MCA revokes manufacturing and allied services restriction for LLPs

The Ministry of Corporate Affairs (MCA) has withdrawn the office memorandum which barred LLPs from any manufacturing and allied activities with immediate effect, according to notification put up on the ministry website.

The memorandum, which was circulated last month,  had anguished some quarters in the industry and hence stands withdrawn.

The confusion arose from the fact that the ministry has relied on the definition of ‘business’ under the LLP Act, 2008, to say that it allows LLPs to carry out trade, profession, services and occupation. And that manufacturing and allied services have been positively excluded from this definition.

The Institute of Companies Secretaries of India (ICSI) in a letter to MCA had also submitted that the OM needs clarification. It had asked for companies engaged in manufacturing activities to be allowed to register as a LLP under the Limited Liability Partnership Act, 2008.

Also, the ICSI has suggested that in case there is an apprehension that manufacturing businesses incorporated as LLPs would become very large and therefore not suitable as an LLP entity, a threshold limit on share capital or turnover may be considered as in the case of one person companies and small companies.

Nearly 14,646 LLPs in the country are carrying out manufacturing activity, as per the ministry’s report in December.