LLP FORM OF CA PRACTICE THE CHARTERED ACCOUNTANTS DAY CELEBRATIONS The Institute of Chartered Accountants of India
What is a LLP ? <ul><ul><li>A LLP is a corporate vehicle that enables professional expertise & entrepreneurial initiative ...
LLP – The LLP Act, 2008 <ul><li>BODY CORPORATE WITH DISTINCT LEGAL IDENTITY </li></ul><ul><li>(can also have transactions ...
Liability of LLP & Partners <ul><li>Every partner is an agent; not of other partners but of LLP  </li></ul><ul><li>LLP not...
Liability of LLP & Partners <ul><li>Unlimited Liability in case of fraud </li></ul><ul><ul><li>If fraud done with knowledg...
Accounts & Audit <ul><li>Maintain proper books of accounts as prescribed </li></ul><ul><li>Cash or Accrual; Double-Entry S...
Issue – Documents available to Public Inspection <ul><li>S. 36  of LLP Act provides for inspection by Public of all docume...
Taxation of LLPs <ul><li>Income -Tax treatment of LLPs same as that of ‘Partnership Firms’ </li></ul><ul><li>LLPs not subj...
Taxation of LLPs – Concern <ul><li>With Introduction of AMT, </li></ul><ul><li>Wide use of LLP vehicle by large businesses...
Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP  Prevailing Law Partnership is prevailed by ‘The In...
Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP  Prevailing Law Partnership is prevailed by ‘The In...
Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP  Prevailing Law Partnership is prevailed by ‘The In...
Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP  Prevailing Law Partnership is prevailed by ‘The In...
Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP  Prevailing Law Partnership is prevailed by ‘The In...
Whether CA allowed to form LLP or convert into LLP ? <ul><li>Recent MCA Circular No 17/71/2011-CL V  dt. 04.04.2011 </li><...
Whether CA LLP qualifies for appointment as Auditor of Company ? <ul><li>S.226(1) of Cos Act – a CA should be appointed as...
Whether CA LLP qualifies for appointment as Auditor of Company ? <ul><ul><li>But how does a company comply with Proviso to...
Does conversion amount to ‘Casual Vacancy’ – Cos. Act ? <ul><li>If firm of CAs converts into LLP, what will be auditee’s s...
<ul><ul><li>Comply with </li></ul></ul><ul><ul><li>ICAI Act, Rules & Regulations </li></ul></ul><ul><ul><li>+ </li></ul></...
ICAI to come out with Policy for CA LLPs <ul><li>Name Approval  </li></ul><ul><ul><ul><li>Under LLP Act, there is a proced...
ICAI to come out with Policy for CA LLPs <ul><ul><li>Merger or Amalgamation of CA LLPs </li></ul></ul><ul><ul><li>Can a pa...
Conversion of Firm to LLP  (Ch. X & 2nd Sch. Of LLP Act) <ul><li>Allowed only for firms as  defined in Indian Partnership ...
Effect of Conversion to LLP  (Ch. X & Second Sch.) <ul><ul><li>All assets & liabilities of firm – Tangible (Movable & Immo...
Effect of Conversion to LLP  (Ch. X & Second Sch.) <ul><ul><li>Every agreement  </li></ul></ul><ul><ul><li>All deeds, cont...
Effect of Conversion to LLP  (Ch. X & Second Sch.) <ul><ul><li>Every partner will continue to be personally liable jointly...
Practical aspects of Conversion to LLP  <ul><ul><li>Administrative & Commercial tasks </li></ul></ul><ul><ul><li>Notify im...
Tax on Conversion of Firm to LLP <ul><li>Memo explaining Finance (No.2) Bill, 2009 mentions that: </li></ul><ul><ul><li>As...
Stamp Duty on conversion to LLP <ul><li>Whether Stamp Duty is payable on Incorporation of LLPs? </li></ul><ul><li>If so, h...
LLP – A Very Good Vehicle for CA Profession <ul><li>Limited Liability </li></ul><ul><li>Flexibility of Partnership </li></...
