SUCH BODY CORPORATE shall act as designated partners.

CONCLUSION

From the above tabulated conclusion the Limited Liability Partnership can NEVER be a subsidiary
of a Company registered under Companies Act, 2013.

______________________________

**MY EXPLANATION

In my opinion, a clarification can be sought from the Ministry of Corporate Affairs by filing
a writ before the High Court to pray for judicial interpretation. The clarification from the
Ministry of Corporate Affairs in order to remove the difficulty cannot be sought because it
has elapsed 5 years from the date of effect of section 1 of the Companies Act, 2013.

In accordance with section 32 of the Limited Liability Partnership Act, 2008, A contribution of a
partner may consist of tangible, movable or immovable or intangible or other benefit of the limited
liability partnership, including money, promissory notes, other arrangement to contribute cash or
property and contract for services performed or to be performed.
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9/24/23, 6:10 PM Can LLP be the Subsidiary of Company

If a Company which contributes 99 percent in the form of shares which are the movable property
and depends that –

In which entity or entities such company has invested its money to obtain the shares of that entity
or entities and contributed the same in the formation of Limited Liability Partnership.

EXAMPLE

A Limited has 99% shares in B
Limited then A limited will be
the subsidiary of B limited
the 99 percent shares of B
Limited is with A limited then A
limited will be the Holding
Company of B Limited.
Both A limited and B limited
becomes the designated
partner in terms of section 7 of
Limited Liability Partnership
Act, 2008 and contribute their
movable property in terms of
section 32 in the form of shares
( A ltd : 99% shares and B ltd :
1% shares) in order to register
the Limited Liability Partnership
and incorporate the same in
Limited Liability Partnership
Agreement

the particular reason behind is that the word EXERCISE generally use for the word VOTE. the
word CONTROL mostly use for the MANAGEMENT, POLICY DECISION which Company Act,
2013 clearly states in section 2(27) in the definition of word CONTROL

From the above example, if difficulty in clause (ii) section 2(87) is to be removed by
following substitution.

a. Control or

b. Exercise more than fifty percent of voting total voting power either at its own or
together with one or more subsidiary companies.

then a Limited Liability Partnership shall be treated as subsidiary of company for the
following three reason of sub section (27) of section 2 of Companies Act, 2013

a. Management by virtue of ANY OTHER MANNER

b. Policy Decision by virtue of ANY OTHER MANNER

c. Management rights.

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9/24/23, 6:10 PM Can LLP be the Subsidiary of Company

in section 2(27) the word “any other manner” has not been clarified.

the particular reason behind is that the word EXERCISE generally use for the word VOTE. the
word CONTROL mostly use for the MANAGEMENT, POLICY DECISION which Company Act,
2013 clearly states in section 2(27).
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Name: ANAND CHURA (https://taxguru.in/author/anandchura/)

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