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Limited Liability Partnership mergers under the Limited Liability Partnership Act, 2008: From statutory framework to judicial application
Over the last decade, Limited Liability Partnerships (“LLPs”) have become a widely used business structure in India. Yet despite the availability of a statutory framework for LLP mergers under the Limited Liability Partnership Act, 2008 (“LLP Act”), limited judicial precedent has left practitioners without clear guidance on its practical operation. A recent order of the National Company Law Tribunal, Mumbai Bench-I (“NCLT Mumbai”), sanctioning an LLP-to-LLP merger, now offers important clarity on the viability of this restructuring tool.
The Order dated May 12, 2026 (“NCLT Order”), sanctioned the scheme of amalgamation of Pulit Trading LLP (“Transferor LLP 1”) and Nyzel Trading LLP (“Transferor LLP 2”) with Raojee Landmarks LLP (“Transferee LLP”). While the NCLT Order provides welcome comfort on the availability and viability of the merger process under the LLP Act, it does not settle all outstanding issues, particularly from a tax perspective.
The statutory framework: Sections 60–62 of the LLP Act
Sections 60 to 62 of the LLP Act (analogous to Sections 230–232 of the Companies Act, 2013) provide a tribunal-supervised route for LLP compromises, arrangements, reconstructions and amalgamations. Rule 35 of the LLP Rules, 2009 (“LLP Rules”) prescribes the procedural requirements. Despite the existence of this statutory framework, limited judicial precedent had been available until this order.
Section 60 of LLP Act provides the basic framework for compromises and arrangements between an LLP and its creditors or partners, including approval by the requisite majority and sanction by the National Company Law Tribunal (“NCLT”). Section 61 of LLP Act gives the NCLT continuing supervisory powers to ensure that a sanctioned compromise or arrangement is properly implemented. Section 62 of LLP Act then operates as the enabling provision for LLP reconstructions and amalgamations, allowing NCLT to provide for the transfer of undertakings, property, liabilities, pending proceedings, and dissolution of transferor LLPs without winding up.
Rule 35 of the LLP Rules prescribes the procedural requirements for applications under Sections 60 to 62 of the LLP Act, including the form and manner of applying to the NCLT for sanction of compromises, arrangements, reconstructions, or amalgamations involving LLPs. Despite the existence of a statutory framework for LLP mergers, market participants have historically had limited judicial guidance on the operation of these provisions in practice.
Brief facts
The present NCLT Order arises from a Scheme of Merger (“Scheme”) involving the following 3 (three) LLPs[1]:
- the Transferor LLP 1, originally incorporated as Pulit Trading Private Limited in Maharashtra on August 5, 1996 and converted to LLP status on February 10, 2024.;
- the Transferor LLP 2, originally incorporated as Nyzel Trading Private Limited in Maharashtra on July 30, 1996 and converted to LLP status on February 10, 2024; and
- the Transferee LLP”), incorporated as an LLP on June 23, 2022.
The Scheme proposed the merger of both Transferor LLP 1 and Transferor LLP 2 into the Transferee LLP. The contribution of each transferor LLP was entirely held by the Transferee LLP, making the transaction akin to an internal group simplification. On merger, the Transferee LLP would cancel the partners’ contributions in each Transferor LLP in full, with no consideration payable. The appointed date was April 1, 2025, and all partners approved the Scheme by resolution on that date.
The stated rationale was to simplify the corporate structure and achieve cost and operational efficiencies, including greater integration and financial strength, better cash management, pooling of human capital, elimination of duplicate processes, and rationalisation of compliance costs.
A notable feature of the case was that both the Transferor LLP 1 and Transferor LLP 2 were originally incorporated as private limited companies in 1996. They were subsequently converted into LLP in February 2024, approximately 1 (one) year before the Scheme was proposed. NCLT Mumbai’s sanction of the Scheme indicates that, on the facts before it, the prior conversion of the transferor entities from private limited companies into LLPs was not treated as an impediment to the LLP merger.
NCLT Mumbai’s ruling
The petition was filed following the first motion order in CA(CAA)138/MB/2025 dated June 12, 2025. The applicant LLPs furnished the required documentation, including master data, LLP agreements, financial statements for the year ending March 31, 2024, the Regional Director’s report dated January 8, 2026, the Official Liquidator’s report dated April 9, 2026, and a copy of the Scheme. All partners gave their consent in a meeting held on April 1, 2025, at the registered office of the LLPs. The Official Liquidator confirmed that the affairs of the LLPs had not been conducted in a manner prejudicial to public interest or creditors’ interests.
NCLT Mumbai observed that, based on the material on record, the Scheme “appears to be fair and reasonable,” was “not in violation of any provisions of law,” and was “not contrary to public policy,” particularly as no objection had been received from any authority, creditors, members, or other stakeholders. Having found that the requisite statutory compliances had been fulfilled, NCLT Mumbai made the petition absolute and sanctioned the Scheme.
Tax considerations
The NCLT Order expressly preserved the Income Tax Department’s right to examine the tax consequences of the Scheme. It states that “the Income Tax Department will be at liberty to examine the aspect of any tax payable as a result of this scheme and in case it is found that the scheme ultimately results in tax avoidance under the provisions of Income Tax Act, it will be open to the Income tax authorities to take necessary action as possible under the Income Tax Law.”
The NCLT Order serves as an important reminder that sanction and approval given by NCLT under the LLP Act does not, by itself, determine the tax treatment of an LLP merger. Unlike the statutory framework applicable to company amalgamations, Indian tax law does not currently contain an equivalent and comprehensive regime specifically addressing LLP-to-LLP mergers.