<ul><li>Thank you… </li></ul>
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LLP &amp; CA Profession

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A Presentation made on CA Day 1st July, 2011 at Vigyan Bhavan, New Delhi - Organiser ICAI, New Delhi

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  • 1) LLP Act, 2008 is heavily influenced by the English and Singaporean Limited Liability Partnership Acts of 2000 and 2005, respectively 2) The Act is also influenced by the Companies Act and Partnership Act [lots of sections are similarly worded]
  • 1) The Act contains: i) 81 sections ii) 14 Chapters iii) 4 Schedules
  • 1) Principal-Agent Relationship in LLPs exists like Partnership Firms 2) Principal is the LLP and Agent is the Partner 3) Section 28 is the Crux of LLPs 4) By Virtue of Section 28, partners of a partnership firm will not be absolved of the liabilities incurred by it upon converting to LLP 5) Partnership by Holding Out: If a person by assent or otherwise, represents himself to be a partner in LLP or the LLP claims a person to be a partner, when in reality he is not, and the LLP obtains credit from the third party on such representation, then such person will also be liable for the credit received by the LLPs 6) It is pertinent to note that where upon the death of a partner, if the LLP proposes to carry on its business using the same name, as used earlier, or by using the name of the deceased partner as a part thereof, will not make the legal heir of such deceased partner liable for the acts of the LLP [Q. 36 of FAQs]
  • 1) Section 30 is meant to protect creditors from fraudulent practices that might be carried out by the LLP 2) Civil liability against an errant foreign partner would be adjudicated by a court under civil laws which recognises ‘foreign awards’ 3) Criminal liability would require adjudication / enforcement by the courts including extradition process. The position in this case, would be similar to that of Foreign Directors of Companies [Q. 37 of FAQs]
  • 1) Rule 24 lays down requirement of maintaining Books of Account which is similar to Section 209 2) Certificate from CS is only required in case where the turnover exceeds Rs. 5 Crore
  • 1) DSC is compulsory as filing of every document / form will be through electronic mode 2) Q. 26 of FAQs states that a name can be reserved for a period of three months from the date of intimation to the registrar in Form-1. Foreign LLPs can reserve the names under which they function outside India for a period of three years and the same application can be renewed on application to registrar in Form-25
  • 1) Conversion will be valid only if all partners of LLP are partners of the Partnership Firm 2) The conversion would not absolve partners of the erstwhile partnership firm of the liability incurred before such conversion
  • 1) Conversion will be valid only if all partners of LLP are partners of the Partnership Firm 2) The conversion would not absolve partners of the erstwhile partnership firm of the liability incurred before such conversion
  • 1) Conversion will be valid only if all partners of LLP are partners of the Partnership Firm 2) The conversion would not absolve partners of the erstwhile partnership firm of the liability incurred before such conversion
  • 1) Conversion will be valid only if all partners of LLP are partners of the Partnership Firm 2) The conversion would not absolve partners of the erstwhile partnership firm of the liability incurred before such conversion
  • 1) Conversion will be valid only if all partners of LLP are partners of the Partnership Firm 2) The conversion would not absolve partners of the erstwhile partnership firm of the liability incurred before such conversion
  • 1) Same is also mentioned in the FAQ issued by MCA
  • LLP &amp; CA Profession

    1. 1. LLP FORM OF CA PRACTICE THE CHARTERED ACCOUNTANTS DAY CELEBRATIONS The Institute of Chartered Accountants of India
    2. 2. What is a LLP ? <ul><ul><li>A LLP is a corporate vehicle that enables professional expertise & entrepreneurial initiative to combine & operate in flexible, innovative & efficient manner providing - </li></ul></ul><ul><ul><li>Benefits of Limited Liability </li></ul></ul><ul><ul><li>+ </li></ul></ul><ul><ul><li>Allowing members flexibility for organizing their internal structure as a Partnership </li></ul></ul><ul><ul><ul><li>Internationally, LLP has become the vehicle of choice for many Professional Service Firms </li></ul></ul></ul>
