Limited liability partnership may borrow from company law
: The government is likely to apply certain provisions of the company law to the proposed new business vehicle called limited liability partnerships after weighing how LLPs grow.
By TNN |
NEW DELHI: The government is likely to apply certain provisions of the company law to the proposed new business vehicle called limited liability partnerships after weighing how LLPs grow.
While the company law specifies elaborate processes for various corporate functions from holding shareholders meetings to mergers and amalgamations, the LLP Bill 2008 proposes simplified procedures for many of these.
But the time-tested provisions of the Companies Act of 1956 may be modified and applied on LLPs as these are known for their transparency, fairness and equitable treatment of all stake-holders, including minority share-holders.
The problem with company law provisions is that they do not facilitate quick implementation of corporate decisions in a dynamic economy. Company law provisions may be appropriately amended before they are made applicable to LLPs, a statement from ministry of corporate affairs said.
The finance ministry will introduce a tax regime for LLPs by the time the government frames rules under the proposed bill after it is enacted. The Cabinet had on Thursday cleared the bill.
While the company law specifies elaborate processes for various corporate functions from holding shareholders meetings to mergers and amalgamations, the LLP Bill 2008 proposes simplified procedures for many of these.
But the time-tested provisions of the Companies Act of 1956 may be modified and applied on LLPs as these are known for their transparency, fairness and equitable treatment of all stake-holders, including minority share-holders.
The problem with company law provisions is that they do not facilitate quick implementation of corporate decisions in a dynamic economy. Company law provisions may be appropriately amended before they are made applicable to LLPs, a statement from ministry of corporate affairs said.
The finance ministry will introduce a tax regime for LLPs by the time the government frames rules under the proposed bill after it is enacted. The Cabinet had on Thursday cleared the bill.
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The LLP form will allow professionals in IT, science and technology sector and venture capitalists to create a flexible vehicle for doing business. This form is expected to help Indian professionals, manufacturing firms and traders to stand up to global competition as this does not restrict the number in partners to 20 which is the case with present partnerships.
Besides, incorporation as an LLP which mandates disclosures, will enhance access to credit for entrepreneurs. Apart from professionals, the LLP form of business would be available to enterprises which meets the requirements of the proposed law.
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