Business

New Bill provides flexibility in LLPs

NEW DELHI: The Government on Tuesday introduced a Bill in the Rajya Sabha which seeks to limit the liability of partners in a firm in proportion to their stake.

Tabled by Corporate Affairs Minister Prem Chand Gupta, the Limited Liability Partnership (LLP) Bill is aimed at providing a platform to professionals such as chartered accountants and company secretaries to set up a partnership firm without putting any restriction on the number of partners.

Under the current norms of the Partnership Act, a maximum of 20 partners are permitted to come together to set up a firm. The new Bill, incorporating the recommendations of the Parliamentary Standing Committee on Finance, was tabled to replace the earlier one which was introduced in the House in 2006 and subsequently withdrawn.

As per the provisions of the new Bill, all classes of professionals would be able to set up an LLP-like structure and such an entity would enjoy all the features of a company. As a separate legal entity, its partners would also be shielded from the joint liability arising from any other partner’s wrong business decisions.

In a new corporate form that is expected to help in combining entrepreneurial initiatives while operating in an innovative and efficient manner, the business model is envisaged to provide a framework for creating flexibility to suit the needs of the services sector as also knowledge and technology-based enterprises.

The LLP structure will also obviate the need for firms to go through the various norms and procedures for setting up the entity. Alongside, it will also empower domestic players to compete with global companies such as PricewaterHouseCoopers and KPMG as the partners can be from anywhere across the world.

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