    3. 3. LLP – The LLP Act, 2008 <ul><li>BODY CORPORATE WITH DISTINCT LEGAL IDENTITY </li></ul><ul><li>(can also have transactions with its partners) </li></ul><ul><li>+ </li></ul><ul><li>PERPETUAL SUCCESSION…COMMON SEAL…SUE/BE SUED </li></ul><ul><li>+ </li></ul><ul><li>ORGANIZATIONAL FLEXIBILITY OF PARTNERSHIP </li></ul><ul><li>+ </li></ul><ul><li>ADVANTAGE OF LIMITED LIABILITY FOR ITS PARTNERS </li></ul><ul><li>(liability will be met out of LLP property) </li></ul>
    4. 4. Liability of LLP & Partners <ul><li>Every partner is an agent; not of other partners but of LLP </li></ul><ul><li>LLP not bound by unauthorized acts of partners in dealing with person if that person knows that the partner had no authority or did not know him to be partner of LLP </li></ul><ul><li>LLP liable in respect of wrongful acts / omissions of partners in course of its business or with its authority </li></ul><ul><li>Obligation of LLP is solely an obligation of LLP & shall be met out of property of LLP </li></ul><ul><li>Partners not personally liable </li></ul><ul><li>Liability of partner/s committing wrongful acts / omissions will be unlimited </li></ul>
    5. 5. Liability of LLP & Partners <ul><li>Unlimited Liability in case of fraud </li></ul><ul><ul><li>If fraud done with knowledge / authority of LLP, LLP’s & partner’s liability will be unlimited. LLP’s liability = Partner’s liability </li></ul></ul><ul><ul><li>Otherwise, LLP will not be liable </li></ul></ul><ul><ul><li>Imprisonment for 2 years & fine upto Rs. 5 Lacs </li></ul></ul>
    6. 6. Accounts & Audit <ul><li>Maintain proper books of accounts as prescribed </li></ul><ul><li>Cash or Accrual; Double-Entry System of Accounting </li></ul><ul><li>Audit – Rule 24(8) – LLP whose Turnover =/< 40 L OR whose contribution =/< 25L shall not be required to get accounts audited </li></ul><ul><li>???? </li></ul><ul><li>File Annual Return ( Form-11 ) with ROC within 60 days from end of FY </li></ul><ul><ul><li>Along with certificate of CS on particulars / statements in Return if turnover > Rs. 5 Crore or Contribution > Rs. 50 Lakh </li></ul></ul><ul><ul><li>Else such certificate must be issued by DP </li></ul></ul><ul><li>File ‘Statement of Accounts & Solvency’ [ Form-8 ] within 6 months from end of FY </li></ul>
    7. 7. Issue – Documents available to Public Inspection <ul><li>S. 36 of LLP Act provides for inspection by Public of all documents with ROC including </li></ul><ul><ul><li>Annual Return (containing , interalia, contribution of each partner) </li></ul></ul><ul><ul><li>Statement of Accounts & Solvency filed by LLP (containing, interalia, details of Assets & Liabilities and Income & Expenditure of the LLP) </li></ul></ul><ul><li>Whether this is acceptable to Professional Firms like CAs? </li></ul>
    8. 8. Taxation of LLPs <ul><li>Income -Tax treatment of LLPs same as that of ‘Partnership Firms’ </li></ul><ul><li>LLPs not subject to - </li></ul><ul><ul><li>MAT u/s 115JB </li></ul></ul><ul><ul><li>[But are subject to newly introduced Alternate Minimum Tax - AMT ] </li></ul></ul><ul><ul><li>Surcharge on income tax </li></ul></ul><ul><ul><li>DDT u/s 115-O </li></ul></ul><ul><ul><li>Deemed Dividend u/s 2 (22) (e) </li></ul></ul><ul><ul><li>S. 79 - Non eligibility to C/f & Set-off of Losses in case of major change in ownership </li></ul></ul>
    9. 9. Taxation of LLPs – Concern <ul><li>With Introduction of AMT, </li></ul><ul><li>Wide use of LLP vehicle by large businesses & </li></ul><ul><li>FDI being allowed in LLP </li></ul><ul><li>....the concern is that the Government would gradually subject LLPs to full fledged Minimum Alternate Tax (MAT) & Dividend Distribution Tax (DDT) </li></ul><ul><ul><li>As per the UK tax laws, </li></ul></ul><ul><ul><ul><li>LLPs that carry on business as a trade or profession are subject to tax as a partnership, i.e. pass-through tax. </li></ul></ul></ul><ul><ul><ul><li>LLPs that do not carry on business as a trade or profession such as an investment company are subject to corporation tax </li></ul></ul></ul>
