TACKLING GROUP DISCUSSION

GD is a very important part in campus placement. It is a stage where most of the participants are eliminated and only 2-3 go in to the next round depending on the companies’ requirements. Performing well in GD brings you closer to your dream Job. 

In GD, topics of discussion could be current affairs to test the knowledge of candidate or they may also provide a case study.The topics depend from company to company and the job profile for which the candidate is appearing for.

In situations where case study is given, it is mainly to test the leadership capability of the candidate.

In case study related GD, 5- 10 mins is given by the Panel to read and understand the situation given in the case. The participant must utilise the time well to identify the crux of the situation.

Once the panel says to start, it is not necessary that you must speak first. If the points are ready, then you may start. If you are speaking first, then you must provide a short glimpse of the case study and thereafter present your points of view.

Once you have presented your points of view, u must provide a chance to other candidates to speak also. One key aspect is not to speak all the time but to listen also. While listening to other candidates, note down the important points conveyed. Also try using the words like, He/she has presented an interesting point, but i would like to contradict/ contrast and so on.

Try to be the leader in the group, but avoid being dominating.  Companies will not prefer people who try to dominate things. 

Also if you realise that the discussion is moving out of context, then it is necessary that you poke in your nose in between and convey the message.

You must present your points of view in between also.

In each GD, there must be a conclusion. The main objective of the case study is to conclude and arrive at a consensus as a group. If the same is not done within the time allowed for GD, the group as such fails and the company may not even select a single candidate as the team has failed to arrive at the conclusion. So when you know that the clock is ticking by, ensure that in last 10 minutes of the case study, conclusion is arrived at. It is a critical part of the GD. 

Try to show to the recruiters the leadership qualities in you. Make your mark and you shall sail through. The rest I cannot say as in reality, situations will defer from individual to individual.

GOVERNMENT EXPENDITURES- TIME FOR ACCOUNTABILITY?

The public limited listed companies in India are required by Clause 49 of listing agreement to show quarterly results so as to inform the intended users about the performance of the company. It also ensures that these listed companies are compliant with all the relevant statutes.

Today, India witnesses a lot of corruption. Every day, we have news on the same cropping up. But why is this happening? This is simply because there is no accountability for the same.  The blame game goes on. The issue is politicised and it brings the Indian Parliament to a halt. Is this what we want? Coal scam, 2G scam, Irrigation scam, land deals, food grains scam, CWG scam and the list just continues. Have we ever wondered where all the money has gone? These amounts are shown as expenditure in the yearly budget presented by GoI. But have these reached the real beneficiaries? No, it has not. A large chunk of money is eaten away by the corrupt bureaucrats.

What is the solution for us? How do we mitigate or stop this? Well Government, collects money from public in form of various types of taxes.  It’s the aam admi paying taxes. We would be very interested to know if the money collected from us is being invested for the development of country.

Government must come out with the quarterly figures of money spent by them on various activities providing full disclosure in terms of money invested, benefits derived from it and also stating that not even a single rupee has been mis-utilised.

This must be signed by Prime Minister, Finance minister and others connected with it, just like the way Directors, CFO sign the financial statement of the company. This process will ensure that money collected from public is not mis-utilised.

If these measures can be introduced in the Indian financial system, it will bring in more transparency and awareness to the Indian Public.

LLPs- Misc Provisions

MISCELLANEOUS PROVISIONS

56. What are the provisions being proposed in the Act for striking off defunct LLPs? Whether LLPs would be allowed a less stringent framework for closing of business?

The Act empowers Registrars to strike off names of LLPs which are not carrying on any business or operation. They will be under obligation to give an opportunity of being heard to LLP concerned. Details for manner of striking off would be prescribed through rules.  Since LLPs would be governed by LLP Agreement it would be possible for LLPs to make suitable clauses in such Agreement prescribing time limits or duration of LLPs. In such cases, provisions for striking off names could be used.

Besides, the Act empowers Central Government to make rules in respect of winding up and dissolution of LLPs. It is proposed to prescribe a simple procedure for voluntary winding up of LLPs under such rules.

57. Whether electronic filing of documents with ROC would be allowed? How far MCA-21 e-Governance initiative will be extended and be useful for LLPs structure under the Act?

The LLP Act contains enabling provisions for use of electronic mode for filing of documents with Registrars. Details have been specified in the LLP Rules, 2009. Authentication of documents as per Information Technology Act, 2000 has also been recognized in the LLP Act.

At present , Office of Registrar for registration etc of LLPs has been set up at Delhi (3rd Floor, Paryavaran Bhavan, CGO Complex, New Delhi-3). The filing and inspection of documents with the Registrar pursuant to LLP Act, 2008/ LLP Rules, 2009 can be made through website www.llp.gov.in  

58. Whether provisions of the Companies Act, 1956 would be applicable to LLPs?

Since LLP shall be in the form of a body corporate, it is proposed that to address various situations applicable to LLPs as such, the relevant provisions of the Companies Act, 1956 may be made applicable to LLPs at any time in the future by Notification by Central Government, with such changes or modifications as appropriate.  

59. Whether, amendments will be required in the Regulatory Acts governing the various professional services so that these can be aligned with the objectives of the Act?

Yes. Amendments to various such Acts would be necessary which can be considered by concerned Ministries/Departments.

INTRODUCTION OF LLP BILL, 2006 IN THE PARLIAMENT AND EXAMINATION BY STANDING COMMITTEE AND SUBSEQUENT ACTION

60. When was the LLP Bill, 2006 was introduced? Whether the Bill was referred to Standing Committee? Has the Bill been revised?

