Corporate ministry withdraws memo barring manufacturing entities from operating as LLPs

NEW DELHI: The ministry of corporate affairs (MCA), late on Tuesday night, issued an 'update' on its website withdrawing the contentious memo that had restricted entities engaged in manufacturing from registering as a Limited Liability Partnerships (LLPs). This memo had also restricted private companies engaged in manufacturing from converting into LLPs.

A few sentences, posted under its update section states: “Manufacturing and allied activities were restricted in LLPs (vide OM No. CRC/LLP/e-Forms dated March 6). This office memo, invoking the restriction regarding manufacturing and allied activities has been withdrawn with immediate effect.”

The announcement follows publication of a news item in TOI’s edition of April 16, pointing out the challenges that manufacturing entities, especially smaller and medium sized entities would face. An LLP structure offers the benefits of corporatisation with limited liability of partners (their personal assets are ring-fenced or protected).

"This is a welcome move by the MCA and would prove helpful in clarifying the position for existing and proposed LLPs engaged in the manufacturing space, especially the small and medium sized enterprises, who are exploring the LLP structure. Full marks to the ministry which understood their concern and took immediate steps to address the issue,” said Anshul Jain, partner, regulatory services at PwC India.