    10. 10. Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP Prevailing Law Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under Registration Registration is optional Registration with Registrar of LLP required. Creation Created by Contract Created by Law Distinct entity Not a separate legal entity Is a separate legal entity under the Limited Liability Partnership Act, 2008. Name of Entity Any name as per choice Name to contain 'Limited Liability Partnership' or 'LLP' as suffix. Cost of Formation The Cost of Formation is negligible Minimum cost of Formation of LLP is Rs. 800 only, comparatively much lesser than the cost of formation of Company Perpetual Succession It does not have perpetual succession as this depends upon the will of partners It has perpetual succession and partners may come and go Charter Document Partnership Deed is a charter of the firm which denotes its scope of operation and rights and duties of the partners LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. Common Seal There is no concept of common seal in partnership It denotes the signature and LLP may have its own common seal, dependant upon the terms of the Agreement Formalities of Incorporation In case of registration, Partnership Deed along with form / affidavit required to be filled with Registrar of firms along with requisite filing fee Various eForms and the LLP Agreement are filed with the Registrar of LLP along with the prescribed Fee. Time line It will take 7 days (approx.) to incorporate It will take 10 days (approx.) to incorporate (inclusive of time taken to obtain DPIN) Legal Proceedings Only registered partnership can sue third party A LLP is a legal entity can sue and be sued Category Partnership LLP Prevailing Law The Indian Partnership Act, 1932 LLP Act, 2008 Registration Optional Compulsory Creation Created by Contract Created by Law Distinct entity Not a separate legal entity Is a separate legal entity Perpetual Succession No perpetual succession as this depends upon the will of partners Has perpetual succession & partners may come & go Charter Document Partnership Deed LLP Agreement Common Seal No concept of common seal It denotes the signature & LLP may have its own common seal
    11. 11. Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP Prevailing Law Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under Registration Registration is optional Registration with Registrar of LLP required. Creation Created by Contract Created by Law Distinct entity Not a separate legal entity Is a separate legal entity under the Limited Liability Partnership Act, 2008. Name of Entity Any name as per choice Name to contain 'Limited Liability Partnership' or 'LLP' as suffix. Cost of Formation The Cost of Formation is negligible Minimum cost of Formation of LLP is Rs. 800 only, comparatively much lesser than the cost of formation of Company Perpetual Succession It does not have perpetual succession as this depends upon the will of partners It has perpetual succession and partners may come and go Charter Document Partnership Deed is a charter of the firm which denotes its scope of operation and rights and duties of the partners LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. Common Seal There is no concept of common seal in partnership It denotes the signature and LLP may have its own common seal, dependant upon the terms of the Agreement Formalities of Incorporation In case of registration, Partnership Deed along with form / affidavit required to be filled with Registrar of firms along with requisite filing fee Various eForms and the LLP Agreement are filed with the Registrar of LLP along with the prescribed Fee. Time line It will take 7 days (approx.) to incorporate It will take 10 days (approx.) to incorporate (inclusive of time taken to obtain DPIN) Legal Proceedings Only registered partnership can sue third party A LLP is a legal entity can sue and be sued Category Partnership LLP Legal Proceedings Only registered partnership can sue third party Is a legal entity & can sue & be sued Number of Members Minimum 2 and Maximum 20 Minimum 2 partners & their is no maximum limit Ownership of Assets Partners have joint ownership of all the assets belonging to partnership firm The LLP has ownership of assets Personnel for compliance with Act It depends upon the partnership Agreement DPs are to be appointed & are responsible for compliance with LLP Act