The Limited Liability Partnership (LLP) Bill, 2006 was introduced in the Rajya Sabha on 15th December, 2006. The Bill was referred to the Lok Sabha Standing Committee on Finance, for examination. The Standing Committee consulted various chambers of commerce, professional institutes and other experts and also heard the M/o Corporate Affairs.

The said Committee presented/submitted its report to the Parliament on 27th November, 2007. Based on such report the Ministry of Corporate Affairs revised the LLP Bill and the revised LLP Bill, 2008 was introduced in the Rajya Sabha on 21st October, 2008. This was passed by the Rajya Sabha on 24th October, 2008. The Bill was passed by Lok Sabha on  12th December, 2008. The President has given assent to this Bill on 7th January, 2009.

61. Whether all recommendations made by Standing committee have been accepted by the Government?

All the recommendations except one made by Hon’ble Standing Committee have been accepted by the Government. The recommendation which has not been accepted related to proposing a restriction on number of LLPs in which a designated partner may become designated partner. During examination of this recommendation, it was felt that since under the Companies Act, 1956 there is no restriction on a person to be come directors in any number of private companies. Since proposed structure for LLPs would be similar to private companies, it was felt that putting a restriction relating to maximum number of LLPs in which a person may become designated partner may not be necessary.

62. Whether the ongoing financial crisis across the globe requires any change in thoughts regarding the LLP Act, 2008?

The ongoing financial crisis across the globe does not appear to have affected Indian economy. The Indian companies and other business entities, including those engaged in banking and financial business are not likely to have any major impact in view of financial crisis of US or Europe, thanks to the strict and conservative legal and regulatory systems working in India.

Since a more professional and mature approach is needed in any country to handle such kinds of crisis,  the LLP Act, 2008, which would allow professionals from various fields to combine and work together in providing various services, would be even more useful.

LLPs - Taxation & Conversion

TAXATION

47. What is the tax treatment being provided for LLPs?

Since the taxation related matters in India are provided under Tax Laws, the taxation of LLPs has not been provided in the LLP Act. The Finance Bill, 2009 has made provisions in this regard, pursuant to which the taxation scheme of LLPs has been proposed to be introduced in the Income Tax Act. The Finance Bill, 2009 has proposed following regarding taxation of LLPs:-

  (a) LLPs to be taxed on the lines similar to general partnerships under Indian Partnership Act, 1932, i.e. taxation in the hands of the entity and exemption from tax in the hands of its partners.

  (b) Consequent changes to be made in the Income-tax Act, 1961 like (i) the word ‘partner’ to include within its meaning a partner of a limited liability partnership, (ii) the word ‘firm’ to include within its meaning a limited liability partnership and (iii) the word ‘partnership’ to include within its meaning a limited liability partnership

  (c) The designated partner shall sign the income tax return of an LLP, or, where, for any unavoidable reason such designated partner is not able to sign the return or where there is no designated partner as such, any partner shall sign the return.

  (d) In case of liquidation of an LLP, every partner will be jointly and severally liable for payment of tax unless he proves that non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part.

  (e) As an LLP and a general partnership is being treated as equivalent (except for recovery purposes) in the Income-tax Act, the conversion from a general partnership firm to an LLP will have no tax implications if the rights and obligations of the partners remain the same after conversion and if there is no transfer of any asset or liability after conversion.

  (f) If there is a violation of these conditions, the provisions of section 45 of Income-tax Act shall apply.

  (g) These amendments are proposed to be made effective from the 1st day of April 2010 i.e. assessment year 2010-11.

CONVERSION OF OTHER ENTITIES INTO LLPs AND VICE VERSA

48. Whether other business entities like firm or company would be able to convert themselves into LLP?

Yes. The LLP Act contains enabling provisions pursuant to which a firm (set up under Indian Partnership Act, 1932) and private company or unlisted public company (incorporated under Companies Act) would be able to convert themselves into LLPs. Provisions of clause 58 and Schedule II to Schedule IV to the Act provide procedure in this regard. 

49. Whether LLP would be able to convert itself into company under the Companies Act, 1956?          

This would not be allowed under LLP Act. However, enabling provisions would be required to be made in the Companies Act for such conversion. Necessary action in this regard would be taken when Companies Act would be revised.

50. What is the treatment for stamp duty issues, both in terms of original incorporation and conversion from other business structures? Would there be any stamp duty exemption in case of conversion?

Since Stamp Duty is the subject reserved for the States, the LLP Act does not contain any provision for treatment of stamp duty issues. The stamp duty payable will depend upon the relevant Stamp Act prescribed by the State Government/Union Territory.

51. What are the requirements and consequence provided in the Act in respect of licences, permits, approvals etc obtained by a firm, private company or an unlisted public company, prior to its conversion into LLP?

It has been provided in the Act that on conversion of a firm/private company/unlisted public company into LLP, any approval, permit or licence issued to the firm/private company/unlisted company under any other Act shall, subject to the provisions of such other Act under which such approval, permit or licence was issued, be transferred in the name of converted entity viz LLP.

MERGER AND WINDING-UP OF LLPS

52. Whether two LLPs would be allowed to merge?

Provisions of section 60 to 62 of the Act provide for the manner in which compromises or arrangements including mergers and amalgamations involving LLPs shall be allowed.

53. What would be the provisions in respect of winding- up of LLPs?

It is proposed to provide the provisions and procedures required to be complied with when the affairs of an LLP are to be wound-up and dissolved, by enabling the Central Government to make rules under the LLP Act, 2008.

