Llp sme training on 1 july 2012


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Llp sme training on 1 july 2012

  1. 1. Perkongsian Liabiliti Terhad @ Limited Liability Partnerships (LLP) ZUHAIRAH ARIFF BT ABD GHADAS SME Training Program 1 July 2012 1
  2. 2. Introduction Generally, there 3 types of business entities which are available in Malaysia:(i) Sole proprietorships(ii) Partnerships / Firm(iii) Companies- Sdn Bhd/BhdLatest addition- February 2012(iv) Perkongsian Liabiliti Terhad (PLT)- Limited Liability Partnerships (LLP) 2
  3. 3. AttributesType/ Legal Limited Existence Regulation TaxAttributes Status LiabilitySole NotProprietorships a legal Not Depends on Self entity available the sole Regulated/ Income Tax proprietor Registration of Business Act 1950 Not Not Depends onPartnerships/ a legal available the partners Partnership Income TaxFirm entity Act 1961/ Contracts Act 1950 IndependentCompanies Legal Available from the Companies Act Corporate entity members- 1965 Tax perpetual succession 3
  5. 5. LLPAttribute Explanation A body corporate or non-body corporate or partnership.Legal status The Malaysia LLP has the status of a body corporate- sec 3(1)Limited Partial Limited Liability- The LLP is liable for all debts ofLiability the business but the defaulted partner shall also be jointly liable for the debts incurred by the LLP for his default. The innocent partners shall not be liable - Sec 21(1)-(4) •Must be registered with the Registrar (SSM).Registration •No submission of incorporation document •No audit requirement and no submission of auditedDisclosure account to RegistrarRequirement •Have to keep a proper keeping of accounts and documents •Have to submit annual declaration of solvency 5
  6. 6. External •Regulated by the LLP ActRegulation •Winding Up procedures- applies the Companies ActInternal •Regulated by an agreement between the partnersRegulation •Default rules of the LLP Act only applies in absence of the agreement- SECOND SCHEDULE [Section 9]Composition • Minimum two person but there is no maximumof partners number of partners-Sec 6 •There must be at least one Compliance officer- duties akin to a Company Secretary- statutory responsibilities • Claims against the LLPProtection of •Claw-back mechanismThird Parties •own tax regime- Different from Company andTax Regime Partnership 6
  7. 7. Legal Status LLPBody Corporate (UK, India, Non-body corporate Partnership Singapore, (Isle of Jersey, UK) (US) Malaysia) 7
  8. 8. Compliance Officer27. (1) A limited liability partnership shall appoint at least one compliance officer from amongst its partners or persons qualified to act as secretaries under the Companies Act 1965 who—(a) is a citizen or permanent resident of Malaysia; and(b) ordinarily resides in Malaysia. 8
  9. 9. Sec 27 (7) A compliance officer shall be—(a) answerable for the doing of all acts, matters and things as are required to be done by the limited liability partnership under sections 17, 19 and 20; and(b) personally liable to all penalties including administrative penalties imposed on the limited liability partnership for any contravention of those sections unless he satisfies the court hearing the matter that he should not be so liable 9
  10. 10. Claw-back Mechanism• Liability of partners when limited liability partnership is insolventSec 22. (1) Notwithstanding anything under this Act, a partner or former partner of a limited liability partnership who receives a distribution from the limited liability partnership—(a) when the limited liability partnership is insolvent and knew or ought to have known at the time of the distribution that the limited liability partnership was insolvent; or 10
  11. 11. (b) which results in the limited liability partnershipbecoming insolvent and knew or ought to haveknown at the time of distribution that the limitedliability partnership would become insolvent as aresult of the distribution,shall be personally liable to the LLP for the amountor value of the distribution if it was received within aperiod of two years before the commencement ofthe winding up of the limited liability partnership.. 11
  12. 12. Tax Status 12
  13. 13. LLP in Malaysia • Labuan Limited Partnerships and Limited Liability Partnerships Act 2010 ( Royal Assent- 31 January 2010 ) Gazetted - 11 February 2010 • Limited Liability Partnerships Act 2012 ( Royal Assent- 2 February 2012 ) Gazetted - 9 February 2012 13
  14. 14. LLP IN MALAYSIAAgenda Labuan LLP Malaysia PLTLegal status Body corporate Body corporateAttributes Similar to companies- Similar to companies- partial limited liability for partial limited liability for defaulted partners defaulted partnersInternal Partnership agreement or LLP Agreement or defaultregulation default rules of the Act rules of the ActThird parties •The word Labuan LLP as •The word PLT as part of/ creditors’ part of the name the nameprotection •Keep proper accounting •Keep accounting and records. other records which give •Claw-back provision. a true and fair view of the LLP state of affairs (7 years) •Claw-back provisions (section 22) 14