    12. 12. Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP Prevailing Law Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under Registration Registration is optional Registration with Registrar of LLP required. Creation Created by Contract Created by Law Distinct entity Not a separate legal entity Is a separate legal entity under the Limited Liability Partnership Act, 2008. Name of Entity Any name as per choice Name to contain 'Limited Liability Partnership' or 'LLP' as suffix. Cost of Formation The Cost of Formation is negligible Minimum cost of Formation of LLP is Rs. 800 only, comparatively much lesser than the cost of formation of Company Perpetual Succession It does not have perpetual succession as this depends upon the will of partners It has perpetual succession and partners may come and go Charter Document Partnership Deed is a charter of the firm which denotes its scope of operation and rights and duties of the partners LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. Common Seal There is no concept of common seal in partnership It denotes the signature and LLP may have its own common seal, dependant upon the terms of the Agreement Formalities of Incorporation In case of registration, Partnership Deed along with form / affidavit required to be filled with Registrar of firms along with requisite filing fee Various eForms and the LLP Agreement are filed with the Registrar of LLP along with the prescribed Fee. Time line It will take 7 days (approx.) to incorporate It will take 10 days (approx.) to incorporate (inclusive of time taken to obtain DPIN) Legal Proceedings Only registered partnership can sue third party A LLP is a legal entity can sue and be sued Category Partnership LLP Liability of Partners Unlimited. Partners are severally & jointly liable for actions of other partners & the firm. Liability extend to their personal assets Limited to the extent their contribution towards LLP except in case of intentional fraud or wrongful act of omission or commission by the partner Principal / Agent Relationship Partners are agents of the firm & other partners Partners act as agents of LLP & not of other partners Transfer/Inheritance of Rights Not transferable. In case of death the legal heir receives the financial value of share Regulations relating to transfer are governed by the LLP Agreement Transfer of Share / Partnership rights in case of death Same as LLP On death of a partner, the legal heirs have right to get refund of capital contribution + share in accumulated profits, if any. Legal heirs will not become partners
    13. 13. Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP Prevailing Law Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under Registration Registration is optional Registration with Registrar of LLP required. Creation Created by Contract Created by Law Distinct entity Not a separate legal entity Is a separate legal entity under the Limited Liability Partnership Act, 2008. Name of Entity Any name as per choice Name to contain 'Limited Liability Partnership' or 'LLP' as suffix. Cost of Formation The Cost of Formation is negligible Minimum cost of Formation of LLP is Rs. 800 only, comparatively much lesser than the cost of formation of Company Perpetual Succession It does not have perpetual succession as this depends upon the will of partners It has perpetual succession and partners may come and go Charter Document Partnership Deed is a charter of the firm which denotes its scope of operation and rights and duties of the partners LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. Common Seal There is no concept of common seal in partnership It denotes the signature and LLP may have its own common seal, dependant upon the terms of the Agreement Formalities of Incorporation In case of registration, Partnership Deed along with form / affidavit required to be filled with Registrar of firms along with requisite filing fee Various eForms and the LLP Agreement are filed with the Registrar of LLP along with the prescribed Fee. Time line It will take 7 days (approx.) to incorporate It will take 10 days (approx.) to incorporate (inclusive of time taken to obtain DPIN) Legal Proceedings Only registered partnership can sue third party A LLP is a legal entity can sue and be sued Category Partnership LLP Cessation as partner As per the agreement As per the LLP Agreement or in absence of the same by giving 30 days prior notice to the LLP Maintenance of Statutory Records Required to maintain books of accounts as per Tax laws Required to maintain books of accounts Annual Filing No return to be filed with ROF Annual Statement of accounts & Solvency & Annual Return to be filed with Registrar of LLP every year Audit of accounts Tax audit of their accounts as per Income Tax Act <ul><ul><li>All LLP (except where turnover in FY < Rs.40 Lacs or contribution < Rs.25 Lacs ) are required to get their accounts audited annually as per LLP Act </li></ul></ul><ul><li>Also subject to Tax Audit as per Income Tax Act </li></ul>