OFFENCES & PENALTIES AND JURISDICTION OF COURTS/TRIBUNAL

54. Broad provisions in respect of Offences and Penalties

Offences and penalties arising out of the non-compliance with the provisions of the Act have been defined along with the substantive provisions themselves.  However, for defaults/ non-compliance on procedural matters such as time limits for filing requirements, penalties have been provided for application in a non-discretionary manner, through the levy of a default fee for every day for which the default continues. Such default fee would be payable at the rate of rupee one hundred per day after the expiry of the date of filing (as prescribed in relevant provision) upto a period of three hundred days. Charging of such default fees would, however, be without prejudice to any other action or liability under the Act, in case the filing is made beyond the expiry of three hundred days.

The offences can be punished either (i) through payment of fine or (ii) through payment of fine as well as imprisonment of the offender. The Judicial Magistrate of the first class, or, as the case may be, the Metropolitan Magistrate shall have jurisdiction to try offences under the LLP Act.

Though most of the offences in the Act provide for punishment by way of charging fine, imprisonment has been provided for in respect of violations relating to

 (i) making by any person a false statement at the time of incorporation of LLP (ii) carrying on business of LLP with intent to defraud or for any fraudulent purposes and (iii) making, knowingly, false statements or omitting any material fact, in any return, documents etc under the Act. The offences which are punishable with fine only can be compounded by the Central Government, by collecting a sum not exceeding the amount of maximum fine prescribed for the offence.

Further, for defaults/non-compliance on procedural matters such as time limits for filing requirements provisions have been made for charging default fees (on daily basis) in a non-discretionary manner.

55. Whether offences would be compounded under the LLP Act? Whether any protection to whistle-blowers is being proposed in the Act?

The Act contains provisions empowering Central Government to compound any offence punishable with fine only by collecting a sum not exceeding the amount of maximum fine prescribed for the offence.
Enabling provisions have also been made in the Act in respect of protection to “Whistle Blowers”. 

LLP- Disclosure & investigation of affairs

DISCLOSURE, AUDIT AND FILING REQUIREMENTS

38. Whether every LLP would be required to maintain and file accounts?

An LLP shall be under obligation to maintain annual accounts  reflecting true and fair view of its state of affairs. A “Statement of Accounts and Solvency” in prescribed form shall be filed by every LLP with the Registrar every year.

39. Whether audit of all LLPs would be mandatory?

The accounts of every LLP shall be audited in accordance with Rule 24 of LLP, Rules 2009.

Such rules, inter-alia, provides that any LLP, whose turnover does not exceed, in any financial year, forty lakh rupees, or whose contribution does not exceed twenty five lakh rupees, is not required to get its accounts audited. However, if the partners of such limited liability partnership decide to get the accounts of such LLP audited, the accounts shall be audited only in accordance with such rule. 

40. Whether any provisions in respect of ‘mandatory insurance’ are being proposed in the Act?

No mandatory insurance has been proposed in the Act.  It would be difficult to assess insurance requirements of different types and sizes of LLPs. This would depend upon the nature of commercial risk attached with work or assignment handled by each. Applying common insurance requirements across a class of LLPs would result in increasing their costs of operation. Therefore, the underlying concern as to the credit worthiness of the LLP in the event of a contractual default is being addressed through statutory provisions for solvency declaration, disclosure of financial information and audit.

41. Whether any Annual Return would be required to be filed by an LLP?

Every LLP would be required to file annual return in Form 11 with ROC within 60 days of closer of financial year. The annual return will be available for public inspection on payment of prescribed fees to Registrar.

42. Whether the Registrar would have any power to call for information from LLPs?

Registrar would have power to obtain such information which he may consider necessary for the purposes of carrying out the provisions of the Act, from any designated partner, partner or employee of the LLP. He would also have power to summon any designated partner, partner or employee of any LLP before him for any such purpose, in case the information has not been furnished to him or in case the Registrar is not satisfied with the information furnished to him.

43. Which documents will be available for public inspection in the office of Registrar?

The following documents/information will be available for inspection by any person:-

• Incorporation document,
• Names of partners and changes, if any, made therein,
• Statement of Account and Solvency
• Annual Return

The fees for such inspection of an LLP is Rs 50/- and fees for certified copy or extract of any document u/s 36 shall Rs. 5/- per page.

44. How would compliance management (i.e. ensuring that LLPs file their documents with Registrars timely and otherwise comply with other procedural requirements under the Act) be ensured in the Act?

The provisions of the Act require LLPs to file the documents like Statement of Account and Solvency (SAS) and Annual Return (AR) and notices in respect of changes among partners etc. within the time specifically indicated in relevant provisions. The Act contains provisions for allowing LLPs to file such documents after their due dates on payment of additional fees. It has been provided that in case LLPs file relevant documents after their due dates with additional fees upto 300 days, no action for prosecution will be taken against them. In case there is delay of 300 days or more, the LLPs will be required to pay normal filing fees, additional fee and shall also be liable to be prosecuted. 

The Act also contains provisions for compounding of offences which are punishable with fine only.

INVESTIGATION OF AFFAIRS OF LLPS AND ROLE OF GOVERNMENT TO CHECK UNSCRUPULOUS LLPS ETC.

45. What are the measures, which can be taken against an LLP, which has engaged in fraudulent activities?

Central Govt may appoint inspectors to investigate the affairs of an LLP. The manner and procedure for conduct of investigation has been specified in the Act.

46. What will be the role of Government in regulation of LLPs? How will the Act able to prevent ‘fly-by-night’ promoters or LLPs vanishing after incorporation?

