As discussed for the reason of non-filing of the required returns by defaulting LLP several LLP has remained non-compliant resulting in the following adverse consequences, which is precisely why the LLP Settlement Scheme 2020 has been announced.
ROC Records Updation:
The ROC records of the LLP are open for inspection by the stakeholders on payment of the prescribed fee, however as the LLP did not file requisite forms the records of the LLP are not updated and hence not available for inspection by the stakeholders.
Avoid Criminal Prosecution of Partners
Due to non-filing of LLP Form to the ROC the designated partners are liable for criminal prosecution. Under this scheme the designated partners of defaulting partners are granted immunity from prosecution.
So that the inactive LLP is able to Close
As several LLP did not file Form 3 and annual returns in form 11 and form 8, the LLP can not be closed as it is a prerequisite before the LLP goes for liquidation or winding up. Under this scheme the expectation from the inactive LLP is to file all the pending forms/returns and then close if required.