    14. 14. Pros & Cons of LLP vis-à-vis Partnership Firm Category Partnership LLP Prevailing Law Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under Registration Registration is optional Registration with Registrar of LLP required. Creation Created by Contract Created by Law Distinct entity Not a separate legal entity Is a separate legal entity under the Limited Liability Partnership Act, 2008. Name of Entity Any name as per choice Name to contain 'Limited Liability Partnership' or 'LLP' as suffix. Cost of Formation The Cost of Formation is negligible Minimum cost of Formation of LLP is Rs. 800 only, comparatively much lesser than the cost of formation of Company Perpetual Succession It does not have perpetual succession as this depends upon the will of partners It has perpetual succession and partners may come and go Charter Document Partnership Deed is a charter of the firm which denotes its scope of operation and rights and duties of the partners LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. Common Seal There is no concept of common seal in partnership It denotes the signature and LLP may have its own common seal, dependant upon the terms of the Agreement Formalities of Incorporation In case of registration, Partnership Deed along with form / affidavit required to be filled with Registrar of firms along with requisite filing fee Various eForms and the LLP Agreement are filed with the Registrar of LLP along with the prescribed Fee. Time line It will take 7 days (approx.) to incorporate It will take 10 days (approx.) to incorporate (inclusive of time taken to obtain DPIN) Legal Proceedings Only registered partnership can sue third party A LLP is a legal entity can sue and be sued Category Partnership LLP Compromise/ Arrangements / M & A Not Allowed Allowed Credit Worthiness of organization Creditworthiness of firm depends upon goodwill & creditworthiness of its partners Will enjoy Comparatively higher creditworthiness as compared to Partnership due to regulatory framework but lesser than a company Whistle Blowing No such provision is provided under Partnership Act, 1932 Provision to protect employees & partners, providing useful information during an investigation / convicting any partner / firm Income Tax Liability <ul><li>30% + education cess </li></ul><ul><li>No MAT / AMT </li></ul><ul><li>30% + education cess </li></ul><ul><li>AMT introduced in last budget </li></ul>
    15. 15. Whether CA allowed to form LLP or convert into LLP ? <ul><li>Recent MCA Circular No 17/71/2011-CL V dt. 04.04.2011 </li></ul><ul><li>“ Partnership” wherever occurring in C A Act shall mutatis mutandis be construed as including LLPs where all the other partners are natural persons (individuals) </li></ul><ul><li>Report of Standing Committee on Finance on CA (Amendment) Bill, 2010 to amend relevant sections of CA Act is with the Government </li></ul>
    16. 16. Whether CA LLP qualifies for appointment as Auditor of Company ? <ul><li>S.226(1) of Cos Act – a CA should be appointed as Auditor </li></ul><ul><ul><li>Proviso to S.226 (1) – a “Firm” in which all partners are CAs may be appointed as auditor in “Firm name” </li></ul></ul><ul><ul><li>“ Firm” is defined in S.4 of Indian Partnership Act, 1932- Partners of Partnership collectively known as “Firm” </li></ul></ul><ul><ul><li>S.226(3) – a “Body Corporate” cannot be appointed as a Auditor </li></ul></ul><ul><li>MCA notification S.O.1152(E) dated 23.05.11 published in Official Gazette </li></ul><ul><li>S.2(7)(c) of Cos. Act – Definition of “Body Corporate” –LLP of a CA will not be treated as a Body Corporate for the limited purpose of S.226(3)(a) of the Cos. Act </li></ul>
    17. 17. Whether CA LLP qualifies for appointment as Auditor of Company ? <ul><ul><li>But how does a company comply with Proviso to S.226 (1) while appointing a CA LLP as an Auditor? </li></ul></ul><ul><ul><li>Is LLP a “Firm”??? Thus will a CA LLP qualify for appointment as Auditor of a Company????? </li></ul></ul><ul><ul><li>CA (Amendment) Bill, 2010 propose insertion of definition of “Firm” to include LLPs. </li></ul></ul><ul><li>Pending amendment to proviso to S.226(1), a Clarification is required from MCA that “Firm” includes LLP for limited purpose of proviso to S.226(1) </li></ul><ul><li>Same needs to be checked not only for Companies but also Nationalised Banks, LIC & other Corporations formed by Special Statutes </li></ul><ul><li>Most of these Special Statutes require appointment of Auditors as per provisions applicable to Companies </li></ul>
