Close on the heels of the Limited Liability Partnership Bill, the much anticipated Companies Bill, 2008 was introduced in Parliament on October 23, 2008. The Government’s press release carries the salient features of the Bill, which is set to usher in the most significant changes to company law since perhaps 1956 when the current Companies Act was brought into being.
Both the Limited Liability Partnership Bill, 2008 as well as the Companies Bill, 2008 are available on the website of PRS Legislative Research, which has shaped into an excellent public resource extensively covering the lawmaking process in India.
Due to the enormity of the changes, any brief discussion of the Bills will be an exercise in futility, but we will attempt to discuss their various provisions, the accompanying concepts and doctrines and their implications over several posts in the near future.
fyi…the LLP Bill has been introduced in the Rajya Sabha and as such will not lapse when fresh elections are held…the Companies Bill however, as introduced in the Lok Sabha, will lapse..political jugglery to the core eh?
LLP Bill – Salient points
1. No limit on number of partners
2. Partnership firm converting into LLP, must comprise of all the partners of the firm and no one else – Does this mean that such an LLP cannot have more partners than the erstwhile firm- Illogical – Schedule 2 of LLP Bill
3. No concept on taxation of the LLP captured in the bill. However, the Concept Concept Paper On Limited Liability Partnership issued by the Ministry of Company Affairs, previously included the following provision:
Section 35 of the Concept paper on LLP is reproduced below:
(1) For the purposes of taxation, any activity carried on by a limited liability partnership with a view to profit shall be treated as carried on in partnership by its partners (and not by the limited liability partnership as such) and, accordingly, the property of the limited liability partnership shall be treated for those purposes as property of the partners.
(2) Where a limited liability partnership carries on a trade or business with a view to profit-
(a) assets held by the limited liability partnership shall be treated for the purposes of tax in respect of capital gains as held by its partners; and
(b) any dealings by the limited liability partnership shall be treated for those purposes as dealings by its partners in partnership (and not by the limited liability partnership as such), in respect of capital gains accruing to the partners of the limited liability partnership on the disposal of any of its assets shall be assessed and charged on them separately.”
4. ‘Designated Partner’ concept- The idea seems to be able to pin down individuals for certain violations of the Act and for such objective, an LLP which only has corporate entities as partners, their nominees will be the designated persons. This appears illogical as a corporate entity is as much capable of being punished as an individual (decision of the Supreme Court of India in Standard Chartered Bank Case (2006) held that in case a company is liable for an offence where the punishment is imprisonment, the relevant officers would be held liable).