Indian LLP Status for Accountancy Practices Being Implemented
Commentary: Chris Devonshire-Ellis
Apr. 14 – The ability for Indian chartered accountants, cost accountants and company secretarial practices to obtain limited liability partnership status will take some time, even though the government has initiated the process. Despite the government approval, the three regulators concerned, the Chartered Accountants of India (ICAI), the Institute of Cost and Works Accountants of India (ICWAI) and the Institute of Company Secretaries in India (ICSI) have all yet to recognize LLP and need to amend their own regulations to do so.
The amendments, which will introduce a minimum of just two partners required to establish an LLP, also carries no limit on the maximum number of partners, unlike a partnership-based firm, which is limited to 20 partners. This restriction has effectively denied Indian firms the ability to evolve as true national practices, with most local firms thus being restricted to practicing purely in their own local area. All three regulators need to amend their own regulations to permit the conversion of CS firms into LLP’s.
The new government relaxation of the rules also provides for the establishment of multi-disciplinary firms, providing a combination of services. Currently, firms are restricted to just one discipline, and may not engage in other activities. The LLP model however allows firms to have chartered accountants and even lawyers as partners, ushering in a new era of “one stop shop” firms that until now has been out of reach.
All three regulators are studying the legal implications of the government’s move, with the ICWAI hoping to have amendments to its own regulations commenced in two months time. India currently has about 65,000 practicing chartered accountants, spread amongst 43,000 firms, while there are about 3,000 practicing company secretaries, engaged by about 2,500 firms.
The moves are also designed to clear out the differential between professionals holding licenses, on which a volume on the number of professionals has traditionally been enforced, against those actively participating in practice. Currently only about 10 percent of all licensed company secretaries are currently practicing, creating an imbalance and bottleneck in the profession for those who wish to enter professional services of this nature.
The government moves are designed to liberalize the domestic market for professional services, and are likely to see in time the development of powerful, national firms, as well as an increase in the numbers of foreign firms practicing in the Indian market.