    18. 18. Does conversion amount to ‘Casual Vacancy’ – Cos. Act ? <ul><li>If firm of CAs converts into LLP, what will be auditee’s stand? </li></ul><ul><li>Would it amount to ‘Casual Vacancy’ u/s.224 of Cos Act </li></ul><ul><li>Whether a Board resolution / Shareholders resolution is required to appoint an LLP as auditors? </li></ul><ul><li>As per Clause 14 of 2 nd Schedule, appointment of firm in any role or capacity shall operate as if LLP was appointed </li></ul><ul><ul><li>Effect of such Clause? </li></ul></ul><ul><li>S.71 – The provisions of LLP Act are in addition to & not in derogation of any other law for the time being in force </li></ul><ul><li>Clause 14 of 2 nd Schedule is not in derogation of the provisions of any other law, hence Clause 14 of 2 nd Schedule should prevail </li></ul><ul><li>A clarification from MCA would be advisable </li></ul>
    19. 19. <ul><ul><li>Comply with </li></ul></ul><ul><ul><li>ICAI Act, Rules & Regulations </li></ul></ul><ul><ul><li>+ </li></ul></ul><ul><ul><li>LLP Act, Rules & Regulations </li></ul></ul>Procedure for formation of CA LLP
    20. 20. ICAI to come out with Policy for CA LLPs <ul><li>Name Approval </li></ul><ul><ul><ul><li>Under LLP Act, there is a procedure for name approval from ROC. </li></ul></ul></ul><ul><ul><ul><li>ICAI has its own set of regulations for name approval </li></ul></ul></ul><ul><ul><ul><li>A system will have to be introduced to synchronize both the name approval procedures </li></ul></ul></ul><ul><ul><li>Conversion of CA firm to LLP </li></ul></ul><ul><ul><li>Seniority of Firms after Conversion of CA Firm to LLP </li></ul></ul><ul><ul><li>Impact of conversion of CA firm to LLP on Networking </li></ul></ul>
    21. 21. ICAI to come out with Policy for CA LLPs <ul><ul><li>Merger or Amalgamation of CA LLPs </li></ul></ul><ul><ul><li>Can a partner of a CA LLP be allowed to transfer his ‘right in Profit & Loss of LLP and to receive distribution’ to a non- CA as per S. 42 of LLP Act?? </li></ul></ul><ul><ul><li>Empanelment – discussions with various authorities, regulators, agencies for empanelment </li></ul></ul><ul><ul><li>Communication with stakeholders </li></ul></ul>
    22. 22. Conversion of Firm to LLP (Ch. X & 2nd Sch. Of LLP Act) <ul><li>Allowed only for firms as defined in Indian Partnership Act, 1932 </li></ul><ul><li>Proprietorship Firms not allowed to convert to LLP </li></ul><ul><li>All partners of LLP must be partners of original firm & no one else </li></ul>
    23. 23. Effect of Conversion to LLP (Ch. X & Second Sch.) <ul><ul><li>All assets & liabilities of firm – Tangible (Movable & Immovable) property as well as intangible property vested in the firm, all assets, interests, rights, privileges, liabilities, obligations relating to the firm & the whole of the undertaking of the firm shall be transferred to & shall vest in the LLP without further assurance, act or deed </li></ul></ul><ul><ul><li>Firm stands dissolved </li></ul></ul><ul><ul><li>Will be removed from records of Registrar of Firms </li></ul></ul><ul><ul><li>If any property is registered with any authority, the LLP shall, as soon as practicable after the date of registration, take all necessary steps as required to notify the authority of the conversion & of the particulars of LLP </li></ul></ul><ul><ul><li>All proceedings by / against the firm pending in any Court / Tribunal / before any authority on the date of registration may be continued, completed & enforced by or against LLP </li></ul></ul><ul><ul><li>Any conviction, ruling, order or judgment of any Court, Tribunal or other authority in favour of or against the firm may be enforced by or against LLP </li></ul></ul>
    24. 24. Effect of Conversion to LLP (Ch. X & Second Sch.) <ul><ul><li>Every agreement </li></ul></ul><ul><ul><li>All deeds, contracts, schemes, bonds, agreements, applications, instruments & arrangements </li></ul></ul><ul><ul><li>Every contract of employment </li></ul></ul><ul><ul><li>Every appointment of the firm in any role or capacity </li></ul></ul><ul><li>… .subsisting before conversion of Firm shall continue to be in force after conversion </li></ul><ul><li>CAUTION – </li></ul><ul><li>Continuity of Approval, Permit / License issued to the firm under any other Act before conversion is subject to the provisions of such other Act under which such Approval, Permit / License has been issued </li></ul><ul><li>One needs to examine the respective State Rent Control Act to ensure continuance of Tenancy on conversion </li></ul>