Under the Income Tax Act, 1961 (“IT Act“), provisions relating to amalgamations, including Sections 2(1B)[2] and 47(vi)[3] (corresponding to Sections 2(6) and 70(1)(e) of the Income Tax Act, 2025), are drafted in the context of company amalgamations. Accordingly, the availability of tax neutrality in the context of LLP mergers would require careful analysis on a case-by-case basis, particularly in relation to the transfer of assets and any resulting capital gains implications. Similarly, loss carry-forward and depreciation continuity under Section 72A[4] of the IT Act (corresponding to Section 116 of the Income Tax Act, 2025) is condition-based and should not be assumed to extend to LLP-to-LLP mergers without a separate analysis.
Stamp duty considerations also warrant separate evaluation, as the position varies across states and depends on the nature of the assets and the language of the applicable state stamp legislation. Certain state stamp laws, such as Maharashtra’s, do not specifically provide for the reconstruction or amalgamation of LLPs, whereas states such as Kerala expressly prescribe stamp duty provisions in this regard. The stamp duty treatment should therefore be assessed separately for each relevant state.
Given these aspects, practitioners must build tax analysis into the structuring of any LLP merger from the outset. While in the present order NCLT Mumbai addresses the statutory process under the LLP Act, it does not, by itself, settle the tax treatment of the transaction. Practitioners should therefore involve tax counsel at an early stage and assess capital gains, stamp duty, Goods and Services Tax (“GST”), loss carry-forward, depreciation, and other tax implications before filing the scheme petition.
Practical takeaways and the way forward
The NCLT Order demonstrates how LLP mergers can be used as a viable restructuring mechanism where the structure is clean, partner approvals are in place, and regulatory and stakeholder concerns are addressed. The NCLT Order provides useful guidance for businesses seeking to streamline group structures and for practitioners advising on the implementation of similar schemes.
From a commercial perspective, LLP mergers offer several practical benefits. Groups operating through multiple LLPs may use the merger framework to consolidate operations, eliminate inter-entity transactions and reduce administrative and compliance burdens. Merging single-purpose LLPs into a central operating entity can further simplify governance structures and rationalise liabilities.
At the same time, NCLT Order offers important practical guidance for practitioners:
- first, a prior conversion history need not, on appropriate facts, be an impediment to a subsequent LLP-to-LLP merger. In this case, the transferor entities had converted from private limited companies into LLPs before participating in the Scheme, and NCLT Mumbai did not treat that fact as a bar to sanction;
- second, tax considerations must be evaluated at an early stage. NCLT Mumbai’s express reservation of the Income Tax Department’s right to independently scrutinise the transaction serves as a reminder that NCLT approval does not insulate a merger from potential tax challenges. Accordingly, implications relating to capital gains tax, stamp duty and GST should be carefully assessed before filing the scheme;
- third, careful structuring and procedural discipline are essential to implementing an LLP merger. In this case, the straightforward structure without external consideration and with unanimous partner consent likely contributed to the absence of objections. The comprehensive documentation supporting the Scheme was equally important. This included partner resolutions, reports from the Regional Director and Official Liquidator, and specific undertakings relating to compliance with General Circular No. 09/2019 issued by Ministry of Corporate Affairs and LLP (Significant Beneficial Owners) Rules, 2023. More complex transactions involving third-party creditors, dissenting partners or cross-border assets will inevitably require more extensive stakeholder management and robust documentation. Practitioners should therefore ensure strict compliance with the procedural requirements prescribed under the LLP Rules, while adopting a carefully structured approach from the outset.
Viewed holistically, NCLT Order reinforces that LLP mergers are evolving into a practical and effective restructuring tool for business groups. However, their successful implementation will continue to depend on careful structuring, robust documentation and early evaluation of regulatory and tax considerations.
Conclusion
As LLPs continue to expand and reorganise their operations, the need for a clear legal framework governing mergers, business transfers, reconstructions and internal restructurings has become increasingly important. While corporate restructuring under the Companies Act, 2013 has been extensively tested before courts and tribunals, practitioners and market participants have had relatively limited precedent on the corresponding restructuring regime for LLPs under the LLP Act.
The NCLT Order, sanctioning the Scheme, is a significant and welcome development.
It is important to clarify at the outset that the significance of the order does not lie in any novel recognition of LLP-to-LLP mergers. The statutory framework already exists: Sections 60 to 62 of the LLP Act, read with the LLP Rules, provide a tribunal-supervised route for compromises, arrangements, reconstructions and amalgamations involving LLPs, including arrangements with creditors or partners. Rather, the significance of the order lies in NCLT Mumbai’s application of the existing LLP Act framework to sanction a clean LLP merger structure, supported by partner approvals and without objections from regulators, creditors, partners, or other stakeholders. Given Mumbai’s role as a major commercial and professional services centre, NCLT Mumbai’s approach is practically important for LLP groups and advisers considering similar
This Prism has been prepared by:
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M. Arun Kumar |
Jaskiran Kaur |
Sarah Azad |
For more details, please contact km@jsalaw.com.
[1]NCLT Mumbai Bench-I, C.P. (CAA) No. 236 of 2025 in C.A. (CAA) No. 138 of 2025 (order pronounced on May 12, 2026).
[2] Section 2(1B) of the IT Act prescribes the conditions for a qualifying amalgamation, including the transfer of assets and liabilities and satisfaction of specified shareholder continuity requirements.
[3] Section 47(vi) of the IT Act excludes from capital gains taxation the transfer of capital assets by an amalgamating company to an Indian amalgamated company pursuant to a qualifying amalgamation.
[4] Section 72A of the IT Act permits the carry-forward of losses and unabsorbed depreciation in specified company amalgamations subject to prescribed conditions.
