M&A Critique

Analysis – Merger of LLPs – A Start

Section 60 and 62 of the Limited Liability Partnership Act, 2008 (The LLP Act) deals with the compromise, arrangement, and reconstruction of the Limited Liability Partnership. The terms compromise, arrangement and reconstruction are not defined under the LLP Act.

In a much-awaited transaction to set precedent for the merger of LLPs, Hon’ble National Company Law Tribunal (NCLT), Delhi bench has approved the scheme of merger of LLP in two cases in February 2021, whereby 4 LLPs got merged into the one LLP vide NCLT order. Though the LLP Act contains provision for the merger of LLPs vide section 60 to 62 and Rule 35 of the LLP Rules there are very few instances where LLPs have proposed the scheme of merger since the procedure for merger of LLPs is not yet streamlined.

As far as procedure for the arrangement/merger is concerned it is akin to the procedure applicable for the arrangement/merger of the Companies given under section 230-232 of the Companies Act, 2013 i.e.

  • Filing of Application for getting direction of meeting of partners and/or creditors.

    NCLT has discretionary power for dispensation of meeting of partners/creditors based on certain points like less no. of creditors/partners, high net-worth of the LLPs, consent of partners/creditors) – section 60(1)

  • If the meeting is directed to be convened resolution is required to be passed with specific majority i.e., majority in number representing 3/4th in value. – section 60(2)

    LLP agreements can contain provisions for differential voting rights.

  • Filing of petition for confirmation of scheme of merger within 7 days of submission of chairperson’s report – Rule 35(10)
  • Obtaining report from the Registrar of Companies and Official Liquidator (Applicable in case of merger) – section 62(1)(a)
  • Filing of order with ROC within 30 days of making of order.

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Surendra Rahalkar