    25. 25. Effect of Conversion to LLP (Ch. X & Second Sch.) <ul><ul><li>Every partner will continue to be personally liable jointly & severally with LLP, for liabilities prior to conversion / arising out of contract entered prior to conversion </li></ul></ul><ul><ul><li>Partner to be indemnified by LLP in respect of such liability subject to anything contrary in LLP Agreement </li></ul></ul><ul><ul><li>Every official correspondence of LLP for 1 year, must bear a statement that it was, from the date of registration converted from a firm into an LLP along with name & registration, if applicable, of firm from which it was converted </li></ul></ul><ul><ul><li>Every LLP to ensure that its invoice, official correspondence and publications bear the following: </li></ul></ul><ul><ul><ul><li>Name / Address of Registered Office </li></ul></ul></ul><ul><ul><ul><li>Registration No </li></ul></ul></ul><ul><ul><ul><li>A Statement that it is registered with Limited Liability </li></ul></ul></ul>
    26. 26. Practical aspects of Conversion to LLP <ul><ul><li>Administrative & Commercial tasks </li></ul></ul><ul><ul><li>Notify important stake holders – Professional bodies, Banks & other lenders, Insurance Providers, Government Departments, Local Authorities, Revenue Department - Income-tax, Service Tax, Profession Tax, etc </li></ul></ul><ul><ul><li>Notify your clients </li></ul></ul><ul><ul><li>Brief employees about the conversion, continuity of their retirement benefits etc. </li></ul></ul><ul><ul><li>Amend external facing communication materials – Websites, stationary, Profile, Invoices, Business cards, Signage and other printed materials </li></ul></ul><ul><ul><li>Re-word engagement letters </li></ul></ul><ul><ul><li>Identify your key contracts that cannot be transferred to the LLP without consent of counter parties and seek such consents </li></ul></ul>
    27. 27. Tax on Conversion of Firm to LLP <ul><li>Memo explaining Finance (No.2) Bill, 2009 mentions that: </li></ul><ul><ul><li>As a LLP & a general partnership firm is being treated as equivalent (except for recovery purposes) in the Act, the conversion from a general partnership firm to LLP will have no tax implications if- </li></ul></ul><ul><ul><ul><li>the rights and obligations of the partners remain the same after conversion & </li></ul></ul></ul><ul><ul><ul><li>if there is no transfer of any asset or liability after conversion </li></ul></ul></ul><ul><li>High Courts of Andhra Pradesh, Calcutta & Bombay have uniformly taken the view that no “transfer” is involved when a firm is converted into a Co. under Part IX of Cos. Act. </li></ul><ul><li>The CBDT, however, has not accepted this principle. A SLP has been filed in SC against the Bombay High Court judgement in Texspin Engg & Manufacturing Works (263 ITR 345) case. </li></ul><ul><li>Need to represent to FM for clarification or amendment to the Act to this effect </li></ul>
    28. 28. Stamp Duty on conversion to LLP <ul><li>Whether Stamp Duty is payable on Incorporation of LLPs? </li></ul><ul><li>If so, how much? </li></ul><ul><li>Whether Cos. & Firms will be exempt from Stamp Duties upon conversion to LLPs? </li></ul><ul><li>It must be noted that Stamp Duties are legislations of respective States & therefore clarity is needed from them [ Q. 50 of FAQs ] </li></ul><ul><li>A View - All movable and immovable properties of the firm automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid </li></ul>
    29. 29. LLP – A Very Good Vehicle for CA Profession <ul><li>Limited Liability </li></ul><ul><li>Flexibility of Partnership </li></ul><ul><li>Corporate Identity </li></ul><ul><li>Perpetual Succession </li></ul><ul><li>Favorable Tax regime compared to Corporate </li></ul><ul><li>Encourages Multi-Disciplinary Partnerships </li></ul><ul><li>Encourage Growth in Profession </li></ul><ul><li>Consequential Amendments / Notifications /Clarifications / Guidelines needed from MCA, IT Department, Stamp Authorities, ICAI, etc </li></ul>
    30. 30. <ul><li>Thank you… </li></ul>

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