Recent Updates Regarding Indian LLPs

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Jul. 28 – Limited liability partnerships (LLPs) in India are a cross structure of a business venture which is an amalgamation of a business firm and a company. A LLP is considered as a mutual structure like any other company, enjoys tax dealings like a partnership firm, limits the liability of the partners to the degree of payment as in cases of the company, and entry or exit of partners is simpler. LLPs are easier to form and close with lesser authoritarian compliance, thus making them a flourishing investment and business medium. The LLP has lesser compliance requirements than a company and also lesser liability than a partnership firm.

The Securities and Exchange Board of India (SEBI) has permitted limited liability partnerships to be admitted as members of stock exchanges to allow them to get registration as stock brokers. Until now, only individuals, firms and companies were performing as stock brokers. Ever since LLPs came into existence since 2009 onwards in India, securities laws (SCRA) did not have any mention of LLPs. Though, LLPs are a body corporate and, as per the LLP Act (2008), LLPs can now be measured for registration as stock brokers and registered with the SEBI. Stock exchanges can now judge the granting of membership to LLPs subject to a LLP complying with securities laws, as LLPs are similar to partnership firms and companies.

In another development, company secretaries, chartered accountants, and cost accountants can now form multi-corrective LLPs which they were previously not permitted so far.

In case of chartered accountants, body corporate cannot be selected as auditors of companies and since, as per LLP Act, a LLP is to be measured as body corporate, there was a stalemate in selection of LLPs as auditors. The Ministry of Corporate Affairs has clarified that LLPs will not be treated as a body corporate for the limited purpose of appointment as statutory auditors. Now, the practicing chartered accountant can take the benefit in forming or realigning their firms as LLPs. With LLPs permissible to be appointed as statutory auditors, LLPs are now gaining significance.

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