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Sarkaritel.com News and Features
Limited Liability
Partnership Bill 2006, A Boon for Enterpreneurs
New Delhi, January 02, 2007
With the growth of the Indian economy, the role played by
its entrepreneurs as well as its technical and professional
manpower has been acknowledged internationally. The
traditional partnership of entrepreneurship, knowledge and
risk capital combine to provide a further impetus to India's
economic growth. However, a need has been felt for a new
corporate form that would provide an alternative to this
effect with unlimited personal liability on the other, in
order to enable professional expertise and entrepreneurial
initiative to combine, organize and operate in flexible,
innovative and efficient manner.
The existing Indian Partnership Act sets out special rules
relating to the liability of partners to persons dealing with
them. First, every partner is liable jointly, with his other
partners for all the debts and obligations of the partnership
incurred during his membership.
Second, every partner is jointly and severally liable for
any loss or damage arising from the wrongful acts or omissions
of any of his partners (as well as his own) which were done in
the ordinary course of the partnership's business or with the
authority of the partners. When the members are liable jointly
and severally for any loss or damage this has the effect that
an injured person may sue one or more of the members
separately or all of them together at his option.
The proposed Limited Liability Partnership Bill 2006,
believed to be a path-breaking legislation and a hybrid
between a limited liability company and a partnership firm
will be particularly beneficial for entrepreneurs,
professionals and enterprises providing services.
The limited liability partnership (LLP) which is a separate
legal person will be liable to the third parties independent
of the other partners. Therefore it is viewed as an
alternative corporate business vehicle that provides the
benefits of limited liability but allows its members the
flexibility of organizing their internal structure as a
partnership based on a mutually arrived agreement.
The LLP form would enable entrepreneurs, professionals and
enterprises providing services of any kind or engaged in
scientific and technical disciplines, to form commercially
efficient vehicles suited to their requirements. Owing to
flexibility in its structure and operations, the LLP would
also be a suitable vehicle for small enterprises and for
investment by venture capital.
The proposed Bill does not restrict the benefit of LLP
structure only to certain classes of professionals and will be
available for use by any enterprise that fulfils the
requirements of this Act. This is also seen as a key enabler
to encourage "Innovation" as it will allow the Directors to
have a limited liability when they partner as angel or capital
ventures.
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