LLP structure is proposed to allow entrepreneurs and businessmen/servicemen to combine themselves with a view to run a business/service for profit in a more flexible manner than companies. The internal processes of LLPs shall be governed by the LLP Agreement. To protect interests of various stakeholders, following approach has been followed in the LLP Act:-

• imandatory incorporation of LLPs with registrar with suitable due diligence to be followed by promotes/professionals at the time of incorporation. Provisions for mandatory Designated Partners Identification Number (DPIN) to be obtained by every designated partner (similar to DIP for directors of companies) have been proposed in the Act.
• MCA-21 e-Governance process will be used for incorporation purposes which will help to track any unscrupulous promoter/partner of an LLP.
• Details of partners and any changes made therein shall be required to be filed with the registrar;
• Filing of annual documents like (SAS and Annual Return) with the Registrars will be mandatory. Such documents will also be open for public inspection;
• Audit of all LLPs (except small LLPs which may be exempted by way of notification by Central Govt) shall be mandatory;
• Provisions have been proposed in the Act to empower Registrar to conduct scrutiny of documents filed with him and for calling of any other relevant information from LLP or its partners/officials and also for summoning of LLPs’ partners/officials in certain cases.
• The Act also contains provisions for investigation of affairs of LLPs by competent inspectors to be appointed by Central Government, wherever circumstances so require.

LLPs- Liability

LIABILITY OF PARTNERS

34. Nature & extent of liability of a partner of an LLP?

Every partner of an LLP would be, for the purpose of the business of the LLP, an agent of the LLP but not of the other partners. Liability of partners shall be limited except in case of unauthorized acts, fraud and negligence. But a partner shall not be personally liable for the wrongful acts or omission of any other partner. An obligation of the limited liability partnership whether arising in contract or otherwise, is solely the obligation of the limited liability partnership. The liabilities of LLP shall be met out of the property of the LLP.

35. what is the liability of a Partner upon reduction of minimum number of members in an LLP?

The Act provides for the minimum of two partners to carry on LLP. If at any time the number of partners of a limited liability partnership is reduced below two and the limited liability partnership carries on business for more than six months while the number is so reduced, the person, who is the only partner of the limited liability partnership during the time that it so carries on business after those six months and has the knowledge of the fact that it is carrying on business with him alone, shall be liable personally for the obligations of the limited liability partnership incurred during that period.

36. Whether a ‘partner by holding out’ will be liable under the Act?

The Act provides that any person (not being a partner in any LLP), who by words spoken or written or by conduct, represents himself, or knowingly permits himself to be represented to be a partner in a LLP (known as ‘partner by Holding out’) is liable to any person who has on the faith of any such representation given credit to the LLP, whether the person representing himself or represented to be a partner does or does not know that the representation has reached the person so giving credit.

It has further been provided that where any credit is received by the LLP as a result of such representation, the LLP shall, without prejudice to the liability of the person so representing himself or represented to be a partner, be liable to the extent of credit received by it or any financial benefit derived thereon.

The provisions have also been made in the Act to provide that where after a partner's death the business is continued in the same LLP name, the continued use of that name or of the deceased partner's name as a part thereof shall not of itself make his legal representative or his estate liable for any act of the LLP done after his death.

37. How penal action on errant partners who are not residents of India will be taken?

For statutory compliances provisions of at least one resident designated partner (DP) in every LLP is would ensure that at least one partner is available in India for at least six months for regulatory compliance requirements. The LLPs would have freedom to appoint more than one resident as DP. LLP as an entity would always remain liable for regulatory or other compliances. Civil liability on such a partner would be adjudicated by the courts under civil law which recognises ‘foreign awards’. Criminal liability would require adjudication/ enforcement by the courts including using the extradition process. Position would be similar to the cases of directors of companies who are foreign nationals. 

DISCLOSURE, AUDIT AND FILING REQUIREMENTS

38. Whether every LLP would be required to maintain and file accounts?

An LLP shall be under obligation to maintain annual accounts  reflecting true and fair view of its state of affairs. A “Statement of Accounts and Solvency” in prescribed form shall be filed by every LLP with the Registrar every year.

39. Whether audit of all LLPs would be mandatory?

The accounts of every LLP shall be audited in accordance with Rule 24 of LLP, Rules 2009.

Such rules, inter-alia, provides that any LLP, whose turnover does not exceed, in any financial year, forty lakh rupees, or whose contribution does not exceed twenty five lakh rupees, is not required to get its accounts audited. However, if the partners of such limited liability partnership decide to get the accounts of such LLP audited, the accounts shall be audited only in accordance with such rule. 

40. Whether any provisions in respect of ‘mandatory insurance’ are being proposed in the Act?

No mandatory insurance has been proposed in the Act.  It would be difficult to assess insurance requirements of different types and sizes of LLPs. This would depend upon the nature of commercial risk attached with work or assignment handled by each. Applying common insurance requirements across a class of LLPs would result in increasing their costs of operation. Therefore, the underlying concern as to the credit worthiness of the LLP in the event of a contractual default is being addressed through statutory provisions for solvency declaration, disclosure of financial information and audit.

41. Whether any Annual Return would be required to be filed by an LLP?

Every LLP would be required to file annual return in Form 11 with ROC within 60 days of closer of financial year. The annual return will be available for public inspection on payment of prescribed fees to Registrar.

42. Whether the Registrar would have any power to call for information from LLPs?

Registrar would have power to obtain such information which he may consider necessary for the purposes of carrying out the provisions of the Act, from any designated partner, partner or employee of the LLP. He would also have power to summon any designated partner, partner or employee of any LLP before him for any such purpose, in case the information has not been furnished to him or in case the Registrar is not satisfied with the information furnished to him.

