Amendments needed in regulations.

Though the government has initiated the process of registering Limited Liability Partnership (LLP) firms, it would take a while before the chartered accountant (CA), company secretary (CS) and cost accounting firms convert to LLPs.

The three regulators Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI) and Institute of Cost and Works Accounts of India (ICWAI) are yet to recognise LLP and need to amend the regulations.

A limited liability entity is a hybrid of existing partnership firms and full-fledged companies. A minimum of two partners are required for formation of an LLP. Besides, there is no limit on the maximum number of partners, unlike the current limit of 20 members in a partnership firm. On April 2, Delhi-based legal consultants Handoo and Handoo registered as the first LLP of India.

According to NK Jain, chief executive officer (CEO) and secretary of ICSI, it will require an amendment to the ICSI regulations to convert CS firms into LLPs. The same holds true for ICAI and ICWAI.

Currently, these firms have partners from their own discipline. For instance, a CA partnership can have only CAs as its partners. But under the LLP model, CAs and CSs or even advocates can set up multi-disciplinary firms, which would act as a one-stop shop for people to avail various professional services.

The ICSI draft for amendments in the existing regulations is being vetted by the legislation department of the Union law ministry, added Jain.

There are about 23,000 ICSI members in the country, of whom about 3,000 are practising company secretaries and there are about 2,000 to 2,500 CS firms.

According to Jain, these are mainly proprietary firms having two to four partners.

We are still studying the effects of LLP, including the legal aspects, said Kunal Banerjee, president of ICWAI. He is hopeful that the process of bringing necessary amendments would be completed in two months. We want to do it as fast as possible, added Banerjee.

A group at ICAI is studying all aspects of LLP, said a senior ICAI member. The entire process would take a couple of months, he added. There are about 65,000 practising CAs in the country and about 40,000 to 45,000 CA firms.

Under the LLP structure, liability of the partner is limited to his stake and no partner is liable on account of any independent or unauthorised acts of other partners. Individual partners are shielded from joint liability created by another partners wrongful acts or misconduct.

On the other hand, under traditional partnership firms, every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner, irrespective of his stake.