A paper titled The Indian LLP Law: Some Concerns for Lawyers and CAs by Amit M. Sachdeva and Sachin Sachdeva has been posted on SSRN. Here is the extract:
With a view to giving the entrepreneurs the necessary regulatory support, India enacted its first law on limited liability partnerships in December 2008, after almost two years of debate. An LLP, as a hybrid business form, coalesces the separate legal existence and limited liability attributes of a company and the organizational suppleness of a general partnership. The Indian LLP Act is based on the LLP legislations in the UK and Singapore.
While this is a promising entity, there are some defects that seem to have crept in. This paper, besides tracing the conceptual and legislative history of this concept, does a general survey of the provisions of the Act. The paper also uses some of the decisions rendered by the English courts to further explain the concept of an LLP.
In the second part, the authors argue that the LLP Act, 2008 seems to have left some concerns unaddressed. Most significant amongst them appears to be the continued application of Section 11 of the Indian Companies Act, 1956, which requires that any entity which associates more than 20 persons must, of necessity, be registered as a company under the Companies Act, 1956. The assumed non-prescription of the limit on the number of partners was seen by lawyers, among others, a robust incentive to incorporate themselves into LLPs. The paper argues against the obviousness of this assumption. Similarly, it is doubted by the authors if the LLP Act would be able to bypass the requirements of the Advocates Act and the Bar Council Rules and permit an association between “advocates” and “non-advocates”.
The article is helpful in that it analyses recent English court decisions on the concept of an LLP, particularly its feature of separate legal existence. The article also seeks to debunk the notion that the LLP Act does away with the limit of 20 partners in case of firms. As the authors rightly state, the 20-partner limit is imposed by Section 11 of the Companies Act and until that section is amended the limit would possibly apply to LLPs as well. As regards criticisms regarding the ambiguity in tax position relating to LLPs, the authors’ fears appear to have been allayed by the Budget 2009 that clarifies that LLPs would be taxed in a similar manner as general partnerships. Finally, the article (somewhat inconclusively, as the authors themselves state) deals with the issue of professional rules governing lawyers and the effect of the LLP law on them.