43. Which documents will be available for public inspection in the office of Registrar?

The following documents/information will be available for inspection by any person:-

• Incorporation document,
• Names of partners and changes, if any, made therein,
• Statement of Account and Solvency
• Annual Return

The fees for such inspection of an LLP is Rs 50/- and fees for certified copy or extract of any document u/s 36 shall Rs. 5/- per page.

44. How would compliance management (i.e. ensuring that LLPs file their documents with Registrars timely and otherwise comply with other procedural requirements under the Act) be ensured in the Act?

The provisions of the Act require LLPs to file the documents like Statement of Account and Solvency (SAS) and Annual Return (AR) and notices in respect of changes among partners etc. within the time specifically indicated in relevant provisions. The Act contains provisions for allowing LLPs to file such documents after their due dates on payment of additional fees. It has been provided that in case LLPs file relevant documents after their due dates with additional fees upto 300 days, no action for prosecution will be taken against them. In case there is delay of 300 days or more, the LLPs will be required to pay normal filing fees, additional fee and shall also be liable to be prosecuted. 

The Act also contains provisions for compounding of offences which are punishable with fine only.

LLP- Registeration

REGISTRATION

23. What are the registration formalities relating to LLPs?

LLPs shall be registered with the Registrar of Companies (ROC) (appointed under the Companies Act, 1956) after following the provisions specified in the LLP Act. Every LLP shall have a registered office. An Incorporation Document subscribed by at least two partners shall have to be filed with the Registrar in a prescribed form. Contents of LLP Agreement, as may be prescribed, shall also be required to be filed with Registrar, online.

Contents of LLP Agreement or any changes made therein, if any, may be filed in Form 3 and details of partners/designated partners may be filed in Form 4 in accordance with LLP Rules, 2009.

24. Whether foreigners can incorporate LLP?

Yes, the LLP Act 2008 allows Foreign Nationals including Foreign Companies & LLPs to incorporate a LLP in India provided at least one designated partner is resident of India. However, the LLP/Partners would have to comply with all relevant Foreign Exchange Laws/ Rules/ Regulations/ Guidelines.

25. What are the broad provisions of the Act in respect of names of LLPs?

Every limited liability partnership shall have either the words “limited liability partnership” or the acronym “LLP” as the last words of its name. LLPs would not be given names, which, in the opinion of the Central Government, are undesirable. Registrar would be under obligation to follow such rules, which would be framed by the Central Government in connection with allotting names to LLPs. There are also provisions in respect of ‘rectification of name’ in case two LLPs have been registered with the same name, inadvertently.

26. for what period a name can be reserved by Registrar?

The name can be reserved by ROC on approval of Form 1, for a period of 3 months from the date of intimation by the Registrar. However, Foreign LLP/Companies have an option to reserve their existing names, under which they are operating outside India, for a period of 3 years in India, which can be further renewed on application to Registrar in Form 25.

27. Can LLP give any other address (besides its registered office) for the purpose of receiving communication from Registrar?

It has been provided in the Act that a document may be served on a LLP or a partner or designated partner by sending it by post or by any other mode (to be prescribed under Rules) at the registered office and any other address specifically declared by the LLP for the purpose in such form and manner as may be prescribed (in the rules). Thus, an LLP shall have option to declare one more address (other than the registered office) for getting statutory notices/letters etc. from Registrar.

CHANGE IN PARTNERS

28. How can a person become a partner of an LLP?

Persons, who subscribed to the “Incorporation Document” at the time of incorporation of LLP, shall be partners of LLP. Subsequent to incorporation, new partners can be admitted in the LLP as per conditions and requirements of LLP Agreement.

29. How can an existing partner cease to be a partner of an LLP?

A person may cease to be a partner in accordance with the agreement or in the absence of agreement, by giving 30 days notice to the other partners.

A person shall also cease to be a partner of a limited liability partnership- 

(a) on his death or dissolution of the limited liability partnership; or

(b) if he is declared to be of unsound mind by a competent court; or

(c) if he has applied to be adjudged as an insolvent or declared as an insolvent.

Notice is required to be given to ROC when a person becomes or ceases to be partner or for any change in partners.

30. What will be the obligation of a partner in case he changes his name or address?

Every partner shall inform the LLP of any change in his name or address within a period of fifteen days of such change. The LLP, in turn, would be under obligation to file such details with the Registrar within thirty days of such change in Form 4.

PARTNER’S CONTRIBUTION AND TRANSACTIONS OF PARTNERS WITH LLP

31. What is the manner in which a partner of an LLP can bring his contribution? How will it be recorded/disclosed in the accounts?

Partner’s contribution may consist of both tangible and/or intangible property and any other benefit to the LLP. The monetary value of contribution of each partner shall be accounted for and disclosed in the accounts of the limited liability partnership in the manner as may be prescribed in the rules.

32. Whether a partner would be able to give loan to or transact other commercial transactions with LLP? What will be his rights and obligations in this regard?

A partner may lend money to and transact other business with the LLP and shall have the same rights and obligations with respect to the loan or other transactions as a person who is not a partner.

33. Whether a partner would be able to transfer his ‘economic rights’?

A partner’s economic rights (i.e. rights of a partner to a share of the profits and losses of the LLP and to receive distribution at the time of winding up) in the LLP shall be transferable. However, such a transfer shall not by itself cause the partner’s disassociation or a dissolution and winding up of the LLP.

However, such transfer shall not entitle the transferee or assignee to participate in the management or conduct of the LLP’s activities. Therefore, the transferee would not be deemed to be a ‘partner’ of the LLP just because a partner has transferred him the ‘economic rights’. For becoming a partner of LLP, the manner specified in the LLP Agreement or the provisions of the Act would have to be followed.

