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Corporate Affairs Ministry withdraws memorandum forbidding LLPs from manufacturing activities

The corporate affairs ministry recently withdrew its memorandum barring Limited Liability Partnerships (LLPs) from engaging in and undertaking manufacturing activities.

Alarms were raised in various quarters about the said office memorandum issued by the ministry earlier in early March vide which LLPs were forbidden from manufacturing and related activities.

The ministry is responsible for the implementation of the Limited Liability Partnership Act.

“Manufacturing & allied activities were restricted in LLPs vide OM (Office Memorandum)… dated 06.03.2019. This OM invoking the restriction regarding manufacturing & allied activities has been withdrawn with immediate effect,”the ministry said in a message posted on its website.

In the memorandum, the ministry had stated that LLPs as body corporates have been set up for the purposes of carrying out business activities related to the service sector.

“Incorporation of LLPs and conversion of LLPs with the proposed business activity (ies), including manufacturing & allied activities are not be allowed,” the memorandum had said.

An LLP is a corporate business vehicle that provides benefits of limited liability while allowing its members the flexibility for organising their internal structure as a partnership, as per the ministry.

The Memorandum was a serious cause of concern as many entities had converted their manufacturing companies into LLPs with even The Institute of Company Secretaries of India (ICSI) flagging concerns in this regard to the ministry.

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