The Hindu Business Line : Limited Liability Partnership Bill introduced

The Limited Liability Partnership (LLP) Bill will work to the advantage of small-scale industries (SSIs) as it can increase their channels of funding. The SSIs can get investment from inactive partners whose liability will be limited to the extent of their investment. They can receive profits without being engaged in the enterprise. Also, it will be a boost for entrepreneurs, with its combined benefits of a company and a partnership firm. The cap of 20 partners (in a partnership firm) is not applicable to an LLP. Being a partnership, management of the company would be simpler. The legal and procedural requirements of an LLP will not be as complex as that of a company.

It should be noted that apart from the services industry, small businesses are also included in this bracket.

Eashwar Natarajan, Chennai

There is nothing wrong in implementing a suitably modified Act in India. That will pave the way for healthy growth of partnership concerns.

S. Krithivasan, email

LLPs or `multi-disciplinary' partnerships are being introduced in the corporate sector as part of the liberalisation of the service sector. LLPs permit independence of the profession, confidentiality of the client relationship and privileged communication. Accountants and other professionals can afford to act as independent advisers rather than mere representatives of the client.

LLPs do not have authorised capital stock-in-trade or closing stock. So, the government may prescribe a simpler balance-sheet. Every partner in an LLP is also its agent. Therefore, the status of a minor who acts as an agent or shareholder of a company or a partner should be clarified in the context of LLPs.

T. S. Sundareswaran, New Delhi

The LLP Bill will fill the vacuum in the Companies Act; it will benefit domestic and multinational companies.

The salient features of the Bill such as limited liability and the partners not being held responsible for the wrong-doings of other partners, etc., are progressive steps.

Such an Act is long overdue. The Ministry of Company Affairs deserves appreciation for this initiative.

S. Nallasivan, Tirunelveli

Responses to Sticklish Issues dated December 11: The policy of disgorgement is not new to financial markets and it is being followed in many countries, including the US. The US laws impose both disgorgement as well as civil money penalties on defaulting agencies. However, the concept of disgorgement entails that the defaulting agencies should partake with the gains that they had made through illegal means. That brings us to the question: What gains did depository participants (DPs) make in the IPO scam? The DPs were only a conduit used by cunning individuals to channel their IPO applications. At the most, the DPs would have made only additional commissions from the sale of IPO as gains. The fact that the benami accounts were not detected is a mistake for which both the DPs and the banks where such accounts were opened are responsible.

Thus, in this case, the DPs have committed a mistake but they have not made any significant gains as a result of it. Therefore, the disgorgement order is unfair from the point of view of the DPs. Additionally, the policy of joint and several liabilities only serves to make the punishment more unfair as there is no proven record of the various DPs conniving together to commit the mistake.

The government should certainly impose civil penalties on the DPs for failing to comply with `know your customer' norms. The same penalties should apply to those banks in which the benami accounts were opened. The IPO scam has certainly opened the eyes of the regulator and the market participants. The decision of the government to make PAN mandatory for participating in the primary markets is a well-thought-out move.

P H Karthik, Mumbai

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