NATURE OF LIMITED LIABILITY PARTNERSHIP (LLP) PART 2

13. Whether Ministry has adopted a “Consultative Approach” while bringing out the LLP Act?

Yes. The Ministry of Corporate Affairs, on 2nd November, 2005, placed a Concept Paper on LLP Law on its website so that all interested stakeholders may express their opinions on the concepts involved and suggest formulations for the consideration of the Ministry on various aspects of LLP Law.  The Concept Paper was also circulated to various concerned Ministries/Departments and autonomous bodies like Comptroller and Auditor General of India (C&AG), Securities and Exchange Board of India (SEBI), Insurance Regulatory Development Authority (IRDA) etc. for their comments.         

Large number of comments and suggestions were received by the Ministry on the Concept Paper. These were examined in light of international practice/law on the subject. The Act has been prepared keeping in view the Indian requirements.  

PARTNERS AND DESIGNATED PARTNERS

14. What are the restrictions in respect of minimum and maximum number of partners in an LLP?  

A minimum of two partners will be required for formation of an LLP. There will not be any limit to the maximum number of partners.

15. Whether a body corporate may be a partner of an LLP?

Yes.

16. What are the qualifications for becoming a partner?

Any individual or body corporate may be a partner in a LLP. However an individual shall not be capable of becoming a partner of a LLP, if—

(a)   he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;

(b)   he is an undischarged insolvent; or

(c)   he has applied to be adjudicated as an insolvent and his application is pending.

17. What are the requirements in respect of “Designated Partners”?

Appointment of at least two “Designated Partners” shall be mandatory for all LLPs. “Designated Partners” shall also be accountable for regulatory and legal compliances, besides their liability as ‘partners, per-se”.

18. Who can be a “Designated Partner”?

Every LLP shall be required to have atleast two Designated Partners who shall be individuals and at least one of the Designated Partner shall be a resident of India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.

19. Should the number of designated partners resident in India not be more than partners from outside India?

LLPs, particularly those as may be engaged in the services or technology-based sectors, may provide services globally. This may require any number of its partners to locate them abroad.  In view of liability structure of partners, designated partners and LLP, clearly provided for in the Act, there does not appear to be any necessity and justification for restriction relating to designated partners to out-number partners located abroad. In fact it may pose unnecessary restriction.

20. Whether there would be any requirement of ‘identification number’ of Designated Partner? Whether Designated Partners would be subject to any other condition/requirement before they are appointed as such?

Every Designated Partner would be required to obtain a “Designated Partner’s Identification Number” (DPIN) on the lines similar to “Director’s Identification Number” (DIN) required in case of directors of companies. Enabling provisions have been made to prescribe under rules conditions, which would have to be fulfilled by an individual who is eligible to be appointed as a ‘designated-partner’.

LLP AGREEMENT

21. How the mutual rights and duties of partners inter-se and those of partners and LLPs would be governed?

The mutual rights and duties of partners inter se and those of the LLP and its partners shall be governed by the agreement between partners or between the LLP and the partners. This Agreement would be known as “LLP Agreement”.

22. Whether LLP Agreement would be mandatory for all LLPs?

As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I.

NATURE OF LIMITED LIABILITY PARTNERSHIP (LLP) PART 1

1. Concept of “limited liability partnership”

• LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.
• The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.
• The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.
• Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
• Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.

Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership.

2. Structure of an LLP
LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.

3. Advantages of LLP form

LLP form is a form of business model which:
(i) is organized and operates on the basis of an agreement.
(ii) Provides flexibility without imposing  detailed legal and procedural requirements
(iii) enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner

4. Other countries where this form is available

The LLP structure is available in countries like United Kingdom, United States of America, various Gulf countries, Australia and Singapore. On the advice of experts who have studied LLP legislations in various countries, the LLP Act is broadly based on UK LLP Act 2000 and Singapore LLP Act 2005. Both these Acts allow creation of LLPs in a body corporate form i.e. as a separate legal entity, separate from its partners/members. 

5.  Difference between LLP & “traditional partnership firm”

• Under “traditional partnership firm”, every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner.
• Under LLP structure, liability of the partner is limited to his agreed contribution.  Further, no partner is liable on account of the independent or un-authorized acts of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful acts or misconduct.

6. Difference between LLP & a Company

• A basic difference between an LLP and a joint stock company lies in that the internal governance structure of a company is regulated by statute (i.e. Companies Act, 1956) whereas for an LLP it would be by a contractual agreement between partners.
• The management-ownership divide inherent in a company is not there in a limited liability partnership.
•  LLP will have more flexibility as compared to a company.
• LLP will have lesser compliance requirements as compared to a company.

APPLICABILITY OF THE LLP Act

7. Whether the LLP Act is applicable to any specific services like professional services regulated by Statutes?

No. Any two or more persons associating for carrying on a lawful business with a view to profit may set up an LLP.

In the light of various inputs received by this Ministry for applicability of the LLP form to small entities and venture capital funded enterprises, it is proposed that the framework should not be restricted to professional services alone as was earlier recommended by Naresh Chandra Committee. Accordingly, the LLP Act does not restrict the benefit of LLP structure to certain classes of professionals only.

