Foreign Law Firms Can now Register in India

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Feb. 10 – Under the newly released Limited Liability Partnership Act 2008, foreign law firms are allowed to register and offer consultation services in India but not practice law. The new enactment was enforced as multinational companies needed international law firms to represent them across borders in complex international deals. The law ministry also felt the introduction of foreign firms would infuse professionalism creating global law firms of Indian origin.

"Foreign law firms can register in India under Section 59 of the LLP Act, for which rules are being framed, and offer consultation. But they can't practice law as right to legal practice is controlled by the Advocates Act which permits only an Indian lawyer enrolled in Bar Council here to do so,'' Union law minister H R Bhardwaj told the Times of India.

The Limited Liability Partnership Bill, 2008 seeks to give companies the best of a partnership and corporation set up. Incorporated under the Indian Companies Act 1956, a partner of an LLP firm is not liable for another partner's misconduct or negligence – each partner’s liability is limited to their agreed contribution in the LLP. Further the partners have the right to manage the business directly, allowing businesses where all investors wish to take an active role in management to flourish. An LLP is seen to be best suited for the services industry and for small scale industries which do require flexibility in legal set up procedures.

The salient features of the LLP Act, 2008 are as under:-

1. The LLP has an alternative corporate business vehicle that would give the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on an agreement.

2. The LLP Act allows the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.

3. While the LLP has a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

4. LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to LLPs and there shall not be any upper limit on number of partners in an LLP unlike an ordinary partnership firm where the maximum number of partners can not exceed 20.

5. The taxation of LLPs shall be addressed in the Income Tax Act, 1961 which regulates taxation of all form of entities.

6. Provisions have been made for corporate actions like mergers, amalgamations etc.

7. While enabling provisions in respect of winding up and dissolutions of LLPs have been made, detailed provisions in this regard would be provided by way of rules under the Act.

8. The Act also provides for conversion of existing partnership firm, private limited company and unlisted public company into a LLP.

9. Nothing Contained in the Partnership Act 1932 shall effect an LLP.

10. The Registrar of Companies (Roc) shall register and control LLPs also.

11. The governance of LLPs shall be in electronic mode in the successful model of the present Ministry of Corporate Affairs Portal.