  15. 15. LLP IN MALAYSIAAgenda Labuan LLP Malaysia PLTFormalities/ •Formal registration •Formal registrationDisclosure •Annual declaration of •Annual declaration ofrequirement solvency. solvency/insolvencyApplicable •Labuan LP and LLP Act •LLP Act 2012Laws 2010Tax regime Labuan Entity -Trading activity- 3% Not finalized -non-trading- not taxable 15
  16. 16. Conversion to LLPConversion from conventional partnership to LLP• Sec 29. (1) A conventional partnership may convert to a LLP• Sec 29(2) In this Part, “convert” means a transfer of the properties, interests, rights, privileges, liabilities, obligations and the undertaking of the conventional partnership to the LLP. 16
  17. 17. Conversion from private company toLLP• Sec 30. (1) A private company may convert to a LLP if(a) there is no security interest in its assets subsisting or in force at the time of application; and(b) the partners of the LLP it is to be converted comprises all the shareholders of the private company and no one else.• Sec 30(2)- In this Part, “convert” means a transfer of the properties, interests, rights, privileges, liabilities, obligations and the undertaking of the conventional partnership to the LLP. 17
  18. 18. Professionals LLP• The members shall only be from the same professions such as all architects, engineers, quantity surveyors, accountants or all lawyers-sec 8(a).• The partners shall regulate their activities by way of contract among themselves which shall incorporate requirement of the professionals ethics and regulation.• The LLP cannot limit its liability below the compulsory level of insurance- to be approved by Registrar- sec 8(b) 18
  19. 19. FIRST SCHEDULE [Section 2] PROFESSIONAL PRACTICEProfessional Governing law Governing bodypractice1. Chartered Accountants Act 1967 Malaysian Institute ofAccountant [Act 94] Accountants2. Advocate i) Legal Profession Act 1976 (i) Malaysian Barand [Act 166] (ii) Sabah LawSolicitor (ii) Advocates Ordinance of Sabah Association [Sabah Cap. 2] (iii) Advocates’ (iii) Advocates Ordinance of Association of Sarawak[Sarawak Cap. 110] Sarawak3. Secretary Companies Act 1965 Nil [Act 125] 19
  20. 20. Power to amend Schedules • Section 92. The Minister may, by order published in the Gazette, vary, delete, add to, substitute or otherwise amend the First Schedule, Second Schedule and Third Schedule. 20
  21. 21. Foreign LLP- Part VI of LLP Act 2012 Section 44. (1) A foreign limited liability partnership shall not carry on business in Malaysia unless it is registered as a foreign limited liability partnership under this Act. Section 46. (1) Notwithstanding anything under this Act, a foreign LLP shall appoint at all times at least one compliance officer from amongst its partners or persons qualified to act as secretaries under the Companies Act 1965 who— (a) is a citizen or permanent resident of Malaysia; and (b) ordinarily resides in Malaysia. 21
  22. 22. Foreign Partners • There is no restriction under the LLP Act for partners to be all locals/residents . As such, foreigners can be partners of Malaysia PLT and their liability will be similar to other local/residents partners. • Foreign partners are different from foreign LLP which is provided under the Act. 22
  23. 23. Managing Foreign Partners • The liability of foreign partners shall be similar to local partners. • The main document is the partnership agreement. • To avoid foreign partners from escaping from liability , a dispute resolution clause and indemnification clause should be included in the partnership agreement- e.g clause on the Indemnification , Governing law and Settlement of Dispute clause. 23
  24. 24. Indemnification ClauseSuggestion:Defaulted partners of X PLT shall indemnify theX PLT and other partners for any claim,demand, loss or liability due to his default in theevent of any actions, formal or informal takenagainst him, including but not limited to refund ofall expenses payable by X PLT and all costs andcharges incurred by X PLT as a result of hisdefault. 24
  25. 25. Governing lawSuggestion:This Agreement shall be constructed inaccordance with and governed by the laws of Malaysia from time to time in force and each ofthe Partners hereby submit to the jurisdiction ofthe courts in Malaysia. 25
  26. 26. Settlement Of Disputes ClauseSuggestion:1.0 Any difference or dispute between the Partners shall be settled amicably through mutual consultation and/or negotiations between the parties.2.0 In case any dispute or difference could not be resolved by means as stated in paragraph 1, then in accordance with and subject to the provisions of the Arbitration Act 1952 as amended or re-enacted from time to time, such dispute or difference shall be and is hereby referred to one (1) arbitrator who shall be appointed by both parties and the award of the arbitrator shall be binding. 26
  27. 27. Conclusion• LLP is a hybrid business entity suitable for small/ medium and Professional businesses- less informalities compared to a company but with all the advantages of a company. It also has internal flexibility akin to a partnership. 27
  28. 28. THANK YOU 28