8. Likely users/beneficiaries of the LLP Law?

India has witnessed considerable growth in services sector and the quality of our professionals is acknowledged internationally. It is necessary that entrepreneurship knowledge and risk capital combine to provide a further impetus to our impressive economic growth. Equally the services sector promises an economic opportunity similar to that provided by information technology over the past few years. It is likely that in the years to come Indian professionals would be providing accountancy, legal and various other professional/technical services to a large number of entities across the globe. Such services would require multidisciplinary combinations that would offer a menu of solutions to international clients.  In view of all this, the LLP framework could be used for many enterprises, such as:-

• Persons providing services of any kind
• Enterprises in new knowledge and technology based fields where the corporate form is not suited.
• For professionals such as Chartered Accountants (CAs), Cost and Works Accountants (CWAs), Company Secretaries (css) and Advocates, etc.
• Venture capital funds where risk capital combines with knowledge and expertise
• Professionals and enterprises engaged in any scientific, technical or artistic discipline, for any activity relating to research production, design and provision of services. 
• Small Sector Enterprises (including Micro, Small and Medium Enterprises)
• Producer Companies in Handloom, Handicrafts sector

9.  Whether an entity which has objectives like “charitable or other not for profit objectives” would be able to set up under LLP Act?

No. The essential requirement for setting LLP is ‘carrying on a lawful business with a view to profit’.

10. Whether provisions of Indian Partnership Act, 1932 would be applicable to LLPs?

No, these shall not be applicable to LLPs.

11. Why a new legislation for LLP? Why not amendments in Companies Act or Partnership Act are made?

The Companies Act is not suited to the liability and governance structure intended for LLPs. The overall intent of the legislation to regulate widely-held companies is different. Therefore, in accordance with the recommendations of the Irani Committee, it is felt appropriate to bring about a separate legislation for LLPs. The administration and enforcement of partnership firms under the Indian Partnership Act, 1932 is at the State level.  Besides, a partnership firm involves full joint and several liability of the partners. Because of this, many firms/enterprises engaged in biotech, information technology, Intellectual property and other knowledge based sectors find traditional partnerships unsuitable. The traditional partnerships are also considered unsuitable for multi-disciplinary combinations comprising a large number of partners, seeking a flexible working environment but with limited liability. LLP structure would promote growth and enable such firms/enterprises expand their trade/business or services across States in India as also abroad. 

IFRS – In Indian Context- PART 3

a.      Fair Value Accounting

The conceptual difference between the accounts under IFRS and under the Indian GAAPs is that in many instances the figures in accounts under the IFRS will be reported on the basis of ‘fair value’ of the items, whereas such items by and large are reported at present at ‘cost’, unless the fair value happens to be lower than the cost. The fair value concept demands that if an item has appreciated in value over its cost, the appreciation will be recognized and if it has declined in value, the decline will also be recognized.

 Assessment of fair value using valuation model brings with it an undesirable level of subjectivity which produces an inherent risk and a question mark on reliability. There is a higher scope for manipulating the financial statements prepared on fair value basis. The So Called Fair Value would heavily depend upon availability of data, assumptions made by the management and the intentions of management. How fair is Fair value, is a very big question?

Argument in favor of fair value accounting is that it helps in determining the true worth of business. The present value of business is known to the investors and helps them take decisions based on the financial statements. No one can deny the fact that financial statements prepared on the basis of fair value gives more useful information to prospective investors. In many cases it provides greater level of transparency (except in cases where complex models are used).

From a careful analysis we can conclude that benefits of fair value based accounting outweighs the disadvantages. However strong measures should be taken by regulatory authorities to improve the verifiability of estimates used in financial statements based on fair value (As discussed earlier the guidance provided by SA 540 is a right step in this direction)

Convergence: - The road ahead

The Term “convergence” means to achieve harmony with IFRS in precise terms. It would mean to design and maintain national accounting standards in a way that financial statement prepared in accordance with national accounting standards draw unreserved statement of compliance with IFRS.

There is feeling among many that Accounting standards will give way to IFRS. ICAI and Government of India is very clear that India is not migrating to IFRS, but the existing accounting standards will be redesigned in such a manner that the moment Indian Accounting standards is followed it will be treated as following international standards. As a part of the initiative, ICAI has released exposure draft on Accounting Standards which has been sent to NACAS for approval.

At the same time, it is important to understand that IFRS need not be adopted word by word. The national standards should meet the requirements of IFRS and there is no prohibition in including additional disclosure requirements or removing optional treatment.

 The roadmap issued by Ministry of Corporate Affairs requires IFRS to be implemented in a phased manner. IFRS will be implemented in three phases, starting from April 1, 2011 as shown in the table below:

Phase	Companies/ Entities covered	Date of Conversion
1	·         Companies which are part of NSE Index- NSE 50 ·         Companies which are part of BSE Sensex- BSE 30 ·         Companies whose shares or securities are listed on overseas stock exchanges ·         Companies whether Listed or not having net worth of more than Rs 1,000 crores.	1st April 2011
2	·         Companies whether Listed or not, having a net worth exceeding Rs 500 crores but not exceeding Rs 1,000 crore.	1st April 2013
3	·         Listed companies having a net worth of Rs 500 crores or less.	1st April 2014
Roadmap for Others
	·         Insurance Companies	1st April 2012
	Banking Companies ·         All SCBs and UCBs having net worth greater than Rs 300 crores ·         All SCBs and UCBs having net worth greater than Rs 200 crores but less than 300 crores.	1st April 2013 1st April 2014

As we can see from the above, in first stage only BSE 30, NSE 50, companies with net worth of more than Rs 1,000 crores and overseas listed are required to converge in 2011. Initiative has been taken by companies towards convergence.

However the process of convergence has not taken place as planned by the Ministry. At this point of time, notification is not issued with regards to implementation of IFRS. It is very unlikely that the IFRS convergence will take place starting April1, 2013.

