The three professional bodies of auditors, company secretaries and cost accountants are still in the process of resolving issues relating to a novel concept that will help them work together, yet differently.

The Institute of Chartered Accountants of India (ICAI), the Institute of Company Secretaries of India (ICSI) and The Institute of Cost Accountants of India (ICoAI) have had inconclusive deliberations on the formation of multi-disciplinary partnerships (MDPs).

Although Parliament ratified amendments to the Acts governing these institutes which enable them to form MDPs, administrative issues still need to be sorted out.

Making business easier MDPs can be defined as business arrangements that enable individuals with different professional qualifications to practice together as partners and combine their skills. In other words, they make doing business easier.

India ranks 142 in the World Bank’s Ease of Doing Business (EDB) index for 2015, behind Pakistan (128) and China (90). The rankings measure 10 parameters and are based on inputs by stakeholders in government and the business community.

One of challenges that companies in India face is that they have to hire and regularly manage multiple entities for audit, accounting, tax, legal and business consulting services. This takes up a lot of time and resources. MDPs will allow firms to provide a one-stop shop for services.

MDPs exist in some form in the UK, Germany, Italy, the Netherlands, Slovakia, Spain, France and Belgium. All these countries rank much higher on the EDB index compared to India. The legislative framework for MDPs was established in December 2011 when the amendment Acts of all three key professional bodies was passed and notified in January 2012. But MDPs are yet to become a reality in India. While MDPs allow professionals to combine complementary skills, they also allow internal risk-sharing. Moreover, MDPs can encourage innovation as they are better able to access capital. MDPs help with branding, growth across geographies, economies of scale and specialisation.

Besides, all the needs of a client organisation in establishing and promoting an entity -- getting licence and launching a venture or project; mobilising funds in the market across the globe; restructuring, mergers, acquisitions and amalgamations -- can all be effectively handled under one umbrella.

The legislative process to legitimise MDPs was complete with the passage of Limited Liability Partnership Act, 2008 and Companies Act, 2013. Further, professional Acts of three key professional bodies (ICAI, ICSI, and ICoAI) have already been amended and notified in January 2012.

In fact, the LLP, which was sought to be the vehicle of promoting MDPs and which combines the benefits of a body corporate and a partnership firm, has taken off very well as an alternate business entity. Unfortunately, not a single MDP LLP has been registered, thanks to the procedural delays by the three professional institutes.

Partners can breathe easy Under MDP, the nature of work that flows could be so divergent that all partners may not be involved in the execution of each assignment. In such a situation, the risk factor involved needs to be evaluated. It is possible that due to the negligence of some partner, the civil liability on the firm in the form of damages or compensation could be heavy. Under the Partnership Act 1932, the liability of a firm is unlimited and the partners are personally, jointly and severally liable in respect of the obligations of the firm. Unlimited liability of partners and the firm will vanish if the liability of the partnership firm and partners could be limited in an MDP — hence the LLP. An LLP combines the organisational flexibility and tax status of a partnership with the advantage of limited liability.

In the UK, MDPs are mainly popular among several professionals’ services. Since MDPs tend to have regulatory overlaps in UK, they are addressed by one regulator relying on the work of another. The Ministry of Corporate Affairs can play a pivotal role by asking three key professional bodies to enter into a mutual recognition agreement (MRA) with other professional body or institution situated outside India.

The concept of LLP should also be popularised with regulators for engineering, architecture and actuarial services. Similar to the ICAI’s new law, allowing partnership with specified professions, AICTE should pass a similar resolutions to include MBAs.

Clients are better served by having experts from various professions addressing problems in a comprehensive manner. Clients may also get economies of scale if they purchase professional services in a package rather.

The writer is a partner at Price Waterhouse. The views are personal

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