Multiple llp within single family

Dearest Reader,

I have gone through your query, and I understand your concern regarding the geo-tagging. Here I am to provide you with an answer. Here it is.

The arrangement that you have described raises so many legal considerations in regard to compliance, disclosure, and scrutiny as per the provisions of the Companies Act, 2023, particularly the geo-tagging requirement.

With the introduction of geo-tagging for the registered office addresses, the Companies Act, of 2023 has made this a mandatory process for the companies to accurately report their physical locations for the sake of Transparency and Accountability in the terms to clarify where business activities are actually conducted.

If these LLPs have leave and license agreements with "Mother Plant" companies but do not operate from their actual registered office location, this can be suspicious.

Under Section 447 of the Companies Act, falsifying records can lead to significant penalties, which may include fines and imprisonment depending on the nature of the offense. Geotagging was initially introduced to fix shell issues and ensure that the reported address matches the actual business operations. This requirement, implemented by the Ministry of Corporate Affairs (MCA), uses this information to prevent anonymous transactions and tax evasion through dummy agencies.

This can also be seen in the case of Shree Cement Ltd. v. Union of India (2018) as the concerned LLPs are mostly connected with familial relationships and associated with a single location even by having multiple agreements, and this can be considered a big red flag (if we say in GenZ language).   

Hence, while forming multiple LLPs under different combinations, one must consider that each LLP should meet the requirements independently. Maintenance of operational transparency, financial records, and adherence to actual locations of the offices for each LLP is highly recommended from my side.

I hope I was able to make things clear for you. Should you require any follow-ups, please feel free to connect with me on LinkedIn. (www.linkedin.com/in/pankhuri-rastogi-9221b2289)

Thank You.

Dear Reader,

It sounds as if your family's attempt to raise some 20 LLPs by inducting various family members and getting them linked up to a parent company, could be under serious scrutiny under the Companies Act, 2023. Of prime importance are Section 248 provisions empowering the Registrar of Companies to strike off companies that are not showing authentic business activity and the now introduced geo-tagging requirements, essentially meant to confirm the actual physical presence of registered offices.

The case of Serious Fraud Investigation Office v. Rahul Modi & Ors. is relevant here. Here, the court rendered clear that entities without substantive business activities and being used to manipulate the finances or evade tax could face serious legal ramifications. Several LLPs should be documented to ensure they do not appear as paper companies, demonstrate proper commercial intent, and are running as actual businesses. 

Please let me know if you have any questions at sankalpt44@gmail.com