Time for Leadership

Movement to IFRS is inexorable and the initiative involves multiple corporate functions, not solely finance. So you have a choice: either to sit back and wait for it to happen or mobilize the company to attempt to extract every possible benefit and dodge every avoidable obstacle.

By starting now, companies are likely to spread out cost, get the jump on competition, and reel the scarce talent before it vanishes. Fire drill atmosphere and last minute projects can be avoided. Processes and systems can be integrated with other initiatives, such as an ERP upgrade or a merger or acquisition. Most important, by starting early, IFRS can be implemented at a pace that suits the company and its circumstances and in their own terms. An IFRS project should not be a distraction from the primary activities of the business. It must be integrated, coordinated and aligned.

Accordingly, it is paramount for all the stakeholders, the government, regulatory authorities and ICAI to work together in achieving full convergence with IFRS. If the means are worked out well, the end is bound to come as planned. If not, it is India Inc which will be the ultimate loser because whether we like it or not convergence is inevitable and is here to stay

Appendix

List of IFRS issued vis a vis Indian Accounting Standards

This can be clubbed under the following categories

a.       Indian Accounting Standards already issued by ICAI corresponding to IFRS

SI.No	Indian Accounting Standards		International Financial Reporting Standards
	No:	Title of standard	No:	Title of Standard
1	AS 1	Disclosure of Accounting Policies	IAS 1	Presentation of Financial Statements
2	AS 2	Valuation of Inventories	IAS 2	Inventories
3	AS 3	Cash Flow Statements	IAS 7	Cash Flow Statements
4	AS 4	Contingencies and events occurring after the balance sheet date	IAS 10	Events after the balance sheet date
5	AS 5	Net Profit or Loss for the Period , Prior Period Items and Changes in Accounting Policies	IAS 8	Accounting Policies , Changes in Accounting Estimates , and Errors
6	AS 6	Depreciation accounting		Corresponding IAS has been withdrawn since the matter is now covered by IAS 16 and IAS 38
7	AS 7	Construction Contracts	IAS 11	Construction Contracts
8	AS 9	Revenue Recognition	IAS 18	Revenue
9	AS 10	Accounting for Fixed Assets	IAS 16	Property , Plant and Equipment
10	AS 11	The Effects of Changes in Foreign Exchange Rates	IAS 21	The Effects of changes in Foreign Exchange rates
11	AS 12	Accounting for Government Grants	IAS 20	Accounting for Government Grants and Disclosure of Government Assistance
12	AS 13	Accounting for Investments		Corresponding IAS has been withdrawn now since the matter is now covered by IAS 32 , 39 , 40 and IFRS 7
13	AS 14	Accounting for Amalgamations	IFRS 3	Business Combinations
14	AS 15	Employee Benefits	IAS 19	Employee Benefits
15	AS 16	Borrowing Costs	IAS 23	Borrowing Costs
16	AS 17	Segment Reporting	IFRS 8	Operating Segments
17	AS 18	Related Party Disclosures	IAS 24	Related - Party Disclosures
18	AS 19	Leases	IAS 17	Leases
19	AS 20	Earnings Per Share	IAS 33	Earnings Per Share
20	AS 21	Consolidated Financial Statements	IAS 27	Consolidated and Separate Financial Statements
21	AS 22	Accounting  for taxes on Income	IAS 12	Income Taxes
22	AS 23	Accounting for Investment in Associates in Consolidated Financial Statements	IAS 28	Investment in Associates
23	AS 24	Discontinuing Operations	IFRS 5	Non Current Assets held for sale and Discontinued Operations ( AS 10 deals with accounting for fixed assets retired from active use)
24	AS 25	Interim Financial Reporting	IAS 34	Interim Financial Reporting
25	AS 26	Intangible Assets	IAS 38	Intangible assets
26	AS 27	Financial Reporting of Interests in Joint Ventures	IAS 31	Interests in Joint Ventures
27	AS 28	Impairment of Assets	IAS 36	Impairment of Assets
28	AS 29	Provisions , Contingent Liabilities and Contingent Assets	IAS 37	Provisions , Contingent Liabilities , and Contingent Assets
29	AS 30	Financial Instruments : Recognitions and Measurement	IAS 32	Financial Instruments :Presentation
30	AS 31	Financial Instruments : Presentation	IAS 39	Earnings Per Share
31	AS 32	Financial Instruments : Disclosures	IFRS 7	Financial Instruments : Disclosures

b.      IFRS  not considered relevant for issuance of accounting standards by ICAI for the reasons indicated

SI.No	International Financial Reporting Standards		Reasons
	No:	Title of standard
1	IAS 29	Financial Reporting in Hyper Inflationary Economies	Hyper inflationary conditions does not prevail in India. Accordingly the subject is not considered relevant
2	IFRS1	First Time Adoption of International Financial Reporting Standards	In India, Indian AS is being adopted since the last many years and IFRS are not being adopted for the first time. Therefore , the IFRS 1 is not relevant to India at present

c.       Accounting Standards presently under preparation corresponding to IFRS

SI.No	International Financial Reporting Standards
	No:	Title of standard
1	IAS 26	Accounting and Reporting by Retirement benefits plans
2	IAS 41	Agriculture
3	IFRS 2	Share based Payment
4	IFRS 4	Insurance Contracts

d.     Guidance Notes issued by ICAI corresponding to IFRS

SI.No	International Financial Reporting Standards		Title of Guidance Note
	No:	Title of standard
1	IFRS 6	Exploration for and Evaluation of Mineral Resources	Guidance note on Accounting for Oil and Gas Producing Activites